We all know of the initial effect that a company will have moving into a new area or expanding their current workforce. We’ll see new jobs! But how many jobs will we really see?
Every industry has what is called a Job Multiplier. A job multiplier is a way to measure how important an industry is to other industries in the region. If an industry has a multiplier of 3, then for every one job created by that industry, another two jobs are created in other industries to support that one job. This also applies in the opposite direction.
Job multipliers are typically tied to a specific industry. Industries with a higher sales to labor ratio have typically have higher job multipliers. Take chemical manufacturing for example. They might have 50 employees at their manufacturing plant. Supporting those 50 employees are millions of dollars of equipment and chemicals; real estate being bought and trucking companies shipping materials.
By expanding a current company or bringing in a new chemical manufacturer, there would be a huge amount of new investment into the region. Not only with initial construction, but with the purchases of new equipment, new chemical contract or new shipping contacts.
There would also be the effect of the new employees salaries, which would go to local real estate and development companies, retail shops in the area and new purchases of vehicles. Overall, for one extra job that is created another four new jobs would be created in the community to support that one job for a total multiplier of 5.
With each industry, a different multiplier will be in effect. But when you take all those multipliers, we see a large impact that keeps the economy growing.