High Labor Income Impacts

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    IMPLAN Support
    We have embedded our response to your questions. 1.) [i]I get VERY high Labor Income impacts -- averaging more than $110,000 per worker. These are mostly construction workers. My question, or rather, my confusion: I guess the labor income impact is the impact spread over the entire construction period? In other words, this is NOT an annualized impact, correct?[/i] [b]Answer[/b]: You are correct. You should annualize the impacts. [p text-indent: 50px;] 1 A.) [i]Similarly, the employment impact is measured in employee-years, right? So, if the impact is 1400 jobs, that could be 140 jobs for 10 years, 1400 jobs in 1 yr, or 700 jobs over 2 years -- am I correct? [/i] [b]Answer[/b]: you are correct. 2. [i]If the preceding guess is correct, then I still have a problem in that labor income per worker is still way too high. How is this explained? Is it that the proprietary income accounts for an unusually high amount? My understanding is that 'proprietary income' is equal to the COMPANY profit -- is that right? Or is it just the business owner's cut fee/profit? Can you please clarify?[/i] [b]Answer[/b]: Labor Income (LI) includes employee compensation (EC) and proprietor income (PI). If you use Sector 36, Construction of other new nonresidential structures, to model your project, then the EC and PI split is probably about 75.19% and 24.81%, respectively. This will change depending on your study region. You can obtain the information needed to derive the split for your region in IMPLAN by navigating to [b]Explore [/b]>Social Accounts>Balance Sheets>View By: Industry Balance Sheet>Choose the IMPLAN Industry> and enter the construction sector number of your project. Then click on Value Added. You copy all of the information show for your sector into Sheet1 of the attached Excel Spreadsheet Template and it will calculate your EC and PI Split. Cells highlighted in yellow are protected and will derive your EC and PI splits when you enter the numeric values in the unprotected cells in the sheet. Using these splits, you can break out EC and PI from the LI in your project. [attachment=563]Sector36_ConstructionVASplit.xlsx[/attachment] 3. [i]This is an easier (I hope) question: why does the model change my direct output impact? For instance, I'll input a construction output figure of say, $50 million, but after I run the model, the direct impact shows up as something like $49,999,985. Can you please explain how that works?[/i] [b]Answer[/b]: The difference in value you reference is due to you properly selecting the Event Year for your project. When you view your project impacts, make sure that the Dollar Year for View (DYV) is set to your Event Year. To change the DYV to match your Event Year you can navigate to Scenario Results>Dollar Year for View (found in left/panel-gray area of results screen). If the year shown in that window is different from your Event Year, click on the dropdown arrow and select the year of your project. When you do, your direct effect value for Output should match what you started with.
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    rpaik
    Hi Thank you for your responses. I have a few followup clarification requests: 1. As I noted, the new labor income per new employee is way high, and I wonder: does the new employment impact exclude any new self-employed proprietors? The average wage/salary for employees would amount to employment impact/EMPLOYEE income (not Labor Income) - right? 2. Proprietary income is defined as to include income to self-employed/nonpayroll workers: am I correct in understanding that this does NOT include any company profit factor? Some people keep suggesting to me that this is the case, but I think they're wrong. 3. If I'm correct in the above understandings, then it should follow that new proprietary income gets counted as new income for the self-employed individuals running their own businesses, correct? Thanks once again!
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    rpaik
    Sorry to keep coming back with questions, but it occurs to me that my strange results (avg. annual construction comp close to $70,000) . . . might be the result of the fact that I entered my inputs as "industry change" scenarios. Is that wrong? Thx -- I'll sit tight now.
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    IMPLAN Support
    Hello, 1. It's probably very worthwhile to split out the compensation per worker from the PI per worker here, as it is likely the PI that is driving this up. If the Sector is oil derived there could be proprietors. Proprietor employment includes: Non-employers, Partnerships. If 5% of a partnership is owned by someone who never show up to work there, they are still an employee in IMPLAN data, and they still earn income. In certain industries, the difference between wage & salary employment, non-employers, and the sum of all proprietors can be large, though usually it is small. Large differences tend to occur in oil & gas, mining, and real estate. You can use the tool tips in the Employment Compensation and Proprietor Income fields to see what the ratios are. If you have your own estimates of compensation, you can always overwrite the IMPLAN estimates. 2. And partnerships as above. You are correct the profits go to Other Property Type Income which are not included in the impact. In every Sector there may be a mix of companies that are corporations and paying profits to Other Property Type Income and partnerships paying Proprietor Income as long as both are present in the region. In addition there can be PI payment going to owner's who live in an area but who are receiving that income from wells in another region. 3. Proprietor Income is spent in the Model like Household Income, although the tax rates are different for Proprietor Income than Employment Compensation. The operational costs are covered by Intermediate Expenditures derived from the Industry Sales value. 4. As long as you are looking at Industry production an Industry Change Activity would be correct.
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    cfryberger
    Hello, I am struggling with a similar issue of high labor income direct impacts - I am modeling the annual impact of a poultry company with 27 employees in Halifax County NC. I've run an industry change with 27 employees in sector 13. The results show an average annual compensation of $327,257 as the direct labor income impact. Even when I manually enter the employee compensation using the average wage that the company reports in NC ($28,655 as of 2010) the results show an average direct labor income impact of $88,808 for those 27 employees. $327,257 average wage seems completely implausible and even $88,808 seems much too high - what is accounting for this extraordinarily high direct impact? Relatedly, I've tried to edit the per employee multipliers in the study are data section, but each time I do so the model locks up and I'm no longer able to access the activities I have setup. Any help on these issues is much appreciated. Thank you, Carolyn
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    IMPLAN Support
    Hi Carolyn, Thank you for your post. In reviewing sector 13 (Poultry and egg production) this sector looks to have a high number of Proprietor Income. IMPLAN's definition of Labor Income not only includes Employee Compensation but also Proprietor Income. This could be the reason for your high Direct Labor Income Value. Could you also provide me with additional information regarding where you are entering your employment number? Is it into the Event screen or are you customizing the entire model? This is just so that I can get a better idea of the mechanics you did to assist you in your study. Thanks!
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    cfryberger
    Thank you for your response. I am entering the employment number in the events screen. Any time I've tried to customize a model the model seems to lock up completely - a separate issue though. So is there any way to separate out the proprietor income from other wages? Thank you, Carolyn
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    IMPLAN Support
    Hi Carolyn, You can split out Proprietor Income from the other wages by going to the Explore menu > Social Accounts > Balance Sheets > Industry Balance Sheet > Select the Industry > Value Added Tab. This will give you the % breakdown for Employee Compensation, Proprietor Income, Other Property Type Income and Tax on Production and Imports. From here you will have the proportion ratios for each item of Value Added. From here you will need to normalize the PI and EC Value Added Coefficients to 100%. I have attached a spreadsheet to help with this. Once the normalized %'s are calculated, you will then have your split. In regards to the customization screen freezing up; which version of the IMPLAN Software are you running (Version 3.0 with the Appliance or Version 3.1 with out the Appliance)? The 3.1 Appliance Free Version, unfortunately, was not designed to handle that type of customization. Version 3.0 would be able to customize the model. However as a caution, when you customize the model, everything gets adjusted (the underlying study area data). When customizing from the Events screen, it will just adjust the sector you selected. I also wanted to mention that the Events screen can be customized: http://implan.com/index.php?option=com_content&view=article&layout=edit&id=568 Thanks
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