The 2014 Economic Impacts of Honda Manufacturing of Alabama, LLC

The 2014 Economic Impacts of
Honda Manufacturing of Alabama, LLC
and its Tier-I suppliers
COMMISSIONED BY THE
ECONOMIC DEVELOPMENT PARTNERSHIP OF ALABAMA
NOVEMBER 2015
Culverhouse
College of Commerce
Center for Business and Economic Research
THE UNIVERSITY OF ALABAMA®
The 2014 Economic Impacts of
Honda Manufacturing of Alabama, LLC
and its Tier-I suppliers
Prepared for the
Economic Development Partnership of Alabama
November 2015
by
Samuel Addy, Ph.D.
Associate Dean for Economic Development Outreach and Senior Research Economist
Ahmad Ijaz
Executive Director and Director of Economic Forecasting
Viktoria Riiman
Socioeconomic Analyst III
Center for Business and Economic Research
Culverhouse College of Commerce
The University of Alabama
Box 870221, Tuscaloosa, AL 35487-0221
Tel: (205) 348-6191Fax: (205) 348-2951
Disclaimer and Acknowledgments: This report reflects the analysis and opinions of the authors, but not necessarily those of
the faculty and staff of the Culverhouse College of Commerce (Culverhouse) or the administrative officials of The University of
Alabama (UA). We are very grateful to the officers and staff of the Economic Development Partnership of Alabama (EDPA), Honda
Manufacturing of Alabama, LLC (HMA), and HMA’s Tier-I suppliers in Alabama who directly or indirectly provided us with key data
or were involved in the data gathering effort. Many thanks also to our colleagues at the Center for Business and Economic Research for
their help on various phases of this research project.
Honda and Its Tier-I Suppliers 2014 Alabama Economic Impacts
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CONTENTS
Executive Summaryi
Introduction1
Economic and Fiscal Impacts 4
HMA Impacts5
HMA Tier-I Suppliers Impacts
8
Combined HMA and Its Tier-I Suppliers Impacts
8
Socioeconomic Trends in the Honda Study Area 9
Population9
Civilian Labor Force and Employment
9
Jobs and Earnings11
Income11
Real GDP11
Conclusions12
Appendix13
Methodology – Economic Impact Analysis
13
Honda and Its Tier-I Suppliers 2014 Alabama Economic Impacts
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Executive Summary
This study presents the 2014 economic and fiscal impacts of Honda Manufacturing of Alabama, LLC (HMA) and its
Tier-I suppliers on the State of Alabama and on Calhoun, Etowah, Jefferson, St. Clair, and Talladega counties. The
economic impacts focus on output, value-added, earnings (wages and salaries), and employment. Output refers to total
or gross business sales and contains value-added, which is the contribution to gross domestic product (GDP) or the value
of goods and services produced on a value-added basis. Earnings impacts are part of value-added and are the wages
and salaries of the workers recognized by the employment impact. The fiscal impacts are conservative because they are
derived from earnings impacts with only income, sales, and property taxes considered; company paid taxes and other
taxes and fees (e.g., utility taxes, car tags and fees, rental/leasing, alcoholic beverages, cigarettes and tobacco, insurance
premiums, lodgings, driver’s license, and auto title) are not.
HMA has invested $2.0 billion to date in Alabama, provides skilled high-paying jobs, generates business for its suppliers
and others, and pays taxes and other impositions. In 2014 the company employed 5,079 Alabama workers with a
$360.8 million payroll for an average of $71,047 per HMA employee which is $28,453 (or 67.0 percent) higher than the
$42,594 average earnings for all Alabama workers. The five counties accounted for 87 percent of the company’s Alabama
employment and payroll. In addition, the company spent more than $2.5 billion in nonpayroll expenditures in Alabama.
The HMA 2014 economic and fiscal impacts on the Alabama economy are $6.8 billion in output (3.4 percent of the
$199.4 billion Alabama Gross Domestic Product [GDP]), which includes $2.5 billion in value-added of which nearly
$1.2 billion is earnings for 17,336 direct and indirect jobs. The earnings impact generated $112.0 million in state ($62.4
million) and local ($49.7 million) taxes. County impacts range from 1,163 workers and $77.2 million in earnings for
Etowah to 2,588 workers and $175.7 million in earnings for Talladega.
The company’s Tier-I suppliers were conservatively estimated to have had 7,618 workers with a $186.3 million payroll and
made $635.2 million nonpayroll expenses in the state in 2014. The associated Tier-I suppliers’ impacts on the state are
$1.9 billion in output (about 1.0 percent of GDP), $697.5 million value-added, $606.7 million earnings, 26,003 jobs, and
$57.8 million in state ($32.2 million) and local ($25.6 million) taxes. For the five counties, the Tier-I suppliers impacts
range from 93 workers and earnings of $2.2 million for St. Clair County to 800 workers and $27.8 million in earnings for
Calhoun county.
The combined economic and fiscal impacts for HMA and its Tier-I suppliers on the Alabama economy in 2014 are $8.7
billion in output (about 4.4 percent of GDP), $3.2 billion value-added, $1.8 billion earnings, 43,339 jobs, and $169.9
million in state ($94.6 million) and local ($75.3 million) taxes.
Clearly, HMA had very significant impacts on Alabama and the five-county region in 2014. In addition, socioeconomic
trends for the five counties indicate that the presence of HMA has been very positive for the region.
