Wednesday, December 26, 2007

Buy local -- how productive? 

I was gathering up some data a few weeks ago for a new Quarterly Business Report -- to be published within the next two weeks, watch this space -- and picked through some new data on St. Cloud GDP. One of the things that jumped out at me was this fact: St. Cloud area employment in retail trade is almost 14% of total employment, but retail contributes only about 8% to area GDP. All those restaurants and bars hire more than 7% of the labor force but do not account for 2% of GDP. So when we worry about what the effect of opening this store or closing that restaurant would be, we are worried about what happens to low-paying jobs and the income of the shopkeepers and not about what the area produces.

John Palmer is thinking about these claims too.
Suppose I shop locally when I could get something for a lower price by shopping on the internet. I'd be better off, and I would have some money left over. If I paid the higher price to the local merchant they'd have the extra money instead of me. But they'd be shipping a bunch of the money outside the community, too, to pay for the merchandise they sold and to buy other things for themselves. I don't see much difference except they'd be richer and I'd be poorer.
You'd need some kind of input-output analysis to get that figured out more precisely, but the only effect I see is that somehow the local shopkeepers will pay better wages to my low-wage workers than the Wal-Marts and McDonalds. But if those places disappeared, do you think the same number of jobs would be available by the local merchants at higher wages? A decrease in demand for workers would push wages up? You'll have to work me through that logic.