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The economic impact of a business is a measure of the amount of and the way that dollars associated with that entity circulate through the region.
The estimates are developed with a computer model called IMPLAN, which stores a profile of the St. Louis metropolitan economy in a database. The model uses production functions for each industry in the region to calculate how spending in one industry circulates through other industries in St. Louis. This economic impact can be expressed either as an annual flow of dollars, or an equivalent number of full time employees.
There are three levels of impact that we consider when we develop these figures: the direct impact, the indirect business impact, and the induced household spending impact. All three of these can be expressed in terms of an annual flow of dollars or annual full time jobs. The “Total Impact” is the sum of these three factors.
This is the most basic part of an organization’s economic impact. It measures the dollars and jobs that the organization directly generates. When expressed in dollars, the direct impact is an approximation of a company’s total revenue or gross output.
Indirect Business Impact
This is a secondary measure of a business’s economic impact. It represents the dollars of revenue and jobs generated by the operating expenses of the organization. Examples might be purchase of raw material from a local supplier or the professional services of an accounting or law firm. This spending generates revenue and employment at firms that supply those goods. Every dollar that an organization spends locally to conduct its business supports another business in some way.
Induced Household Spending Impact
This is a tertiary measure of a business’s economic impact. It is a measure of the business revenue generated by the personal spending of the organization’s employees. Think of an employee at an organization spending money at Schnucks or Macy’s. The employee’s paychecks support revenue and jobs the same way that the organization’s spending on equipment supports revenue and jobs.