8/6/2019 Kentucky's Cabinet for Economic Development's Economic Impact Estimate Study of GM Plant Expansion

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Kentucky Cabinet For Economic DevelopmentOffice of Research & Public Affairs

http://www.thinkkentucky.com/  

4/29/2011

Economic Impact Estimate

General MotorsWarren County, Rest of Kentucky and Kentucky Statewide

4/29/2011 

Kentucky Cabinet For Economic DevelopmentPrepared by Phil Flynn

Staff Economist

Table 1Economic Impact Estimate Direct Input Assumptions 

Status EmploymentAverage Wage Wage & Benefits

Aggregate Average Aggregate Average

New 250 $ 15,080,000 $ 60,320 $21,840,000 $ 87,360

Existing 471 $ 36,500,000 $ 77,500 $49,250,000 $ 105,000Total 721 $ 51,580,000 $ 71,540 $71,078,000 $ 98,600

MethodologyThe estimates are derived from data and models involving calculations by the Kentucky Cabinet for EconomicDevelopment utilizing MIG, Inc. 2009 (adjusted) databases and IMPLAN Version 3.0http://implan.com/V4/Index.php  software system matrices which are utilized in the computation of economicimpact estimates.

NAICS 3361 – Automobile manufacturing

Existing employment wage and salary input data provided by the GM Bowling Green Assembly Plant web site,4/29/2011, http://www.bowlinggreenassemblyplant.com/ . 

New employment wage and salary input data provided by the GM-KEDFA application.

Inclusive of Kentucky residents and non-Kentucky residents.Based on a 2,080 hour work year.

All values are annual and adjusted to current $ values.

Location: Warren County, Kentucky.

Note: This data may not total due to rounding.

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Kentucky Cabinet For Economic DevelopmentOffice of Research & Public Affairs

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4/29/2011

Table 2General Motors

Combined Expansion and Existing Economic Impact EstimateEstimated Economic Impact — Warren County 

Impact Type Direct Effect Indirect Effect Induced Effect Total Effect

Employment 721 612 613 1,946Average Annual Wage(Inclusive of Benefits) $98,600 $57,200 $34,100 $65,200

* Total Value Added(Gross Domestic Product) $131,000,000 $53,000,000 $37,000,000 $222,000,000

Estimated Economic Impact -- Rest of Kentucky (Excluding Warren County) Impact Type Direct Effect Indirect Effect Induced Effect Total Effect

Employment 0 388 270 658

Average Annual Wage(Inclusive of Benefits) $ - $57,200 $36,600 $48,800

* Total Value Added

(Gross Domestic Product) $ - $34,000,000 $18,000,000 $ 52,000,000Total Estimated Economic Impact — (120 Kentucky Counties) 

Impact Type Direct Effect Indirect Effect Induced Effect Total Effect

Employment 721 1,001 883 2,605

Average Annual Wage(Inclusive of Benefits) $98,600 $57,200 $34,800 $61,100

* Total Value Added(Gross Domestic Product) $ 131,000,000 $87,000,000 $55,000,000 $274,000,000

Source: The estimates are derived from data and models involving calculations by the Kentucky Cabinet forEconomic Development: MIG, Inc. 2009 (adjusted) databases and IMPLAN Version 3.0 software system matricesare utilized in the computation of economic impact estimates. Adjusted to present values.

Note: All values are annual and adjusted to current $ values.Note: Compensation values are inclusive of estimated benefits.Note: Total Personal Income = Employee Compensation + Proprietors Income.* This data may not total due to rounding.

Social/Economic Cost

This study estimates/reports the positive economic impacts, which occur as a result of amotor vehicle assembly facility in Warren County, Kentucky. This report does not accountfor the cost incurred by the Commonwealth as a result of the jobs and industries impacted.These costs may include police and fire department services, public education, publicinfrastructure (roads, bridges, prisons, airports, sewage treatment, water treatment, trashcollection, etc.), social services, health services, environmental impacts, and taxincentives/abatements.