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The 2014 Economic Impactsof
Honda Manufacturing of Alabama, LLC
and Its Tier-I Suppliers
Introduction
This report presents the economic and fiscal impacts of Honda Manufacturing of Alabama, LLC (HMA) in Lincoln,
Alabama, and its Tier-I suppliers on the State of Alabama and each of the following five Alabama counties: Calhoun,
Etowah, Jefferson, St. Clair, and Talladega. Socioeconomic trends in these five counties are also presented.
The economic impacts are for calendar year 2014 and focus on output, value-added, earnings (wages and salaries), and
employment. Output refers to total or gross business activity often measured by revenues or sales. This overall business
activity impact includes value-added, which is the contribution to gross domestic product (GDP) or the value of goods and
services produced on a value-added basis. The contribution to GDP is overall business activity less business-to-business
transactions that are also called intermediate transactions. Earnings impacts are part of value-added and are the wages and
salaries for employment impact jobs. The fiscal impacts are conservative because they are derived from earnings impacts
with only income, sales, and property taxes considered; company paid taxes and other taxes and fees (e.g., utility taxes, car
tags and fees, rental/leasing, alcoholic beverages, cigarettes and tobacco, insurance premiums, lodgings, driver’s license, and
auto title) are not.
HMA is the largest light truck production facility in the
world and sole producer of Honda Odyssey
minivans, Pilot sport utility
vehicles, and the Acura MDX
as well as V-6 engines. Current
annual vehicle production
capacity is 340,000. Production
began at the plant in November
2001 and more than three
million vehicles have rolled off
the line. HMA provides skilled
high-paying jobs, generates business for its suppliers and others, and pays taxes and other impositions. The company has
invested $2.0 billion to date in Alabama.
The company employed 5,079 of the state’s workers with a $360.8 million payroll in 2014 (Table 1). The five counties in
this study accounted for 87 percent of the HMA employment and payroll. The average earnings for an HMA Alabama
employee was $71,047, roughly 67.0 percent (or $28,453) higher than the $42,594 average earnings for an Alabama worker.
In addition to its payroll, HMA made more than $2.5 billion in nonpayroll expenditures within the state. Nonpayroll
expenditures include purchases, employee benefits, taxes, and other charges. The company also paid millions in taxes;
property taxes paid because of the plant’s location amounted to $10.3 million.
Honda and Its Tier-I Suppliers 2014 Alabama Economic Impacts
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The plant had 27 Tier-I suppliers in 2014. Fifteen of these suppliers employed 4,523 Alabama workers with a $124.3
million payroll and had $579.6 million nonpayroll expenditures in the state. It is estimated that all 27 suppliers employed
7,618 Alabama workers and had payroll and nonpayroll expenditures of $186.2 million and $635.2 million, respectively
(Table 1). It is therefore important to note that the Tier-I supplier impacts presented here are very conservative.
Additionally, the exclusion of non-Tier I suppliers means that the impacts reported here are below what the full HMA and
its suppliers impacts in 2014 would have been.
Table 1. HMA and Its Tier-I Suppliers 2014 Employment and Expenditures in Alabama
HMA
Employment
Payroll expenditure ($ Millions)
Nonpayroll expenditure ($ Millions)
Total expenditure ($ Millions)
5,079
360.8
2,556.9
2,917.7
Average HMA worker earnings ($)
Average Alabama worker earnings ($)
HMA to Alabama worker earnings ratio
71,047
42,594
1.67
HMA Tier-I Suppliers
7,618*
186.3*
635.2*
821.5*
Note: Rounding errors may be present. Payroll expenditure covers just salaries and wages, not benefits. The 5,079 HMA
employment covers separations and new hires as well; at any time during the year there were at least 4,700 workers or
associates as they are called.
* Conservative estimates based on complete data for 15 of the 27 HMA Tier-I suppliers.
Source: Economic Development Partnership of Alabama; Honda Manufacturing of Alabama, LLC; U.S. Bureau of
Economic Analysis; and Center for Business and Economic Research, The University of Alabama.
The spending by HMA and its Tier-I suppliers and their workers ends up providing jobs and stimulating business activity
in various sectors of the Alabama economy and the five county economies. The spending also generates significant
taxes for the state and other taxing jurisdictions. Combined payroll and nonpayroll expenditures made in the state in
2014 totaled $2.9 billion for HMA and $821.5 million for the Tier-I suppliers. Such large cash infusions have significant
impacts on state output and GDP and generate earnings and employment beyond those of the company and its suppliers.
The economic and fiscal impacts presented following indicate the influence that HMA and its suppliers have on the
Alabama and county economies, except for any stipulations noted. Payroll, employment, and nonpayroll expenditure data
provided by the Economic Development Partnership of Alabama (EDPA), HMA, and the Tier-I suppliers to HMA were
used for the analysis. The impact methodology is detailed in the Appendix.
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State Honda Suppliers
Limestone
Lauderdale
27
Colbert
3
21
Lawrence
Marion
24
19
2
25
DeKalb
Marshall
Cullman
23
26
20 9
Fayette
Cherokee
Calhoun
St. Clair
Talladega
4
15
Etowah
Blount
Walker
Lamar
Jackson
17
Morgan
Winston
Marion
Madison
22
Cleburne
Talladega
5
7
Tuscaloosa
Pickens
13
Shelby
14
Bibb
Greene
11
1
Hale
Chilton
16
Perry
Sumter
Autauga
Marengo
Lowndes
Choctaw
Coosa
8
Elmore
Lee
Montgomery
Russell
Bullock
Wilcox
Washington
Barbour
Pike
Butler
Clark
12
Talla poosa Chambers
Macon
Dallas 10
18
Randolph
Clay
Crenshaw
Monroe
Henry
Coffee
Conecuh
Conecuh
Covington
Geneva
Dale
Houston
Mobile
6
1.
