10 percent: The Local Stimulus

Posted by: John Tozzi on February 19, 2009

Yesterday we asked whether promoting shopping at local businesses would be enough to revive the economy in Wilmington, Ohio, from the 8,000 jobs being lost as DHL shuts down its hub there. Today, I found this chart from a study of local business impact in West Michigan: based on 2007 figures, shifting 10 percent of spending to local businesses would add 1,614 jobs with a payroll of $53 million.

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Dan Houston, who conducted the study, puts it this way: “If you could create something with 1600 jobs and a $50 million payroll, every public official in Michigan would show up to cut the ribbon. That’s a new car plant.”

The idea of shifting 10 percent of spending to local businesses seems to be catching on very quickly. New England local business groups launched an initiative this fall to promote the idea. And, in a moment of serendipity, I just saw that Stowe Boyd posted about this on his /Ground blog covering all things local.

I think this idea is catching on at this particular moment because we are more acutely aware of every dollar we spend. Many people do truly value the businesses in their community. For those who are cutting back, I suspect there’s an element of guilt if they spend less at their neighborhood market, favorite bar or restaurant, local boutique or hardware store. That’s because when you shop at those places, you often recognize the workers and the owners and maybe know them by name. Cutting back on those purchases — unlike cutting your spending at a chain store headquartered out of town — can have a direct effect on their livelihoods, and you see them in your neighborhood.

The elegance of the 10 percent shift right now is that it doesn’t ask people to expand their budgets and spend more. It asks people to be more conscious about where they spend what they’ve already budgeted for. If returns on local spending are as dramatic as as the Grand Rapids study suggests, the 10 percent shift might be a way out for local economies devastated by mass layoffs.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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