Locally creating the multiplier effect

Published 8:40 am Saturday, October 29, 2016

(Editor’s Note: This is the second part of a series on the Shop Orange County campaign of the area chambers of commerce)

By Dawn Burleigh


Spending a dollar locally creates a multiplier effect.

The multiplier is comprised of three elements — the direct, indirect, and induced impacts.

  • Direct impact is spending done by a business in the local economy to operate the business, including inventory, utilities, equipment and pay to employees.
  • Indirect impact happens as dollars the local business spent at other area businesses re-circulate.
  • Induced impact refers to the additional consumer spending that happens as employees, business owners and others spend their income in the local economy.

On average, 48-percent of each purchase at local independent businesses was recirculated locally, compared to less than 14-percent of purchases at chain stores, according to American Independent Alliance website.

Chairman of the Chamber Economic Development Tad McKee calls it the circle of life.

“When you spend locally it creates the multiplier effect,” McKee said. “Business are able to hire more, more houses are built, more students enrolled in the schools.”

Orange County school districts receive approximately $5,200 in funding per student.

More local purchases could help increase the funding available to the school district.

Orange County school districts are comprised of 15,000 students and 2,100 employees.

“When people shop, they do not think about how it affects everything,” Greater Orange Area Chamber of Commerce President Ida Schossow said. “It affects how many firemen, police officers we have and our roads. The non-profits also benefit such as the Lion’s Club, little league baseball teams, and dance teams.”

The multiplier effect, repeated a number of times as the initial shopping purchase dollar reverberates throughout the Orange County economy, only happens when people shop locally.

“If you look at Seattle and Portland, they are booming as more people shop on the Internet,” Tad McKee said. “By not staying local, they could be in danger of losing their jobs.”

McKee also said industries looking to relocate in areas showing a strong support of local businesses.

“In Austin, it is anti internet,” McKee said. “In the long term, the internet affects Orange County. So many are addicted to shopping on the Internet. In the extreme, once local business dry up, then the neighborhoods dry up.”

Since the grassroots efforts of the chambers began the Shop Orange County campaign, local cities have seen an increase in sales tax revenue.

“It is showing favorably with the increase in housing developments in the Little Cypress and Orangefield areas,” McKee said.