2.
3.
4.
5.
6.
7.
8.
9.
AGC Automotive Americas
Alabama Cullman Yutaka Technologies, LLC
American Leakless Company, LLC
A.P. Plasman Inc.
Bridgewater Interiors, LLC
Fleetwood Metal Industries
Gulf Shore Assemblies, LLC
Hanwha L&C Alabama, LLC
Hayashi Telempu North America
Honda and Its Tier-I Suppliers 2014 Alabama Economic Impacts
10.
11.
12.
13.
14.
15.
16.
17.
18.
Baldwin
HL-A Company Inc.
Industry Products Company
INOAC Interior Systems
International Automotive Components
Johnson Controls Interiors, LLC
KTH Leesburg Products, LLC
Kumi Manufacturing Alabama, LLC
Matsu Alabama Inc.
M-TE Inc.
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19.
20.
21.
22.
23.
24.
25.
26.
27.
Newman Technology of Alabama Inc.
Nitto Denko Automotive-Ohio Inc.
North American Lighting
Pilkington North America Inc.
Rainsville Technology Inc.
Sanoh America Inc.
Topre America Corporation
TS Tech Alabama, LLC
Unipres Alabama Inc.
3
Economic and Fiscal Impacts
To determine the total economic and fiscal impacts, two types of impacts are estimated. The first, household impacts,
deals with the economic and fiscal impacts of the spending behavior of workers of HMA and its suppliers and
determines employment and earnings impacts. Direct effect multipliers are used to determine the household impacts.
Expenditure impacts, the second type, include output and value-added impacts and use final demand multipliers. In this
study, multipliers from the Regional Input-Output software, RIMS II, developed by the U.S. Department of Commerce’s
Bureau of Economic Analysis are used. RIMS II is available for every state, region, county, and metropolitan area in the
nation. The impact model developed for the analysis combines RIMS II multipliers for the motor vehicle, body, trailer,
and parts manufacturing sector for Alabama and the five counties with a fiscal impact component that is specific to
those geographies. Impacts of HMA only, the suppliers, and a combination of the two are presented in that order. Table
2 shows both the relevant input data and RIMS II multipliers that were used for this report.
Table 2. Input Data and Multipliers
HMA
Employment
Payroll Amount
Expenditures
TIER-I Suppliers
Employment
Payroll Amount
Expenditures
Multipliers
Output
Value-Added
Direct Earnings
Direct Employment
Alabama
Calhoun
Etowah
Jefferson
St. Clair
Talladega
5,079
1,172
647
604
824
1,196
$360,845,228
$2,556,889,842
$78,164,471
$46,395,019
$44,553,911
$61,337,658
$83,422,269
Alabama
Calhoun
Etowah
Jefferson
St. Clair
Talladega
7,618
186,251,254
371
13,393,073
338
8,745,903
90
1,948,886
51
1,234,269
248
7,972,446
635,211,528
2,609,969
1,096,268
1,094,782
443,426
8,409,735
Alabama
Calhoun
Etowah
Jefferson
St. Clair
Talladega
2.3239
1.6088
1.5105
1.9162
1.5193
1.6789
0.8491
0.5348
0.5190
0.7425
0.5319
0.4977
3.2574
2.0763
1.6648
2.5411
1.7981
2.1057
3.4133
2.1571
1.7980
2.6767
1.8171
2.1641
Note: Rounding errors may be present. Payroll expenditure covers just salaries and wages, not benefits.
Source: Economic Development Partnership of Alabama; Honda Manufacturing of Alabama, LLC; U.S. Bureau of
Economic Analysis; and Center for Business and Economic Research, The University of Alabama.
Fiscal impacts are derived from earnings impacts allowing for the fact that not all of the earnings impacts are sales or
income taxable. Spending on sales taxable items constitute 42.4 percent of total earnings based on U.S. Bureau of
Labor Statistics (BLS) data. State taxable income (net income) is about 65.8 percent of earnings. Sales tax rates used
are 4.0 percent for the state and 5.0 percent for local (combined county and city) jurisdictions statewide; local sales tax
rates vary between 3.0 to 7.0 percent but are usually at 5.0 percent. The state income tax rate is essentially 5.0 percent
Honda and Its Tier-I Suppliers 2014 Alabama Economic Impacts
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on net income; the first $500 and the next $2,500 are taxed at 2.0 percent and 4.0 percent, respectively, for single
persons, head of family, and married persons filing separately while for married persons filing joint returns the first
$1000 and the next $5000 are taxed at 2.0 percent and 4.0 percent, respectively, and excess net income is taxed at the
5.0 percent rate. Corporations pay at a 6.5 percent rate and corporate income tax averages about 15 percent of
individual income tax. State law in 2006 increased the individual income tax threshold by increasing the standard
deduction for taxpayers with adjusted gross income of $30,000 or less and by increasing the dependent exemption for
taxpayers with adjusted gross income of $100,000 or less. Property taxes are determined using assessment and millage
rates published by the Alabama Department of Revenue as well as the ratio of state property tax receipts to state
individual income tax receipts.
