From: Phil deHaan (dehp@calvin.edu)
Date: Wed Apr 09 2003 - 14:17:14 EDT
April 9, 2003 == MEDIA ADVISORY
A Calvin College professor of economics and business says local plant closings
have a ripple effect in West Michigan that goes far beyond the company directly
impacted. And, he says, those ripples may mean the local economy will be weak
for a little while longer.
Evert Van Der Heide did a study recently called "Declining Local Jobs and the
Impact of Major Plant Closings in West Michigan." He says when companies like
Lifesavers close a plant in Holland or Bosch pulls out of Grand Rapids it hurts
not only employees of those businesses but also lots of other people.
"The impacts go farther than the 1,200 jobs lost at Bosch," says Van Der Heide
(pronounced VAN DER HIDE). "When they close, Bosch will no longer purchase
goods and services from local suppliers. And those newly out of work will buy
less which will affect the retail sector."
The effect of lower employment to suppliers is called the indirect effect by
economists, says Van Der Heide, while the effect of people buying less is
called the induced effect. Van Der Heide says economic models make it possible
to predict these effects.
He says for Bosch there are not only the 1,200 jobs lost, but also indirect
and induced effects on such things as local construction; transportation,
communication and utilities; wholesale trade and retail trade; real estate; and
services. Those effects will add almost 1,000 more lost jobs to the 1,200
direct lost jobs at Bosch.
"Many sectors of the local economy are impacted by Bosch's presence locally,"
says Van Der Heide. The furniture industry makes an even greater impact on the
economy locally says Van Der Heide. A loss of 1,200 furniture jobs, he says,
results in almost 1,600 other lost jobs in other areas, the majority in the
service industry.
As a result, says Van Der Heide, it's difficult to say when the current
recession may end. But he thinks "it's unlikely that the employment picture
will improve as quickly as we'd like within the near term in the West Michigan
area given the fact that major employment declines are scheduled for the near
future."
"Their combined impact," he says, "is substantial when the full multiplier
effect is considered."
He does issue one caveat however. He says: "A big increase in demand after
the Iraqi war could make the end of the local slowdown come relatively early."
Van Der Heide notes employment held steady for the nation during 2002, but
that Michigan's employment declined 1.3 percent on average. Some of the
largest declines were registered on the east side of the state with a drop of
4.9 percent in Flint and 2.1 percent in Detroit. The Grand
Rapids-Muskegon-Holland region experienced a comparatively favorable decline of
just .7 percent. But, says Van Der Heide, from mid-2000 to the end of 2002
employment had slipped by nearly 20,000 jobs or 3.3 percent.
A new course at Calvin called "Urban Regional Economies" was the impetus for
Van Der Heide's recent study. He says it's important for Calvin students to
study and understand "bigger picture" economic issues as they pertain to West
Michigan and beyond.
Contact Van Der Heide at 616-526-6099
-end-
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