What’s the downstream impact when a sophisticated industry like Dow Chemical shuts down units and lays employees off?
It’s significant, though difficult to trace. That’s according to economist Loren Scott. But just because it’s hard to pinpoint a specific vendor or supplier hurt by Dow’s recent decision to mothball some units and eliminate 260 high-paying jobs—160 of them in Plaquemine—there’s definitely a “multiplier effect,” Scott says.
Construction might feel it first in the form of layoffs, but then it filters down to all kinds of businesses: legal firms, health care, retail and wholesale, car dealers and even movie theaters. Any time large numbers of people are laid off, a lot less money is spent. Scott calls it a reverse ripple effect: When you add jobs, the ripples spread outward as wealth is spent. When you take away jobs, the opposite happens.
“Once the construction firm takes a hit, the employee is not going to be spending money at all the places they spend money,” Scott says.