Making an impact on jobs

When does creating jobs in the city lead to more jobs in the countryside?

We recently introduced an Impact Assessment Model to our economy.id resource for local government. It shows the impact of adding (or losing) jobs in one industry sector throughout the entire supply chain. I knew this would be extremely important for councils wanting to demonstrate the full value of attracting jobs to their area, but what I hadn’t counted on, was how much I would learn about the structure of local and regional economies – especially when combining the model with other information included in economy.id.

The City of Knox is located in Melbourne’s eastern suburbs, between 20 and 25 kilometres south-east of the Melbourne CBD.  It includes the suburbs of Bayswater, Boronia, Ferntree Gully, Rowville, Scoresby and Wantirna among others.

While being largely residential, Knox has significant areas of employment, particularly in manufacturing, retail, health and education. Employment is dominated by large manufacturing and wholesale industrial parks in Bayswater and Scoresby, a major retail centre, major public and private hospitals, as well as a TAFE.  You can see the dominance of Manufacturing, Construction and Wholesale Trade in the following chart.

Source: City of Knox online economic profile (economy.id)

Let’s look at Manufacturing in more detail.  You can see from the table below that Knox has a diverse manufacturing base, but that most manufacturing industries lost employment between 2006 and 2011. Take Food Product Manufacturing for example, which lost 83 jobs in that time period.

Source: City of Knox online economic profile (economy.id)

A loss of jobs in Food Product Manufacturing does not only affect that industry sector – it has knock on effects throughout the local economy and beyond – think of Agricultural Production, Transport, Wholesale and Retail Trade for example as we move along the supply chain from the production of raw materials to final consumption of the food product.  An excellent way to understand these linkages is to look at an Impact Assessment Model.

In the example below, I’m going to (theoretically) replace those 83 jobs and see what happens more broadly.

Source: City of Knox online Impact Assessment Module

First we can see that by adding 83 jobs in Food Product Manufacturing, the total effect is the addition of 213 jobs in the local area (City of Knox)¹.  So one job in Food Product Manufacturing results in 2.5 times the number of jobs in total. However, of these only 76 will be jobs for local residents ².  This is because Knox attracts many workers from outside of the local area.

But let’s look at the impacts in more detail.

Source: City of Knox online Impact Assessment Module

Looking at broad industry groupings we can see that the biggest gain in jobs is indeed in Manufacturing (129 within Knox and a further 17 jobs outside of Knox).  This is more than the 83 jobs we have put into Food Product Manufacturing as there has been a knock on effect into other manufacturing sectors  both locally and further afield. You can imagine that it might create jobs in Print Manufacturing for example, as labels will need to be made for products. And there will be a jobs created in Machinery and Equipment Manufacturing to equip the processing plant … and so it goes on.

Of the locally created jobs in Food Product Manufacturing, only 36 will be taken up by local residents, with the remainder being taken up by people commuting into Knox. This number may seem small, but when you look at the Journey to Work data for Knox, you learn that currently, nearly 70% of jobs in Manufacturing are filled by non-residents.

However, Food Product Manufacturing is still important for local job creation because a further 40 jobs are created for local residents in other associated industry sectors such as Transport Postal and Warehousing (7 jobs for local residents) and Retail Trade (7 jobs for local residents).

But wait, there’s more!!  What happens further up and down the supply chain?

When we think of Food Product Manufacturing, at one end of the supply chain is the production of inputs – so you naturally think there will be a knock on effect into Agriculture. In fact, it results in 83 jobs being created in Agriculture – but as Knox is not exactly a farming area, the vast majority of those jobs are outside of Knox (77).

At the other end of the supply chain is consumption of the end product – so you’d think there will be a knock on effect into Retail Trade  (think the local sandwich bar) – and indeed there is, and the majority of these jobs are in Knox (13) and employ local residents (7).

Now if this has got you thinking, I’ve added another table which breaks the industry sectors down even further. Have a look and see if you can make the connection between the 83 jobs created in Food Product Manufacturing, and each of the associated jobs created in the table below…

Source: City of Knox online Impact Assessment Module

^1. This is based on a Micro-simlation Model of the local economy that feeds into an Input/Output Model. The model is generated by industry leaders in economic research NIEIR (National Economics). The model has been developed into a tool for local government decision makers by .id and is delivered online as a module to economy.id.

². This is modelled by NIEIR using Journey to Work data.

If you would like to receive more updates about demographic or economic trends, do follow us on twitter @dotid or subscribe to our blog (above). You may also like to visit us at id.com.au