Why Focus on High-paying Base Jobs
The way communities create economic opportunity and wealth generation is by focusing on the creation of base jobs (sometimes called ‘primary jobs’).
On average, base jobs pay wages that are significantly higher than non-base jobs. In Larimer County, average earnings of workers at base employers are $55,628 compared to $31,608 for the average non-base job.
Base employers are defined as companies which produce goods and services in excess of what can be consumed by the local market. Those goods not consumed by the local market are exported to other markets in exchange for money, or ‘export’ income. Put another way, when a base employer sells a product outside the Fort Collins area, money is returned to Fort Collins for those products, and that in turn creates a flow of new income into the community in the form of payroll and secondary benefits. The secondary benefits include the creation of ‘indirect’ or ‘spin-off’ jobs and tax revenue to local governments. Generally, the secondary jobs include retail services, suppliers, lawyers, doctors and non-profit employment. These occupations provide services to base employers and their employees.
A term used to measure the benefits of any given economic activity is ‘multiplier.’ There are various types of multipliers such as output, employment, income and value-added. They summarize the total impact that can be expected from an economic activity. Employment multipliers for base employers are significantly higher than those for non-base employers.
An employment multiplier is derived from a series of economic calculations that estimates the number of jobs required to meet the needs of one high-paying base job. The larger the multiplier, the greater the economic impact of the high-paying base job. Two things determine the size of the multiplier: the average wage paid to the employee and the amount and cost of “inputs” required for the base employee to accomplish his or her work.
A ‘typical’ employment multiplier might be in the 1.2 to 3 range. That means a high-paying base job supports an additional 0.2 to 2.0 jobs in the community. These jobs may either be through the employer’s supply chain, or the purchases of employees themselves.
Retail employment, with generally lower wages, has low multipliers. Therefore, while important to finance local government through sales tax collections, the retail sector typically is not an economic driver. Higher paying base jobs are important to a community because they put disposable income into the pockets of residents, which in turn creates a healthy retail sector and revenue to local government.
In Fort Collins, this sets up a potential conflict in the city government’s economic program. Since city government gets most of its revenue from sales tax, there is short-term pressure to focus on retail development rather than focusing long-term on growing base employment.
In summary, base jobs = community wealth = better quality of life / standard of living. Conversely, loss of high paying base jobs = declining disposable income = diminished aggregate community wealth = diminished quality of life / standard of living.