Economic impact of GM closing studied
JANESVILLE — The loss of General Motors in Janesville could result in the loss of nearly 9,000 jobs and nearly half a billion dollars in labor income in Rock County, according to an economic impact analysis by a UW-Madison/Extension professor.
Steven Deller, a professor and community development economist, used a popular modeling technique to calculate the impact of GM’s recent decision to close its Janesville assembly plant by the end of 2010 at the latest.
Using software developed by the Minnesota Implan Group, Deller did the analysis with the basic assumption that nearly 2,200 of the plant’s 2,667 employees live in Rock County.
The study uses employment numbers from 2007. It doesn’t take into account the 574 employees who will leave the plant under a recent special attrition program, and it doesn’t factor in wage and benefit extensions workers have in their national labor contract.
“It’s just a snapshot in time, a look at the local economy with the plant and without the plant,” Deller said. “It’s a worst-case scenario.”
The modeling program starts with the assumption that 2,196 GM employees who live in Rock County will lose their jobs. It gets to the nearly 9,000 mark—about 10 percent of the county’s resident workforce—when jobs are lost through a ripple effect. Examples include employees who work for companies that work directly with GM, such as its major suppliers, or those that work at other businesses such as grocery and hardware stores who may lose jobs because of a loss of business.
Every modeling program uses some sort of multiplier, a number that expands the effects.
In this case, the program attached different multipliers to the direct number of GM jobs lost (2,196) and the direct labor income of those GM employees ($188 million).
Deller’s analysis used a jobs multiplier of just more than 4. The labor income multiplier was 2.4.
Deller said he’s confident in the accuracy of the latter, but the multiplier of 4 on the job loss is probably too high.
“I’ve seen some advocacy groups use multipliers of 10,” Deller said. “That’s one of the reasons I got into doing this because people were making decisions based on some outrageous numbers.
“Sometimes I don’t know how some of these consultants can sleep at night.”
Deller said multipliers higher than 2 generally make him nervous.
Doug Venable, Janesville’s economic development director, said he agrees that a multiplier is necessary, but he’s not sure what it should be.
“Is it more than 1? Yes,” he said. “Is it more than 10? No.
“Is it 2, 3? Maybe.”
Deller said Implan is excellent software but agreed it’s not without its critics, who say the outcomes are dependent upon who inputs and tweaks data.
“One of the problems with Implan is that they’ve made it so user friendly,” he said. “If you put garbage in, you’ll get garbage out, and we try to hold people’s feet to the fire on that.
“But it’s still a complex model and mistakes can be made.”
Deller said such an economic impact study should not be the basis for make-or-break decisions.
But it may have been in Beloit, where a casino project has been on the table for years. In 2000, a consultant used Implan to do an economic impact study for proponents of the casino. It estimated that the casino would draw nearly 5 million visitors a year and generate annual gross receipts of about $300 million.
An independent study commissioned by the city, however, estimated the impact at 1.3 million visitors and annual receipts of about $100 million.
In the end, voters by a wide margin approved a referendum in support of the casino.
Deller said economic impacts often become inflated when numbers are double- or triple-counted.
That could happen in Rock County if one study is done for GM workers, others are done for the loss of jobs at GM suppliers such as Lear Corp. and LSI and the results are added together. The multiplier on the GM study would account for the supplier jobs lost, he said.
“The controversy with Implan has always been with who is doing the analysis,” Deller said. “This one was done for the GM situation by the UW-Extension. We don’t have a political agenda.”
Jun 26, 2008 at 11:36 a.m.
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Good question. Anyone, anyone? Bueller, anyone?
Jun 22, 2008 at 8:56 p.m.
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"Deller said he’s confident in the accuracy of the latter, but the multiplier of 4 on the job loss is probably too high."
Then why use 4?
Jun 21, 2008 at 5:11 p.m.
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tallman~
I see your point. But, what's wrong with putting yourself in a position to reap the profits from those goods since we're being forced to use them? I'm talking about utilizing this valuable tool called the internet. People can buy from stores in other countries just as easily as they can in their own towns now! Online, millions of stores all look the same to the consumer! The only way these companies and manufacturers will be able to lure the consumers to their sites are the ones that wisely decide to partner up with them or they won't have their business. In other words, share that middleman dollar with the consumers or we'll find another company who will! It's called "community". Create the community and the manufacturers will come! This is what's happening. I'm living it.
Jun 21, 2008 at 4:37 p.m.
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I am not crying either but have written numerous article responses. It is not just holding the line on spending for overseas products because you will be hard pressed to find any that are not. Even the GM products made in Janesville had many, many foreign parts in them. Yet those making the big GM bucks and others are all flocking into Wal-Mart and every other chain store(not the mom and pop stores or GM dealers for parts)because their prices are cheaper. Now, you have all the independant stores gone!! I again say, I saw no union workers outside those stores demanding american made or supporting the workers getting higher wages.
It is time also for all of us to demand economical responsibility for Government to cut wages drasticly and management jobs where two are working and three supervisors standing there watching. There are many more examples but I would suspect many of you know them. Stand up and demand what you want or play the "Lets all get along" game and see where it gets us. Right into another depession which may not be avoidable and yet good for the masses.
Jun 21, 2008 at 3:17 p.m.
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copenhagen~
Do you think what Kleej was saying is a joke?
What's your plan for the future? Don't you know people who are hurting out there? I think it's humorous that so many people make a mockery out of people's comments (especially one like Kleej's that makes total sense)
yet they have no results of their own to back up why they think it's such a joke? If you keep doing what you've always done and aren't getting the results you'd like to have, wouldn't you at least try something different? How many times do you touch a hot stove before you learn not to? Success and failure work the same way. Just for the record...COPENHAGEN, I'm not crying while I'm typing. Sorry to disappoint you.
Jun 21, 2008 at 2:22 p.m.
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I don't care, just asking
Jun 21, 2008 at 2:20 p.m.
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did you have tears in your eyes when you typed that "Kleej"?
Jun 21, 2008 at 1:22 p.m.
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Couldn't agree more Kleej!! Great post.
Jun 21, 2008 at 10:39 a.m.
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There's going to be an economic impact regardless of GM whether they closed or not! We are in a global economy. GM and manufacturing companies are outsourcing everything to be more competitive and attempting to sell their finished product back in the states for the same rediculous prices! Newsflash. Average people, or individuals (if you will) are now competing with these huge greedy companies through home based e commerce businesses! These corporations are slowly being bled to death nowadays and people are banding together and agreeing not to pay these rediculous prices for this stuff, especially when they've decided to cut the American worker right out of the picture, yet have the nerve to try and sell the products back to the same working person they dumped on! Is everyone on board with that? Do you find that acceptable? Wouldn't you like to fight back? If the answer is yes, then do it! If no, you're brain is asleep! It's time to put the profits back in the working man's pockets rather than these greedy companies in corporate America who have been robbing people like you I blind for years. The consumer rebellion is here! This isn't theory either. It's here. Time for us to prosper again! Consumer capital is KING which means you and I (the consumer) is in charge!
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