The Multiplier Effect as talked about on the AMIBA website is a way to give yourself and your community a raise. The way the multiplier effect works is that when you buy local you recirculate that money through your local economy in more ways than you do if you shop at a national chain. The impact happens in three ways:
Direct impact happens when the business spends money in the local economy to operate the business, including inventory, utilities, equipment and pay to employees.
Indirect impact happens when those other businesses recirculate that money to other local businesses.
Induced impact happens through consumer spending when employees and business owners spend money at local businesses.
The difference between spending your money at a local business versus a chain is that when you spend at a local business 48 cents of every dollar recirculates through the local economy versus 14 cents if the money is spent at a local chain. That’s a difference of 34 cents.
Now if we look at the GDP (Gross Domestic Product) per capita then we can measure how much of a raise we give ourselves when we shop locally. As I’m currently living there, let’s look at New Mexico. Per capita GDP in New Mexico in 2015 was $41,551. If all of that money was spent at national chains then each resident of New Mexico is giving themselves a raise of 14 cents of each dollar spent or $5,817 per year. Now if everyone spent their money at local businesses the amount of a raise everyone would be giving themselves would be 48 cents of each dollar or $19,944 per year. That’s a difference of $14,127 per person, per year.
This assumes that every dollar you spend is spent at local businesses and that everything you need is manufactured locally. Which is never the case. But, by shopping as much as you can locally you end up paying yourself more than if you shop at a national chain.
Look up your state’s per capita GDP and figure out how much of a raise you can give yourself by shopping local.