Archive for September, 2011

Per Capita, Household, and Business Spending Required to Achieve Full Employment

September 23, 2011

The economic recovery starts with the sound of a ringing cash register.

The economy moves through the cash register: business revenues,  jobs, taxes, etc.  To create jobs, money must move through the cash register.  To achieve full employment, you must first estimate how much money must move through the cash register.

An employee and their paycheck are business expenses.  Before incurring the additional expense of a new employee, a business must realize enough revenues to cover that cost.  The question then arises as to how much new revenue a business must realize to have the confidence to hire their next employee.

Click below to download an analysis showing examples of the estimated per capita, household, and business spending that are require to pay for new employees, create jobs,  and lower the unemployment rate enough to achieve full employment in a local area (Greenville County, SC.)

Full employment analysis for Greenville County, SC

Included is the above graph showing the weekly business spending required to pay the employee compensation costs (e.g., 2/3 wages + 1/benefits) for 1000 jobs.  Also included is the graph shown below that illustrates the amount of money from  weekly per capita spending that must be applied to pay employee compensation costs for enough jobs to achieve full employment in that county.

The graphs in the analysis follow the following progression to demonstrate the local economic activity required to achieve full employment:

• Number of jobs required to lower unemployment rate by specific percentages.
• Business spending required to pay for paychecks and employee compensation (i.e., jobs).
• Business spending required to change the unemployment rate by a specific percentage.
• Applied per capita & household spending required to pay for paychecks and employee compensation (i.e., jobs).
• Applied per capita & household spending required to change the unemployment rate by a specific percentage.

To generate the graphs, the following data was used:

  • 2010 Greenville County, SC Population: 451,225
  • 2010 Greenville County, SC Households: 176,531
  • July 2011 Greenville County, SC Labor Force: 225,340
  • July 2011 Greenville County, SC Employed: 204,946
  • July 2011 Greenville County, SC Unemployed: 20,394
  • July 2011 Greenville County, SC Unemployment Rate: 9.1%
  • Number of jobs representing a 1% shift in the Unemployment Rate: 2,253
  • Example Wage Rates ($/hour): $10, $12, $14, $16, $18, $20
  • Employee Compensation (EC) Multiplier  (e.g., 2/3 wages + 1/3 benefits): 1.5

Population data: U.S. Census Bureau

SC Employment data: SC Dept. of Employment and Workforce