What does local really mean to the economy?

When consumers and businesses do more business with local companies, the multiplier effect is in action. Think about buying something from Wal-mart versus buying from a local retailer. Think about buying from McDonald’s or a locally owned eatery with a greater number of locally sourced foods. Where do the profits go in each case?

Money spent or income received has a greater multiplier effect when spent with a local business.  A higher percentage of each dollar spent will turn over several times in the local economy before being lost to the external economy.

Example: If I purchase sausages produced in Denver, a higher percentage of the initial dollars spent would circulate in the local economy vs. those from buying an imported product or from some other state.  (local wages, local meats to make the sausage, local labor to grind, case and package them, local profit, local property taxes, etc.)  Source http://www.carrollcountyunited.org/files/Buying_local.pdf

That same study shows in Maine that for every $100 dollars spent at a locally owned business, $45 stays in the local economy and an additional $8.70 is spent elsewhere in the state vs. $14 for a national chain or franchise store. The same outcome was noted in an Austin, TX study. A shift of just 10% in buying local vs. purchasing from chains keeps more money in the local economy and supports more jobs. The four largest components of this local spending were: wages and benefits paid to local employees; goods and services purchased from other local businesses; profits that accrued to local owners; and taxes paid to local and state government.

This graphic shows  how it works:

buy local graphic

A recent retail diversity study of San Francisco and three Peninsula cities found that purchasing from locally
owned stores created about 70% more local jobs, and 67% more overall local income, per dollar spent. The authors concluded that by shifting just 10% of purchases to local businesses, consumers would add nearly 1,300 new jobs and $200 million in economic activity to the cities studied.

Please try and buy more local. Always.