What Happens To Your Dollar Once It Has been Spent?

How a dollar flows through the community is greatly affected by who owns the business and the decisions they make about how to run it. However, multiple studies have shown that dollars spent at a local business return more value to the local community and the value sticks around longer.

One study, commissioned in 2013 by the British Columbia division of the Canadian Union of Public Employees, analyzed the economic impact of the province’s independent retailers. The study found that “for every $1,000,000 in sales, independent retail stores generate $450,000 in local economic activity, compared to just $170,000 for chains. Among restaurants, the figures are $650,000 for independents and $300,000 for chains. Across both sectors, this translates into about 2.6 times as many local jobs created when spending is directed to independent businesses instead of chains. The study concludes that a shift of just 10 percent of the market from chains to independents would produce 31,000 jobs paying $940 million in annual wages to BC workers.”

Jobs seem tangible and easy to understand, but what does this additional economic activity and impact really mean?

There are a few examples of what happens to that dollar after you spend it.

First, the owner lives here and pays taxes here. The profit generated in their business helps give us a strong local tax base. Local independent businesses are not hiring expensive tax consultants and savvy tax lawyers to help reduce the amount of taxes they pay. The owners do not live elsewhere where they pay taxes in another jurisdiction.  There is simply less extraction.

Second, the independence of the business enables them to make their own decisions, leading to a more local supply chain.  This means a more robust business-to-business network of local suppliers who can sell to, and do business with, other local businesses. We can see the power of this in our own backyard, like how The Pennyloaf Bakery recently switched to fabric bags over plastic, which they had custom made by Sew Dandee. This is also why local food producers can often end up on a local restaurant’s menu, while doing business with a large chain is out of the question as decisions are made by head office in another city.

Third, the business donates to the community through charitable giving and support of causes/events.  While big business does support charity, their contribution as a percentage of their revenue is smaller than local independent business, and the charities they choose to support with those profits earned in Manitoba may not go back to supporting causes in Manitoba. Large chains do a good job of showcasing their charitable contributions as it helps with public perception of their brand and expansion. But their primary focus is profit and return for shareholders, so the charitable contributions and promotion of those contributions are done looking through that lens. https://slate.com/author/ken-stern – some nugget from this piece about charitable giving?

Subtle changes that arise when multinational companies enter a city, like the flow of money post-purchase, can have a huge impact on our community. Imagine what a local shop could do with 2.6 times as many customers. Or how different our city would look with a 2.6 times lower rate of unemployment. It’s changes like these that make a difference, and changes like these that we can start to counteract by shopping local.