From Your Board: March 2020

The Effects of Shopping Local On Your Friends & Neighbors

Small local farms and businesses are excellent for the economy because they create jobs. By supporting local producers, you contribute to helping your friends, neighbors and other community members find sustainable employment. In addition, they often develop a close network between themselves, and their local buyers. This builds relationships among community members, which fosters a sense of belonging and togetherness within the community.

This extends beyond local food. Other small local businesses play a vital role in job creation. Buying from local businesses helps employment levels stay more stable and may even create more opportunities for residents to work in the community.

When dollars are spent locally, they can be re-spent locally, raising the overall level of economic activity and paying more salaries. This re-circulating of money leads to an increase in economic activity, with expanse dependent on the percentage of money spent locally. Significantly more money re-circulates locally when purchases are made at the locally owned business. This recirculation is attributed, in part, to locally owned businesses purchasing more often from other local businesses, service providers and farms. Purchasing locally helps other businesses grow.

Four ways in which a business keeps money local are wages and benefits paid to residents, profits earned by local owners, the purchases of local goods and services for resale and internal use, and contributions to local nonprofits with studies showing that small businesses donate more than twice as much per sales dollar to local non-profits, events and teams compared to big businesses. Consistently, locally owned businesses exceed their chain competitors in all four ways.

On average, for every $100 in consumer spending with a locally owned business, an average of $73 remains in the local economy. The remaining $73 is then dispersed locally in the form of wages, charitable donations, taxes that fund city services, and purchases of goods and services from other local businesses. Contrast this to the effects of consumer spending at a non-locally owned business. For every $100 spent, only $43 remains in the local economy.

Money spent in a community is re-spent several times in that community This spending happens in multiple layers: spending done by a business in the local economy to operate the business, including paying employees and local taxes; then the money that those local businesses spent at other area businesses re-circulates in our local economy; and finally there is consumer spending which happens when employees, business owners, and others spend their income in the local economy. This economic multiplier effect creates additional jobs in our communities — plumbers, electricians, retailers, service industries, hairstylists, teachers, accountants, etc. Those jobs form the critical mass required to not only keep and create jobs locally but to maintain vibrant, healthy communities with shops, restaurants, hospitals, schools and a wide range of recreational and cultural opportunities.

Besides helping local small farms survive for future generations, buying local helps maintain other small businesses and helps keep the unique character of our communities.


Rey Dalitto