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Proprietor's Income versus Employee Compensation

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bmcwill
I think I understand the relationship between proprietor's income and employee compensation, but I just want to be sure before I go on record. My understanding is that when an sole proprietorship owner receives income some portion of it will be reinvested in his/her business generating direct demand and some portion will flow like employee compensation into the household of which he/she is a member. The portion that is employee compensation will then be further divided into savings and consumption that will lead to induced demand. If that is the correct way to view these two income streams, then how does Implan set the proportions (PI/EC; and EC = C+S --> C/EC) -- historical patterns? If it is historical patterns, then are these factors set for all the proprietors in the region or just the historical patterns for the sector specified in the activity? Bruce
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    IMPLAN Support
    Hi Bruce, Thank you for your post! When a sole proprietory organization receives revenue, that revenue is recorded under the Proprietor Income (PI) category. However if the company is a corporation then revenue is being recorded into the Employee Compensation category. Both are spent as labor payments to household purchases that drive the Induced but the PI is taxed at a different rate. You are correct in that when revenue comes into the company, that becomes the Direct Impact. The Direct Impact then drives the Indirect impact of that company purchasing supplies from other companies. Finally, the Induced Impact is created when employees spend their wages. Please see the attached document: Employee Compensation and Proprietor Income are two components of Labor Income. The historical patterns are set per industry per region. As each industry or sector has different ratios of employee compensation and proprietor income values per region. http://implan.com/index.php?option=com_content&view=article&id=641:641&catid=259:KB37 [attachment=610]Presentation1.pptx[/attachment]
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