- 4.1 Output Multipliers
- 4.2 Employment Multipliers
- 4.3 Direct and Total Employment: Output Ratios
- 4.4 Income Multipliers
4.0 RESULTS
Detailed results of multipliers and impacts (including forward linkages for agriculture and forestry) are presented in Tables 5.1 to 5.9. The comments in Section 5 focus on the impacts of agriculture, forestry and related processing industries.
4.1 Output Multipliers
Output multipliers generally have been quite volatile over the period 1976177 to 1990/91, and in constant prices have varied by up to 40% (both increases and decreases) over various time spans. When one considers that the direct impact is constant, then the indirect impact has varied to an even greater extent.4
Output multipliers have not altered in any consistent way over the period, with some having increased at one stage and decreased at another, some having consistently increased, and still others having consistently decreased. Averages reported in the tables are not weighted and can be misleading. However, it is clear that in agriculture, multipliers at constant prices have significantly declined. The probable cause of this is the significant decline in real prices over the period 1976/77 to 1990/91 which squeezed profits and reduced real expenditure on inputs per unit of output. At current prices, multipliers have been more stable as one would expect. Reduced profitability is likely to be accompanied by reduced spending, and inputs which are rising rapidly in price are likely to be substituted for with inputs which have become relatively cheaper.
4.2 Employment Multipliers
Employment multipliers have also been volatile, with changes over the period ranging from -50% to +120%.5 One possible cause of the big changes in multipliers could be alterations in the definitions of structure of an industry. For example, in 1976/77 "cropping" included only the cropping portion of mixed farms, whereas in later years it includes the entire output of mixed farms, Other causes of change could be differing rates of change in the employment:output ratios of various industries, and alterations in the degree of sub-contracting. The significance of the latter effect can be assessed by examining changes in total employment impacts (including indirect and induced effects) per $ million of output, with output expressed in constant prices.
4.3 Direct and Total Employment: Output Ratios
Over the period 1976/77 to 1990/91 direct and total employment:output ratios fell in almost every industry for which comparable data was available, the notable exception being wholesale and retail trade. 6
The results are not surprising in that they confirm the generally recognised increases in labour productivity7 over the period. During the period 1986/87 to 1990/91 there appears to have been an increase in output per worker of approximately 7%. Given that real output increased by 3% over the period and total GDP did not change,8 there has been an average increase in production per person of 4%.
4.4 Income Multipliers
Income multipliers (reported only in current prices) have also varied significantly by factors varying between -43 and +83%. The effects on income multipliers of the fall in agricultural produce prices are immediately apparent. The rapid fall in sheep meat and wool prices has been accompanied by an estimated halving of the proportion of sales going to household income,9 and low on-farm income immediately leads to a high multiplier.
Income multipliers were also calculated in "constant prices" using the Prevailing Wage index by sector as a deflator. However, the results are not meaningful for farming where there is no disaggregated PWI, and where most of the income is from self-employment. In other sectors, there was little difference between constant and current price multipliers, suggesting that income:output ratios had moved in similar fashion in most industries (although at a more disaggrtgated level, such as "rail transport", ratios have changed significantly).
Although the income effects for 1990/91 are subject to considerable error (for example, no re-estimation of the ratio of self-employed to employees has been incorporated), it appears that the fall in input:output ratios continued from 1986/87 to 1990191.
4 For example, if a multiplier decreases by 25% from 3.6 to 1981/82 to 2.45 in 1990/91 (as it did for dairy farming), the indirect and induced impact has fallen from 2.6 to 1.45, a decline of 45%.
5 Note that conversion to constant prices does not alter employment multipliers, although it does affect employment impacts per $ million.
6 The employment data for services and government suggests that the l986/87 data contains some anomalies with large growth in one area being offset by a large decline in other areas. Investigation suggests that industry 168 "Central Government Administration - Hospital Boards arid Health Department" has been incorporated into "Health" in 1981/82 and into "Government Administration" in 1986/87. For this reason, comparisons of 1986/87 with other years are not valid for these industries.
7 Note that the increase has been in output per employee. This is a combination of greater labour productivity and increases in capital per employee.
8 Output can increase faster than GDP with greater specialisation and more sub-contracting,
9 The estimation of household incomes in fanning in subject to considerable error, depending, as it does, on farmers' reported income in census returns,
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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