The Impact of Buying Local in Waco

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.

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.

When it comes to local spending, a little can go a long way, and jobs can be created with very small increases in spending per person. The Perryman Group estimates that a job would be created in the Waco area if everyone in the area spent just another $0.82 per year at a local retail store, $0.37 per year at a local restaurant, or $1.06 per year at a local personal services firm.

Prior to the pandemic, the Waco economy was growing at a steady pace and was in a healthy place. Now, due to the decreased demand and limitations placed on businesses over the past few months for public health reasons, many of the normal supports for the economy are disrupted and businesses are struggling to maintain jobs and cash flow. Waco has also typically enjoyed a large amount of tourism in recent years, especially during the summer months. According to the Waco Convention and Visitors Bureau, the number of visitors to Waco through the first half of the year is down 61 percent compared to 2019, a shortfall of over 800,000 so far. Visitors to Waco provide extra money to inject into the local economy, which then spurs additional local spending.

Due to the disruption in the area economy, supporting local businesses is more important than ever. The loss of a substantial number of visitors coupled with the other difficulties in the economy caused by the pandemic will lead to a large shortfall of revenue for local area businesses. However, simple actions from local residents can make a big impact. Intentionally spending money at local businesses (or choosing a local chain store over an online retailer) can provide additional money to circulate throughout the local economy. Even choosing a staycation in lieu of typical summer destinations can provide additional stimulus for the local economy, especially as others’ travel plans have been substantially curtailed by COVID-19.

Choosing local establishments can make a very real difference in overall performance. In the end, we will get through this time – we just need to hang on for the bumpy ride. n