Tuesday, March 16, 2004


According to the Iowa Child website, the Rainforest will create “400 permanent jobs with ripple effect of 2,000 jobs in eastern Iowa.” A ripple effect, also known as an “employment multiplier,” means that each original job created by a new business has the effect of creating other jobs, because the workers employed by the new business buy food, entertainment, housing, etc. Doing the math, Iowa Child has a ripple effect or employment multiplier of 5, five additional jobs for every one job created by the Iowa Child project.

This further suggests that the project is being oversold. I ran “employment multiplier of five” through Google, and that yielded no hits. I also ran “ripple effect of five” through, and it yielded one hit. The phrase appeared in a local newspaper, and it referred to manufacturing jobs page 16). Iowa Child is definitely not creating manufacturing jobs.

And if you run “average employment multiplier” through Google, you’ll notice that very few of the numbers are much higher than 2 (and some of the ones that are may not be employment multiplier from new jobs but from new investment.)

I wonder what happens when a project fails? Is it possible to have a negative ripple effect?