Honda of America Mfg., Inc. - Honda in Ohio: Economic Multiplier Effects

When Honda and its suppliers create jobs and pay wages and salaries, much of this income is spent and re-spent on goods and services produced in the local and regional economy where they are located. This chapter examines the "ripple" or "multiplier" effects that can be attributed to Honda's growth in Ohio. To estimate this multiplier effect on the economy, this Study has utilized a sophisticated model developed by the U.S. Department of Commerce Bureau of Economic Analysis known as RIMS II (Regional Input Output Modeling System). This model captures the ripple effects on the economy across 3 dimensions:

Direct Economic Impact - The expenditures, jobs and income created directly by Honda's operations in Ohio (discussed in Chapter 1 of this Study).

Indirect Supply-side Economic Impact - The economic ripple effects on industries related to Honda as a result of Honda's expenditures (the first stage of which is discussed in Chapter 2 of this Study).
Induced Demand-side Economic Impact - The broad economic impact from increased consumption by Honda associates and employees in related industries.

This Study expresses these economic multiplier effects in terms of economic output, employment and earnings:

For each $1 in output Honda produced in 2003, it generated an additional $1.1 dollars statewide creating a total Ohio output multiplier of 2.1.
As a result of the output multiplier of 2.1, Honda's 2003 total output of $17.1 billion increases total output in Ohio to $36.0

For each of the 16,049 jobs Honda directly provided in 2003, another seven jobs were generated statewide for a total Ohio employment impact of 128,406 jobs (and a total employment multiplier of 8.0).
For each $1 Honda paid in wages during 2003, another $3.3 dollars in earnings were generated in Ohio, creating a total earnings multiplier of 4.3.
Honda's $1.13 billion in wages and salaries paid to its associates in 2003 results in a total Ohio earnings impact of $4.85 billion.
As a result of Honda's long tenure in Ohio, the comprehensive scope of its operations in the state, and the large reliance on Ohio suppliers of parts and raw materials, the economic multiplier effects found here are significantly

significantly larger than those found by other comparable studies of automakers in other states.