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Kentucky Cabinet For Economic DevelopmentOffice of Research & Public Affairs

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4/29/2011

Glossary of Economic Impact TermsEconomic impacts are a mathematical method of specifying the economic relationships amongall businesses/industries and between businesses/industries and consumers. Input-output (I/O)modeling is the most commonly utilized method to assess the economic outcomes of job creationor reduction. Economic impact modeling captures the direct impact of an employment

expenditure (jobs with wages, salaries, and benefits) on the economy. Additionally, thesecondary effect (indirect) on the economy is captured and the consumer based (induced) effectsare calculated by the model.

Economic impact analysis typically utilizes an economic model input-output (I/O) which tracesthe flow of goods and services, income, and employment among related sectors of the economy.The I/O model generates a mathematical depiction of the flow of economic activity. Id Est: 

Final demand changes on the industrial sector producing the good/service (output) purchasesinputs from other industrial sectors, which in turn purchase inputs from other sectors. Theseindustrial sectors purchase additional labor inputs. Employees of these industries use theircompensation to purchase goods and services from the economy. Linkages betweenindustries in a region create an economic ripple effect as a result of changes in demand forproducts. Strong linkages can lead to a healthier economy, as capital flows through theeconomy rather than out of it.

Direct Effects: Direct effects are the changes in economic activity during the first round of spending. These represent the impacts (e.g. change in employment) for the expenditures and /orproduction values specified as direct final demand changes.

Indirect Effects: Indirect effects are the changes in sales, income, or employment within theregion in backward-linked industries supplying goods and services. These represent the impacts(e.g. change in employment) caused by the iteration of industries purchasing from industriesresulting from direct final demand changes. New jobs will be created outside of the primaryindustry/direct impact industry.

Induced Effects: These represent impacts (e.g. change in employment) on all local industriescaused by the expenditures of new household income generated by the direct and indirect effectsresulting from direct final demand changes. Induced effects may also reflect government orinvestment gains.  New jobs created in the areas of food services, plumbing, medical/dental care,barbershops, clothing sales, police & fire protection, lawn care, legal services, financial services,real estate, merchandize stores, automobile dealers, & service stations, et cetera, are due to thedirect and indirect effects of the initial creation of jobs.

Total Value Added: Indicates the total economic value (impact) attributable to Kentucky’s

workers and industries. Note: Data consistent with Kentucky’s Gross Domestic Product (GDP).

Employee Compensation (Includes Benefits)--Employee compensation describes the totalpayroll costs (including benefits). Includes wage and salary payments (by employers) as well asbenefits including overtime compensation, health and life insurance, retirement payments, andother non-cash compensation. Significant employment of seasonal and/or part-time workers maylower personal income averages.

Personal Income = Employee Compensation (Includes Benefits) + Proprietary Income 

Proprietary Income — Consists of payments received by self-employed individuals as income.

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Kentucky Cabinet For Economic DevelopmentOffice of Research & Public Affairs

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4/29/2011

Methodology/Sources (partial)The economic impacts estimates and conclusions resulting from this study have been derivedfrom Minnesota IMPLAN Group, Inc. databases. This aggregate database is primarily composedof government data sources including information from

  US Bureau of Economic Analysis Benchmark I/O Accounts of the US;  US Bureau of Economic Analysis Output Estimates;  US Bureau of Economic Analysis REIS Program;  US Bureau of Labor Statistics ES 202 Program;  US Bureau of Labor Statistics Consumer Expenditure Survey;  US Bureau of County Business Patterns;  US Census Bureau Decennial Census and Population Surveys;  US Census Bureau Economic Census and Surveys;  US Department of Agriculture; and  US Geological Survey.The estimates are derived from data and models involving calculations by the Kentucky Cabinet

for Economic Development: MIG, Inc. 2009 databases and IMPLAN Version 3.0 softwaresystem matrices are utilized in the computation of economic impact estimates.

Report Prepared by:Phil Flynn Phil.Flynn@ky.gov 

Staff Economist(502) 564-4886 ext. 3401

The information provided herein by the Division of Research--Cabinet For Economic Developmentis believed to be accurate but is not warranted and is for informational purposes only. Anyestimates, projections, or information provided to make estimates or projections are providedwithout assurances or warranties and should not be relied upon as fact. Users of the informationshould perform their own due diligence in drawing conclusions from the information provided.