by M. Ray Perryman, PhD, President & CEO of The Perryman Group
BUYING LOCALLY IS ABOUT MORE THAN JUST SUPPORTING INDEPENDENT LOCAL BUSINESSES; IT ALSO HAS A MUCH WIDER IMPACT BY SUPPORTING THE ENTIRE LOCAL ECONOMY. In the midst of the global coronavirus pandemic, the primary focus has rightfully been placed on public health and slowing the spread of COVID-19. At the same time, social distancing requirements and other consequences of the virus are causing substantial harm to the economy. Millions of jobs have been lost across the nation, with more than 4,200 lost in the Waco area from June 2019 to June 2020 (which is actually a substantial improvement over the 11,100 lost between January and March). It is absolutely essential to balance economic recovery and public health concerns. The sharp downturn in the economy was brought about by a health crisis, and a full rebound cannot occur without solutions being found. In the interim, however, it is possible to support local economies by spending more at local businesses. Increasing local spending generates benefits across the economy. Every dollar spent in an economy has a broader impact within the entire economic system. When the revenues of local businesses increase, they are more likely to add or retain employees. They also spend more with other local businesses providing necessary goods and services. When employees spend their earnings, additional benefits occur. This concept of the additional impact every dollar spent can have is referred to as a multiplier effect. While this indirect and induced impact can occur anywhere within a larger economy, local businesses generate a greater impact within the area economy.
10 | FALL 2020
Studies performed by Civic Economics in conjunction with the American Independent Business Alliance found that local, independent businesses have a greater local economic impact than chain businesses. Specifically, these studies found that local retailers recirculate three times as much revenue as chain retailers and local restaurants recirculate twice as much compared to chain restaurants. While chain businesses also provide stimulus to the local economy, particularly in the form of wages for their workers, local businesses offer a larger premium. The Perryman Group’s US Multi-Regional Impact Assessment System was used to measure the total potential economic benefits of increasing local spending in Waco in some of the sectors most impacted by the pandemic. We estimate that if people in the Waco area increased spending at local retail stores, restaurants, and personal services establishments to levels consistent with local product and service availability and patterns in other comparable areas, it would lead to an increase in direct spending of almost $3.2 billion per year. When multiplier effects are considered, this increase in local spending leads to additional economic benefits of over $1.0 billion in gross product, $605.1 million in personal income, and 17,628 jobs in the Waco area. This additional activity would represent a significant boost to the local economy, with the increase in employment representing a 13.9 percent increment for the area.
