Hopefully, everyone is aware that IMPLAN calculates economic impacts based on labor income. Impacts associated with spending by labor are called "indirect" effects in IMPLAN. You can, in theory, create an IMPLAN report by entering a change in labor income.
For example, if the hospital increases wages by $2 million, what is the economic impact in the community? This is all driven off labor income, not jobs or output. Those do not change in this scenario.
The question is, what is the direct effect in IMPLAN? How does IMPLAN treat a labor income change? For example, what about in-commuters? They drive in to work and take their salary home. Do I have to adjust the labor income change for them? Or what about taxes? Does IMPLAN account for a percent that goes to taxes or do I have to adjust labor income for those too?
Here's what I learned:
"Leakages from labor income include payments to social insurance (social security, medicare, unemployment contributions paid by both the employee and the employer) and incommuters, the remainder go to local households. Leakages from household spending include income taxes, savings and imported goods and services. The remainder is purchase of local goods and services and is significantly smaller than the original labor income value.
Also, this first round of local spending is "output", the labor income required to produce this new demand is even smaller.
Remember that retail industry purchases are margined, so only the gross margin is guaranteed to be local, the producer value may or may not be from a local manufacturer." - Posted to IMPLAN user's forum by Doug Olson
My interpretation: IMPLAN accounts for leakages to non-local suppliers and to in-commuters.
It raised a second question for me - how do they calculate the percent going to in-commuters. I found this on the forum (also from Doug):
"Currently commuting flows are based on the REIS residence adjustment, adjusted by national "alien" workforce ratios. These values are net values. The current MRIO only internalizes the interregional industry purchases. We are working to introduce the commuting to the Multi-region model"