Living Locally   /   Community   /   Money

How buying local creates jobs and prosperity

Crunching the numbers on local economic impact

July 6, 2016 by Nemi Boyo

*Graph: Local Economic Return of Independents vs Chains, data compiled from nine studies by Civic Economics, 2012. Graph by American Independent Business Alliance

Local economy expert Michael Shuman says that, “Shifting just 10% of your spending to local businesses can create 31,000 new jobs and $940 million in new wages.”

That’s a lot of impact for such a small percentage of your purchases. Let’s take a look at how this is possible.

When we choose local businesses over the non-local alternatives, more money stays in our local economy. More than a decade of research by Civic Economics has shown that, on average, 48% of money spent at local businesses re-circulates locally. On the other hand, only 13.6% of money spent at chain stores re-circulates locally, meaning the remaining 86.4% leaves the local economy. 

In essence, 48 cents of each dollar you spend at a local business is re-spent in our city by that business on goods and services from other businesses in the area, donations to local charities, employee wages, and by the owners of the business who spend their profits locally. Each of those local businesses re-spend 48 cents of each dollar they receive in Calgary in the same manner.

This increases demand for local products and services, causing local businesses to expand. Expansion creates jobs and reduces unemployment.

As unemployment falls, and there are fewer workers available to hire, wages rise. (We all know from the oil boom of the past few years that companies are willing to pay more to attract employees when labour is in short supply.) Rising wages mean people have more disposable income to spend. When spent at local businesses this starts the economic cycle all over again, creating more prosperous communities.

TAKE ACTION:

  1. Choose local the next time you need to make a purchase. For a list of Calgary’s best local businesses, check out our directory.
  2. Want to learn more about the positive economic impact of buying local? Check out the many studies conducted by Civic Economics.
  3. Read Michael Shuman’s latest book, The Local Economy Solution: How Innovative Self-Financing Pollinator Enterprises Can Grow Jobs and Prosperity.