What is a multiplier?

A multiplier is a frequently used tool in the evaluation of economic impacts.

It is a number that indicates the ultimate effect or ‘impact’ on an economic variable (e.g. economic activity, measured as income or employment) that can be expected from an initial change in a related variable (e.g. the investment associated with a film project).

Multipliers reflect the underlying economic reality that increases in demand or spending cause ‘flow-on’ or ‘ripple’ effects. For example, a film shoot at a particular location will increase the incomes of accommodation providers, shopkeepers, suppliers of raw materials for sets, and so on. This will in turn increase the demand or level of spending for their suppliers of goods and services. This flow-on can, in theory, continue indefinitely, but over time each ripple becomes increasingly smaller.

The Australian Bureau of Statistics releases ‘input-output multipliers’ for 106 industry sectors, with the latest tables being for 1998/99, but does not produce multipliers for the cultural sector. The Statistics Working Group (SWG) attempted to fill this gap and generated multipliers based on 1996/97 input-output tables. Multipliers based on more recent data are not available from the Australian Bureau of Statistics (ABS) or the SWG due to resource and data constraints.

Types of multipliers

A number of different types of multipliers can be used to estimate the impact of film and video production (or indeed any activity) on a range of economic indicators. Two of the most commonly used multipliers are:

• Gross value added multiplier. This multiplier indicates the extent to which incomes from primary factors (e.g. labour and capital) increase for a given increase in demand. In a national accounting framework context, this amounts to the value of wages and salaries plus the value of gross operating surplus (also known as gross regional product or a measure of company profits).
• Employment multiplier. This multiplier indicates the increase in employment that will be required to occur as a result of a given increase in demand. It should be noted that, theoretically, the number of jobs could stay the same, as businesses may respond to a change in demand in the short term by paying overtime rather than taking on new staff. Therefore, the increase in employment is often measured in full time equivalents (FTEs) and the multiplier is usually expressed in terms of an increase of ‘X’ FTEs per million dollars of extra spending.