It is important to note that the fiscal impacts are conservative for two major reasons. First, since they are derived from
the earnings impacts they are additional to any company paid taxes. Second, only income, sales, and property taxes
are considered and reported. Taxes and fees that are left out include utility taxes, car tags and fees, rental/leasing,
alcoholic beverages, cigarettes and tobacco, insurance premiums, lodgings, driver’s license, and auto title. Table 3
shows the separate economic and fiscal impacts of HMA and its Tier-I suppliers on Alabama and Calhoun, Etowah,
Jefferson, St. Clair, and Talladega counties and Table 4 shows the combined impacts.
HMA Impacts
The 2014 HMA statewide economic impacts are $6.8 billion in output (3.4 percent of the $199.4 billion 2014 Alabama
GDP), of which $2.5 billion is value-added (or contribution to GDP) that includes $1.2 billion million in earnings to
Alabama households for 17,336 direct and indirect jobs. The employment impact includes 12,257 indirect jobs with
average earnings of $66,457. Of the five counties, Talladega had the highest earnings impacts and Etowah had the
lowest, ranging from $77.2 million to $175.7 million. The separate county employment impacts range from 1,163
workers for Etowah County up to 2,588 for Talladega County. The $1.2 billion 2014 HMA statewide earnings impact
generated a total of $112.1 million in state and local taxes. The state received $62.4 million made up of $38.6 million
in income taxes, $19.9 million in sales taxes and $3.8 million in property taxes. County and municipality tax receipts
totaled $49.7 million and comprised $24.9 million sales taxes and $24.7 million property taxes. Etowah County had
the lowest sales tax receipts ($1.2 million) while Talladega County collected $2.9 million. Property tax receipts were
also the lowest in Etowah County, but highest in Calhoun County.
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Table 3. Separate 2014 Economic and Fiscal Impacts for HMA and its Tier-I Suppliers
HMA IMPACT
Economic Impacts (Millions, except for jobs)
Output (Gross Business Sales)
Contribution to GDP
Earnings (Wages and Salaries)
Employment (Jobs)
Fiscal Impacts (Millions)
State taxes
Individual income (II)
Sales
Property
Combined state II, sales, and property
Local (city and county) taxes -- statewide
Sales
Property
Combined local sales and property
HMA TIER - I SUPPLIERS IMPACT
Economic Impacts (Millions, except for jobs)
Output (Gross Business Sales)
Contribution to GDP
Earnings (Wages and Salaries)
Employment (Jobs)
Fiscal Impacts (Millions)
State taxes
Individual income (II)
Sales
Property
Combined state II, sales, and property
Local (city and county) taxes
Sales
Property
Combined local sales and property
Alabama
$6,780.5
$2,477.4
$1,175.4
17,336
Calhoun
Etowah
Jefferson
St. Clair
Talladega
$162.3
2,528
$77.2
1,163
$113.2
1,617
$110.3
1,497
$175.7
2,588
$38.6
$19.9
$3.8
$62.4
$5.3
$2.8
$0.5
$8.6
$2.5
$1.3
$0.2
$4.1
$3.7
$1.9
$0.4
$6.0
$3.6
$1.9
$0.4
$5.9
$5.8
$3.0
$0.6
$9.3
$24.9
$24.7
$49.7
$3.1
$5.4
$8.5
$1.5
$1.2
$2.6
$2.2
$2.3
$4.5
$2.1
$2.0
$4.1
$3.4
$2.9
$6.2
Alabama
$1,909.0
$697.5
$606.7
26,003
Calhoun
Etowah
Jefferson
St. Clair
Talladega
$27.8
800
$14.6
608
$5.0
241
$2.2
93
$16.8
537
$19.9
$10.3
$2.0
$32.2
$0.9
$0.5
$0.1
$1.5
$0.5
$0.2
$0.0
$0.8
$0.2
$0.1
$0.0
$0.3
$0.1
$0.0
$0.0
$0.1
$0.6
$0.3
$0.1
$0.9
$12.9
$12.8
$25.6
$0.5
$0.9
$1.5
$0.3
$0.2
$0.5
$0.1
$0.1
$0.2
$0.0
$0.0
$0.1
$0.3
$0.3
$0.6
Note: Rounding errors may be present. Therefore $0.0 million indicates amounts that are less than $50,000 but not equal to zero.
Source: U.S. Department of Commerce, Bureau of Economic Analysis; EDPA; HMA; Alabama Department of Revenue; and Center for Business and Economic Research,
The University of Alabama.
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Table 4. Combined HMA and its Tier-I Suppliers 2014 Economic and Fiscal Impacts
HMA & TIER-I SUPPLIERS IMPACT
Economic Impacts (Millions, except for jobs)
Output (Gross Business Sales)
Contribution to GDP
Earnings (Wages and Salaries)
Employment (Jobs)
Fiscal Impacts (Millions)
State taxes
Individual income (II)
Sales
Property
Combined state II, sales, and property
Local (city and county) taxes
Sales
Property
Combined local sales and property
Alabama
$8,689.5
$3,175.0
$1,782.1
43,339
Calhoun
Etowah
Jefferson
St. Clair
Talladega
$190.1
3,328
$91.8
1,771
$118.2
1,858
$112.5
1,590
$192.4
3,125
$58.6
$30.2
$5.7
$94.6
$6.2
$3.2
$0.6
$10.1
$3.0
$1.6
$0.3
$4.9
$3.9
$2.0
$0.4
$6.3
$3.7
$1.9
$0.4
$6.0
$6.3
$3.3
$0.6
$10.2
$37.8
$37.5
$75.3
$3.6
$6.3
$10.0
$1.8
$1.4
$3.1
$2.3
$2.4
$4.7
$2.1
$2.1
$4.2
$3.7
$3.1
$6.8
Note: Rounding errors may be present.
