NRPA Measuring Impact of Park & Rec

Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved 46 Interpreting Employment Multipliers An employment multiplier coefficient measures the direct, indirect, and induced effect of an extra unit of visitor spending on employment in the host community. Employment multipliers are expressed in terms of number of jobs per million dollars in direct sales. Exhibit 4-2 showed the average employment coefficients across six industries. It indicates that for every $1 million in direct sales in those six industries by visitors from outside the area, 31 jobs would be created: approximately 19 direct jobs, 3 indirect jobs (22∙36-18∙71), and 9 induced jobs (31∙07-22∙36). There are three important caveats regarding the estimates of employment that should be noted. First, estimates include both full-time and part-time jobs, and do not distinguish between them. The employment measurement does not identify the number of hours worked in each job or the proportion of jobs that are full- and part-time. However, it seems reasonable to posit that local businesses are unlikely to hire addi- tional full-time employees in response to additional demands created by a tournament or event because the extra business demands will last only for a few days. In these situations, the number of employees is not likely to increase. Rather, it is the number of hours that existing employees work that will increase. Existing employees may be requested to work overtime or released from other duties to accommodate this temporary peak demand. At best, only a few very short-term additional employees may be hired. It is improbable that 31 jobs will be created in city A if an extra $1 million expenditure attributable to an event is forthcoming (Exhibit 4-2). The few jobs that do emerge will probably be short-term and part-time jobs. However, decision makers easily may be misled into assuming these are full-time positions. Second, the employment estimates assume that all existing employees are fully occupied, so an increase in external visitor spending will require an increase in level of employment within the jurisdiction. In the context of the hotel’s front desk, for example, the employment estimator assumes that the existing staff would be unable to handle additional guests checking in for overnight stays associated with a tourna- ment. However, in many cases, they are sufficiently underemployed to do this, so additional staff would not be needed. In these situations, the employment coefficient is exaggerated. Further, it has been noted that even after businesses have fully used their existing capacity: Expansion is likely to depend on the businesses’ longer-term expectation about whether the additional spending is temporary or permanent. In either case, the additional hiring may be delayed for a significant time. This will slow each cycle of expansion and possibly stretch the total expansion out over a lengthy period. (Power, 1988) A third potentially misleading corollary of employment estimates is that they imply all new jobs will be filled by residents from within the community. However, it is possible that some proportion of them will be filled by commuters from outside the community. In these cases, it is inappropriate to conclude that all the jobs benefit the community’s residents. The first and second caveats suggest that the employment multiplier coefficient is an inappropriate output measure for reporting the economic impact of short-term events such as festivals and sports tour- naments. It becomes appropriate only when the focus is on park and recreation facilities, such as parks, golf courses, zoos, and so forth, where a consistent flow of visitors from outside the area to the facility suggests that full-time jobs are likely to be created. Using and Interpreting IMPLAN Until approximately a decade ago, estimating the multiplier effect of visitor expenditures in a com- munity was a laborious, complex, and expensive task. Trained economists had to be hired to construct an input-output model to examine relationships within the local economy both between businesses, and between businesses and final consumers. This required the collection of large amounts of data from lo- cal industries. The only practical recourse for most agencies wanting to incorporate an indicator of the multiplier effect was to use an arbitrary coefficient that purported to be “conventional wisdom.” Such