Just like any other trade, economics has its own language. The commonly used term ‘multiplier’ may seem mysterious and not something you might even notice, but it is an important tool that reveals much about business and our economy.
A ‘multiplier’ is simply a way to estimate and compare the economic impacts, such as the impact of adding or subtracting a business, jobs/services, goods, tasks, etc. The multiplier amount is typically represented in the form of a decimal (i.e. like 1.4). Sometimes, the multiplier may be an aggregate of related processes, phases, or relationships, or even a negative number.
These multiplier decimals are created through studies using fairly complicated bean-counter techniques which may apply to a specific point in time and place. The end result is often used to generate a numerical report or perhaps a summary statement similar to “For every $1 spent in tourism, the region has seen an increase of $Y in capital expenses and $Z in payroll.”
Let's take manufacturing. It was reported that in the fourth quarter 2018, that manufacturers contributed $2.38 TRILLION to the U.S. economy, accounting for 11.4 percent of the Gross Domestic Product. In terms of a multiplier, their summary statement would look something like "For every $1.00 spent in manufacturing, another $1.82 is added to the economy" which is one of the highest multiplier effects of any economic sector supporting the claim that four employees are hired for every one worker in manufacturing. 1/
We can measure the value of manufacturing activities and justify why it might be a high priority business to attract to our community. We also know that, like other businesses, they will need qualified talent to survive. It is estimated that over the next decade, 4.6 million manufacturing jobs will be needed and many of these could go unfilled due to a skills gap. The lack of talent provides an opportunity for future employees and a risk. A persistent skill shortage could cost $4.5 trillion in reduced output. 1/
At this point we can compare these figures to other businesses and activities and prioritize for the types of businesses we would want to attract and retain. Multipliers help us identify activities that can generate the most 'bang for the buck,' how much an activity contributes to the economy, and start the discussion over what is needed to support their continued success. It also let's us measure the impact in a community when a business is loss (a negative multiplier pops up).
Multipliers create a standardized way to analyze economic trends and performance over time and start the conversation of workforce development opportunities. Amazing!
1/ "Facts about Manufacturing" at https://www.nam.org/facts-about-manufacturing/
Effective workforce-development programs will be a crucial part of US efforts to fuel economic growth, lead on innovation, and compete on the global stage." 1/
Don’t confuse workforce development with workplace training. The two are very different. Workplace training is valuable for helping existing employees succeed. Workforce development is focused on getting those potential workers to the table.
Why worry about Workforce development?
Can your small business stay in business without additional talent for the next 10 years? Chances are you can’t. Even if everybody is healthy, there are always unexpected events that can turn a profitable, well run business topsy-turvey.
Technology is automating low-skilled and easily automated tasks changing the skill levels of new recruits and existing employees alike. Technology will drive change in the job market, in other words, 65 percent of today’s primary school students will hold jobs that don’t exist today.1/
If there are no family wage jobs, our quality of life will degrade. Who will be there to fix the plumbing, care for the aged and nurse the ill, build the homes, or pump the gas (it is Oregon after all and we are not allowed to pump our own!).
Competition for workers will continue to increase not only locally but for pulling potential workers outside of our area that may be willing to accept lower-paying city jobs, because even those appear to pay better than well-paying local jobs. Of course, the cost and quality of living is also different but that is often conveniently ignored.
Some jobs will be very difficult to fill or automate. This can be due to the requirements, pay, benefits, or other problems such as lack of workforce housing or childcare, and a degraded infrastructure (such as hospitals, transportation, and education). It is interesting to note that many jobs already are in the hard to fill category which suggests that a certain percentage of these jobs may never be filled. It has been estimated that 50 percent of workforce activities could be automated, but few (around 15%) have been. Yet. It is estimated that by 2030, 30 percent of the US workforce will need to change jobs or upgrade skills significantly to stay employed due to automation.1/
How Workforce Development Helps
Our goal is to help strengthen the South Coast workforce pipeline as part of the South Coast Development Council business retention/recruitment and expansion vision.
Without available labor, businesses will not thrive or come here. Yes, a workforce pipeline currently exists, but we hear that business are not getting the number and quality of candidates they need. With low unemployment rates, we are generally in a position where there are more jobs than qualified candidates to fill them. Because we are rural and because the populations in many coastal cities are dwindling, we may feel this shortage more acutely. The lack of skilled labor could degrade our quality of life.
Potential employees may look elsewhere if they are not able to find employment quickly or at least find resources that will help them find a job. Because of the rural environment, many of the resources are fragmented across several small organizations that are spread across the regional landscape.
A collaborative process is needed to actively cultivate the next generation of talent and strengthen the existing pipeline. This includes connecting business and educators, learning best practices, and figuring out how to foster an ongoing development program. Development might include ensuring that young prospective hires know how to write a resume, or dress appropriately for a job interview. It also includes training and exposure to different types of jobs and skills. And finally, it includes a certain amount of competition between businesses to hire the right candidate, and between candidates to put their best foot forward.
The implementation of the McMinnville Works Internship program at the South Coast Development Council in June is the start of that process. The training will help businesses learn the best practices for hosting an intern, and will be able to talk about ways to continue to improve our workforce pipeline.
Is there a way to measure our success? Maybe. Maybe our population will gradually increase as more of our local families stay intact longer, rather than losing all of our young ones to other communities. Maybe we can fill quality jobs with quality candidates faster. Maybe we can raise the quality of life here and make sure that critical jobs get filled.
What’s the value of a more resilient and adaptable workforce, stronger communities, and accelerated economic growth? Our future.
Reference: 1/ “Creating an effective workforce system for the new economy” July 2018 by Chen, Wan-Lei, et al. at https://www.mckinsey.com/industries/public-sector/our-insights/creating-an-effective-workforce-system-for-the-new-economy
Business Recruiting Retention, & Expansion
We are all about Business recruiting/retention and expansion. But like any other topic, economics has some unique language such as Multipliers and Unicorns. The purpose of this Blog is to help clarify that language and concepts.