Source: U.S. Department of Commerce, Bureau of Economic Analysis; EDPA; HMA; Alabama Department of Revenue; and Center for Business and Economic Research, The University of Alabama.
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HMA Tier-I Suppliers Impacts
The 2014 HMA Tier-I suppliers’ statewide economic and fiscal impacts are $1.9 billion in output (nearly 1.0 percent of the
$199.4 billion 2014 Alabama GDP), which includes $697.5 million in value-added of which $606.7 million is earnings for
26,003 jobs, and $57.8 million in state and local taxes. The state received $32.2 million made up of $19.9 million in income
taxes, $10.3 million in sales taxes, and $2.0 million in property taxes. County and municipality tax receipts of about $25.6
million comprised $12.9 million sales taxes and $12.8 million property taxes. The employment impact includes 18,385
indirect jobs with average earnings of $22,869. Of the five counties, impacts range from 93 workers and $2.2 million
earnings for St. Clair County to 800 jobs and $27.8 million earnings for Calhoun County. Accordingly, local tax impacts
were lowest for St. Clair County and highest in Calhoun County). An important caveat is that the Tier-I supplier impacts
presented here are very conservative because input data for suppliers are estimated from 15 suppliers’ responses out of 27.
Combined HMA and Its Tier-I Suppliers Impacts
The combined HMA and suppliers 2014 economic and fiscal impacts on Alabama and the five counties are shown in Table 4.
The same caution as with the suppliers’ only impacts applies to the combined impacts. Statewide economic impacts are $8.7
billion in output (4.4 percent of the $199.4 billion 2014 Alabama GDP), $1.8 billion in earnings and 43,339 jobs. The
employment impact includes 30,642 indirect jobs. Of the five counties, Calhoun had the largest jobs impact while Talladega
had the largest earnings impacts. St. Clair had the smallest impact
in term of jobs and Etowah had the lowest earning impact. The
separate county impacts range from 1,589 workers $91.8 million in
earnings up to 3,328 workers and $192.4 million in earnings. The
$1.8 billion statewide earnings impact generated a total of $169.9
million in state and local taxes. The state received $94.6 million
consisting of $58.6 million in income taxes, $30.2 million in sales
taxes and $5.7 million in property taxes. County and municipality
tax receipts totaled $75.3 million and comprised $37.8 million sales
taxes and $37.5 million property taxes. Of the five counties,
Talladega had the highest sales tax receipts with $3.7 million and
Etowah County had the lowest at $1.8 million. Property tax receipts
were lowest in Etowah County ($1.4 million) and highest in
Calhoun County ($6.3 million). These fiscal impacts only cover
income, sales, and property taxes and do not include other taxes
and fees; they also do not include taxes paid directly by HMA and
its Tier-I suppliers to state and local jurisdictions. The combined
impacts show clearly that the presence of HMA has significant
impacts on the Alabama economy, especially when its Tier-I
suppliers are also taken into consideration.
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Socioeconomic Trends
in the Honda Study Area
Population
Honda’s employment of 5,079 workers at its plant in Lincoln, Alabama, is astounding considering that the city had
an estimated population of 6,438 in 2014. Talladega County, home to the city, is Alabama’s 17th most populous county
with an estimated 81,322 residents in 2014. U.S. Census Bureau data indicate that Talladega County lost 969 residents
—a 1.2 percent decline—between 2010 and 2014, a period in which the State of Alabama population rose by 1.4
percent. Population fell in Talladega County’s two largest cities; by about 70 to 16,012 for Talladega and by 161 to
12,703 for Sylacauga. The city of Oxford, which is largely in Calhoun County but spills over into Talladega County,
had almost no change in population for its Talladega County portion. Lincoln was the only city in the county that saw
population growth, gaining about 180 new residents (2.9 percent) from 2010 to 2014. Expanding production and job
gains at the Honda plant most likely created this.
As noted earlier, the workforce at HMA is largely drawn from Talladega, Calhoun, Etowah, Jefferson, and St. Clair
counties. Population growth was most rapid in St. Clair County, which is part of the Birmingham-Hoover metro area,
with a gain of 3.7 percent (3,104 residents) from 2010 to 2014. Growth was most rapid in the county’s largest cities
of Moody and Pell City. Jefferson County, which is the center of the Birmingham-Hoover MSA, has started seeing its
population increase since 2010 as the Hoover city population keeps rising and the attraction of urban living helps to
curtail earlier population losses in the city of Birmingham. The county gained an estimated 2,443 residents between
2010 and 2014, an increase of 0.4 percent. Calhoun County, hit hard by the last recession, saw its population shrink by
2,670 residents or 2.3 percent. Much of that loss was in the city of Anniston, followed by Jacksonville and Oxford.
Etowah County, which comprises the Gadsden MSA, has seen mixed employment growth. However, the county has
been growing its leisure and hospitality services as well as rebuilding the manufacturing sector, auto suppliers being
one of the growing industries. The county lost almost 900 residents over the four years, a decline of 0.9 percent.
Gadsden city and Attalla city had the largest decreases while Southside city population has been increasing.
Civilian Labor Force and Employment
Alabama and most of its counties saw gains in both civilian labor force and total employment between 2000 and 2007,
but all areas of the state were negatively impacted by the 2007-2009 recession. Statewide employment declined by
almost 164,400 (7.9 percent) between 2007 and 2009. Employment began to rebound slightly statewide in 2010, but in
2014 it still had not surpassed its 2007 level. Although the civilian labor force declined as well, it did not drop as fast as
employment. The state’s unemployment rate—which was at 4.0 percent in 2007—climbed to a peak of 11.0 percent in
2009, dropped to 6.8 percent in 2014, and averaged 6.1 percent through September 2015.
