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.”