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Employment of Talladega County residents dipped by 6,509 from 2007 to 2010, but started rising again after that. With
HMA increasing production and hiring new workers as well as other companies’ expansions, employment in the county
rose by about 1,845 or 6.1 percent from 2010 to 2014 far exceeding the state’s 2.0 percent growth. However, the county
unemployment rate has exceeded the state rate as the growing number of jobs has kept the labor force up while the
state’s labor force has fallen somewhat. The county unemployment rate peaked at 14.4 percent in 2009, but dropped to
7.7 percent in 2014.
The impact of HMA can also be seen in the employment trends of the other study area counties. Calhoun County
employment grew until the last recession, but then posted declines for the years thereafter except for 2011 and
continued declining in the first nine months of 2015. The gain of 226 jobs (0.5 percent) in 2011 could not offset the
more than 7,000 jobs lost from 2007 to 2010. The county labor force has been shrinking since 2008. The
unemployment rate in Calhoun County climbed to 11.4 percent in 2010, but has fallen to 7.9 percent in 2014. Similarly,
employment in Etowah County declined by almost 4,240 or 9.8 percent from 2007 to 2010, started to grow in 2011, and
is now slowly regaining growth in manufacturing and service industries. Employment has risen by 3.4 percent between
2010 and 2014, beating Alabama’s 2.0 percent. Unemployment rose from 4.2 percent in 2006 to 11.5 percent in 2009,
but has declined since then to 7.0 percent in 2014 and remained consistently above the state rate as the county labor
force continues contracting and employment grows slowly.
Employment in St. Clair County is impacted by hiring at Honda and related suppliers, but also strongly affected by
activity in Jefferson County. About 37 percent of workers living in St. Clair County worked in the county while 45
percent worked in Jefferson County in 2006-2010. The county’s employment sharply declined by about 1,890 in 2009,
but then jumped in 2010 by 1,630, and registered a total gain of almost 3,390 (10.3 percent) between 2009 and 2014.
With a 2014 unemployment rate of 5.8 percent, the lowest of the five study area counties, St. Clair County’s rate remains
well below the Alabama rate. Jefferson County contributes about 15 percent of Alabama’s civilian labor force and the
diversity and size of the county’s workforce make it difficult to discern relevant trends. Many who work in Jefferson
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County commute in from other counties, but more people have started living and working in the county. In 2006-2010,
89 percent of Jefferson County’s workers lived in the county compared to 75 percent in 2000. Unemployment in the
county peaked at 10.8 percent in 2009, but remained consistently below the state rate. A roughly 18,150 employment
gain from 2009 to 2014 and varying labor force growth reduced the rate to 6.3 percent.
Jobs and Earnings
The Census Bureau’s Local Employment Dynamics (LED) database provides data on jobs and earnings by sector in the
state and each county on a quarterly basis. Jobs in the state fell to the lowest level of 1,949,912 in the first quarter of 2010
(Q1 2010) after the recession. From Q4 2010 to Q4 2014 (the most recent quarter for these data), 70,834 jobs were
created. Average monthly earnings across all sectors rose to $3,416 in Q4 2014, an increase of about $180 or 5.5 percent
since Q4 2010. The manufacturing sector gained 21,951 jobs (8.4 percent) in that period with its average monthly
earnings rising $373 or 9.0 percent. Growth of HMA and related manufacturing provides a more positive picture for
Talladega County during the same period. The number of jobs in the county grew slowly but steadily to 34,362, an
increase of 4,210 jobs or 14.0 percent after falling to its lowest level of 27,426 in Q1 2010; this is much better than the
state’s 3.4 percent growth. Average monthly earnings across all sectors climbed more rapidly in the county than in the
state over the four years, up $450 for a 13.0 percent increase, to $3,916 about $500 above the state average. Talladega
County’s manufacturing sector added 2,160 jobs between Q4 2010 and Q4 2014, an increase of 25.5 percent.
Manufacturing average monthly wages rose by $931 during this period, an increase of 17.0 percent that is more than
double Alabama’s. The county’s average monthly manufacturing wage of $6,393 in Q4 2014 amounted to 141 percent of
the state average.
Income
During the eight years from 2000 to 2008, total wage and salary income in Alabama rose by 38.2 percent. Jefferson
County’s increase was a smaller 25.5 percent and Etowah County saw a 21.0 percent gain. Wages and salaries in Calhoun,
St. Clair and Talladega counties rose higher than the state average by 50.9, 63.0 and 66.9 percent, respectively. The state
and five study area counties saw wage and salary income fall to the lowest levels in 2009. From 2009 to 2013, however,
wages and salaries started rising steadily in all the counties except Calhoun. Talladega had the most rapid increase with a
22.3 percent gain, more than twice the state’s 8.1 percent, followed by St. Clair with 19.8 percent. Jefferson had 8.5
percent and Etowah 5.7 percent. In the same period, per capita income gains for three study area counties—Jefferson, St.
Clair, and Talladega—beat the state gain. Personal income gains in Etowah County slightly lagged the state average while
Calhoun County’s gain was well below the state gain over the four-year period.
Real GDP
Growth in the real value of goods and services produced in Alabama accelerated from 1.1 percent in 2010 to 2.0 percent
in 2013 and 2014 reaching $185.3 billion in 2014 from $172.2 billion in 2010. Strong growth in the state’s automotive
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industry helped manufacturing sector real output rise 20.7 percent during the four years to $33.1 billion. The real GDP
of durable goods manufacturers, which includes automotive-related firms, grew 30 percent to $21 billion. Among the
five study area counties, Talladega saw the largest real GDP increase over the four-year period with 22.1 percent. Its
manufacturing sector’s real GDP grew 34.2 percent, much higher than the 20.7 percent for the state’s sector, to nearly
$1.5 billion. St. Clair County had the second highest increase in real GDP during the four-year period. Real GDP for the
county’s manufacturing sector grew 52.4 percent, from $197 million in 2010 to $300 million in 2014.
Conclusions
This report determined that the 2014 economic and fiscal impacts of HMA and its Tier-I suppliers on the State of
Alabama and on Calhoun, Etowah, Jefferson, St. Clair, and Talladega counties are very significant. HMA has invested
2.0 billion to date in its Lincoln, Alabama plant, provides skilled and high-paying jobs, generates business for its
suppliers, and pays taxes and other impositions. In addition, HMA’s presence has been generally positive for the state
and five counties as is evidenced by socioeconomic trends involving population, civilian labor force and employment,
jobs and earnings, income, and real GDP.
In 2014 HMA employed 5,079 Alabama workers with a $360.8 million payroll for an average of $71,047 per employee—
which is 67 percent higher than the $42,594 average earnings for an Alabama worker—and spent more than $2.5 billion
in nonpayroll expenditure. The company’s 27 Tier-I suppliers are estimated to have employed an additional 7,618
Alabama workers with a $186.3 million payroll and made $635.2 million nonpayroll expenses in the state.
HMA alone had 2014 economic and fiscal impacts on the Alabama economy of $6.8 billion in output (3.4 percent of the
$199.4 billion Alabama Gross Domestic Product [GDP]), including $2.5 billion in value-added of which nearly $1.2
billion is earnings for 17,336 direct and indirect jobs, and $112.0 million in state and local taxes that does not include
any company paid taxes. The combined impacts of HMA and its Tier-I suppliers are $8.7 billion in output (about 4.4
percent of GDP), $3.2 billion value-added, $1.8 billion earnings, 43,339 jobs, and $169.9 million state ($94.6 million) and
local ($75.3 million) taxes. These impacts clearly show that HMA has significant impacts on the economies of Alabama
and the five counties, especially if its full network of suppliers is taken into consideration; the full network was not
considered in this report.
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Appendix
Methodology - Economic Impact Analysis
Economic impact analysis measures the effects of a specific economic activity or event on a specified geographic
area. Examples include the economic impact on a state or county of a proposed industrial plant, an existing
industry, closing a military installation, or expansion of an existing industrial facility. In some cases, federal laws,
as well as state and local regulations, require economic impact studies prior to the implementation of a particular
policy (relocation of an economic activity, change in tax policy, changes in zoning ordinance, etc.). No matter
what the justification, impact studies are designed to provide information for instituting policies to facilitate
positive economic impacts and/or mitigate potential negative impacts. Economic impact analysis is therefore an
important decision making tool which can enhance the quality of decisions made, as well as the decision making
process in both public and private sectors. The analysis typically focuses on one or more of the major economic
indicators: output, value-added, employment, and income. The purpose of an impact study usually determines
which socioeconomic variable(s) should be monitored. In this study, the primary focus is on all four major
indicators and the consequent changes in tax revenues: income, sales, and property taxes.
Economic impacts comprise direct and indirect types. Direct impacts are those that are most obvious and
include the wages and salaries of the employees who work directly for a firm or industry, as well as all other
expenditures of the firm or industry, including taxes and distributed profits. Indirect economic impacts, often
referred to as the “ripple” or “multiplier” effects, occur because of the additional demands arising from new
income and expenditures for inputs and products related to the activity under study. New income creates
demand for consumer products and services and their associated indirect impacts are often called induced
impacts. Indirect and induced impacts may spark demand for the output of the firm or industry under study.
For example, HMA creates direct and indirect impacts on other industries through purchases of products and
services for the companies own use and for its workers as consumers. These industries and their workers in
turn make purchases from other vendors in the area, and so forth. To meet this additional demand, the other
industries have to increase production and sometimes payroll with purchases of inputs that may also include
HMA products (Odysseys, Pilots, and Acura MDXs) for their transportation needs. All of this results in
development of the economy. The total economic impacts of the organization being studied are the combined
direct, indirect, and induced impacts. The ratio of the total economic impact to the direct impact is the
multiplier that can be used to summarize the economic effects of the organization on the region(s) or area(s) of
focus.
Economic relationships do not obey strict geographic boundaries; workers and their incomes and industry
purchases flow across these boundaries enabled by transportation and communication. Thus a portion of the
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indirect effects of purchases or expenditures may occur beyond the boundaries of the specified region. Such
occurrences are called leakages, as opposed to linkages (supplier-purchaser relationships) within the region.
In general a small geographic area will have a small absolute economic impact due to a high likelihood of
leakage. A large region will have a larger absolute economic impact, but a smaller relative economic impact of
an individual firm or industry on that area. The closure of one plant within a state, for example, may have only
a small relative impact even if the plant employs thousands of workers; the absolute impact could be very large.
The important point is that the effect or size of the economic impact is influenced by the size of the study area.
If the area is too broadly defined, the relative impact will be small. If narrowly defined, the relative impact will
be large.
Determining the Multiplier
Several methodological approaches are used in estimating economic impacts. These include the construction
of econometric, economic base, computable general equilibrium (CGE), and input-output (I-O) models.
Econometric and CGE models can be very costly and time-consuming to build. Economic base models require
a very detailed set of information that is sometimes not available. The other methodological approaches
generate slightly smaller multipliers than I-O models because of assumptions on factors such as input
substitution and optimization behavior by economic agents.
The I-O modeling framework is used in this study. The technique generates multipliers for the economic
activity of interest by focusing on economic interactions among all industries and all other economic
transactions in the specified region. Interindustry relationships exist in two directions; backward (suppliers and
other upstream linkages and leakages), and forward (distributors, retailers, customers, and other downstream
linkages and leakages). The number and strength of these backward and forward linkages and leakages
determines the multiplier effects of the industry. In general, products and services that require a small number
of inputs and little additional processing (little value addition) will have smaller multiplier effects than complex
products that require lots of inputs and extensive processing.
The four main types of multipliers—output, value-added, income or earnings, and employment—are defined
as follows. Output multipliers represent the total dollar change in output that occurs in all industries for each
additional dollar of output delivered to final demand (final consumption) by the industry under study. Valueadded multipliers are similarly defined except that they represent the total dollar change in value-added across
all industries. Earnings multipliers represent the total dollar change in earnings of households employed by all
industries for each additional dollar of payroll expenditure (or each dollar of output delivered to final demand)
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by the industry whose economic impact is being estimated. Employment multipliers represent the total change
in the number of jobs in all industries for each direct job (or for each million dollars of output delivered to final
demand) by the industry whose economic impact is being estimated.
The nature of the product and technology largely determine the degree of interindustry linkages and leakages
(and thus the overall impact), and the specific impact on a region depends upon the degree to which these
interindustry relationships are localized. Technology determines inputs and economics determines the
geographic source of supply and destination of products or services. Inputs purchased outside the economic
impact study area constitute a leakage of potential impact. The leakage represents activities of local firms that
have no economic impact on the local economy, and provides opportunities for “localizing” such impact.
Identifying leakage can provide valuable planning information to local economic development authorities for
commercial or industrial development. An activity’s maximum impact on a specific area is obtained when
all interindustry linkages occur within the area. A system-wide view is required because different firms have
different linkages. The I-O technique permits the incorporation of such system-wide perspectives.
To estimate the economic impact of HMA and its Tier-I suppliers on the Alabama economy and the specified
five county economies, linkages between them and the motor vehicle and parts industry and related suppliers
and customers must be traced. This task is greatly facilitated by the Regional Input-Output Modeling System
(RIMS II), an I-O model developed and maintained by the U.S. Department of Commerce’s Bureau of
Economic Analysis. The model is available for every state, region, county, and metropolitan area in the nation.
This study uses RIMS II for the state of Alabama and the five counties.
The RIMS II I-O model consists of nearly 400 industries. Data on each industry reflects the value of inputs
used per dollar of output in the production of that industry’s output and is represented in a tabular format. For
example, data for the motor vehicle, body, trailer, and parts industry show the value of each input per dollar of
product produced (or service provided). Since the rows (outputs) are produced by specific industries, they are
also columns (inputs). Demand for a particular input causes supply from its source industry which in turn
creates demand for the materials that are used to produce the particular input, and so on. The round-by-round
effects decrease and converge; I-O methodology captures the total effect of the rounds of spending with the
multiplier. RIMS II multipliers for an economy account for all linkages in and leakages from that economy.
I-O models are based on a table of transaction balances, which ensures economy-wide accounting consistency.
Total payments equal total receipts for each producing sector and aggregate final demand equals aggregate
value added.
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Multipliers are determined mathematically from I-O tables that are constructed from observed and reported data for
the economic area of interest. The economy is divided into a number of producing industries or sectors that sell and
purchase goods and services to and from each other with interindustry or inter-sector flows that are key data. Sector
goods and services are purchased by domestic consumers (households), international customers (exports),
government (federal, state, and local), and for private investment purposes. These external to production purchases
are for direct use and termed final demand. For an economy with n sectors, if Xi represents total output for sector i, Yi
represents final demand for sector i products, and zij represent interindustry flows, then
Xi =
n
∑ zij + Y i
(1)
j =1
If aij represents the I-O technical coefficients where aij = zij / Xj so that sectors use inputs in fixed proportions (the
constant returns to scale Leontief production function) then the above equation becomes
n
X i = ∑ a
ij X i + Y i
(2)
i =1
The standard formulation of the basic I-O model and its application, in matrix notation is:
Transactions balance:
X = AX + Y
(3)
Solving for X:
X = (I - A)-1Y
(4)
For a change in Y:
X = (I - A)-1 Y
(5)
where X is the gross output column vector, A is the matrix of fixed I-O coefficients, Y is the final demand column
vector, and I is the identity matrix. This model enables determination of the output given changes in final demand
levels (consumption, investment, government, or exports). The Leontief inverse, (I - A)-1, provides the I-O
multipliers used to determine impacts. The elements of the matrix are really very useful and important. Each
captures in a single number, an entire series of direct and indirect effects. Gross output requirements are translatable
into employment coefficients in a diagonal matrix that is used together with the Leontief inverse to generate
employment impacts. Similar manipulations generate value-added and income or earnings multipliers.
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Culverhouse
,
College of Commerce
Center for Business and Economic Research
THE UNIVERSITY OF ALABAMA®