ECONOMIC IMPACT OF ARTS AND CULTURAL PRODUCION –

FLORENCE-MUSCLE SHOALS MSA

February 26, 2016

Authors:

Keith D. Malone

J. Douglas Barrett

ii

Table of Contents

Executive Summary……………………………………………………………………………….ii

Arts and Cultural production in the United States………………………………………………...2

Arts and Cultural production: Florence-Muscle Shoals MSA…………………………………….6

Gross Domestic Product…………………………………………………………………………..8

Employment……………………………………………………………………………………...12

Earnings………………………………………………………………………………………….16

Taxes……………………………………………………………………………………………..18

Summary…………………………………………………………………………………………19

About the Authors………………………………………………………………………………..21

List of Tables

Table 1…………………………………………………………………………………………….4

Table 2…………………………………………………………………………………………….9

Table 3…………………………………………………………………………………………...10

Table 4…………………………………………………………………………………………...11

Table 5…………………………………………………………………………………………...13

Table 6…………………………………………………………………………………………...14

Table 7…………………………………………………………………………………………...15

Table 8…………………………………………………………………………………………...16

Table 9…………………………………………………………………………………………...17

Table 10………………………………………………………………………………………….19

Table 11………………………………………………………………………………………….19

Executive Summary

Economic Impact: The Arts and Cultural Production entities contribute to both the economy of the Florence-Muscle Shoals MSA and to quality of life. The economic contributions accrue through goods and services produced, and direct, indirect, and induced spending. The direct measures are spending, number of employees, and taxes generated by arts and cultural production individuals and firms. The indirect measures are spending, number of employees, and taxes resulting from spending of employees of the arts and cultural production firms. Induced measures are the resulting spending, number of jobs, and taxes due to the existence of the arts and cultural production in the Florence-Muscle Shoals MSA. Overall, the Arts and Cultural Production in the Florence-Muscle Shoals MSA make a sizable contribution to the local Gross Domestic Product (GDP).

Total Economic Impact of Arts and Cultural Production

EMPLOYMENT:

Direct Jobs 1,808.99

Indirect Jobs 849.28

Total Jobs* 2,658.27

EARNINGS (in millions): $62.81

Total GDP (in millions): $206.96

TAXES:

County Sales Taxes $103,270

City Sales Taxes $246,810

Total Sales Taxes $350,080

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The Economic Impact of the Arts and Cultural production in the Shoals

Arts and Cultural Production (ACP) has obvious impacts on local and national culture, and has recently become a topic of economic interest in the United States and around the world. ACP has proven to be difficult to measure economically due to the non-monetary nature of cultural benefits and the inter-industry composition required to produce arts and cultural goods and services. During 2012, the Bureau of Economic Analysis (BEA) constructed and Arts and Cultural Production Satellite Account (ACPSA) in an attempt to capture the inter-industry composition, and assign an economic value for ACP in the United States. Specifically, this satellite account measures economic value added, production value, and employment, but does not attempt to place an economic value on quality of life components of ACP. The purpose of this report is to extend the national analysis to estimate the annual economic impact of arts and cultural production in the Florence-Muscle Shoals Metropolitan Statistical Area (F-MS).

This report applies national level and area specific data to approximate the economic impact of ACP in the F-MS area. The economic impact is measured using four components: Gross Domestic Product (GDP), employment, earnings, and taxes. Data limitations prevent this study from examining the total economic impact of ACP, and therefore estimates included herein should be considered as a starting point for considering the total economic impact of ACP in the area. Additional data for ACP firms and employees along with monetary estimates for cultural and quality of life benefits are needed to create a more comprehensive picture of ACP for F-MS.

This report is organized as follows: the following section reviews the national study produced by the BEA, section two develops estimates for the F-MS area, and the final section concludes.

Arts and Cultural Production in the United States

Few question the importance of arts and culture in any vibrant society. However, the perception is that such “value” is heavily non-pecuniary in nature.[1] Attaching a monetary value to the arts and cultural segments of the economy recently has become a priority in several countries, including the UK, Canada, Australia, Spain, and Colombia. In 2012, the United States joined this group with the National Endowment for the Arts (NEA) and the US Department of Commerce Bureau of Economic Analysis (BEA) undertaking the project of establishing a system in which arts and cultural production would be a distinct and measureable sector of the American economy. The NEA Guide to the U.S. Arts and Cultural Production Satellite Account: Including a Blueprint for Capturing the Economic Value of Arts and Cultural Workers and Volunteers delineates the process and outcomes of this work.[2] The remainder of this section provides an overview of this methodology which is employed to estimate the economic impact of arts and cultural production for the F-MS. Gross Domestic Product (GDP) is examined first.

The first step to determine economic value in any sector requires quantifying its contribution to GDP. Specifically, GDP is a monetary measure of national (or other geographic entity’s) production that captures the final value of all goods and services produced in a given geographic area during a specified period (typically one year). The BEA publishes “industry accounts” GDP data for more than seventy industries including federal, state and local governments. However, while the list of industries spans the national economy, certain components of different industries themselves are affected by other “latent” industries. Thusly, such industries require additional examination to determine the total economic impact of the industry. A common example given is travel and tourism, as its services are provided within multiple industry accounts; namely, Accommodation, Transportation, Entertainment, and Retail Sales. Measuring the specific dollar contributions for travel and tourism is not simple, since only a part of each of the aforementioned industries is reflective of the travel and tourism component. Consequently, the actual contribution from travel and tourism to GDP must be determined/ estimated.

The Arts and Cultural Production sector also experiences this dilemma. Considering the current interest in developing monetary estimates for this industry, the BEA has constructed a satellite account for the purposes of estimating total GDP for this industry. These accounts are necessary given the propensity of economic activity in arts and cultural production (and others such as travel and tourism), actually cut across multiple major industry accounts. In establishing an arts and culture satellite GDP account, monetary information from the following is combined to provide a more complete measure of arts and cultural production in the United States: agents/managers for artists; museums; advertising; architectural services; interior design services; industrial design services; graphic design services; other design services; computer systems design; photography and photofinishing services; and fine arts education. The new BEA account was given the name “Arts and Cultural Production Satellite Account” (ACPSA).

In constructing this and similar satellite accounts, the BEA uses data sources including Economic Census Annual Survey, Non-Employer Statistics, and Census of Governments. Key components gathered include data concerning industry output, value added, employment, compensation and measures of indirect production. The first step involves an analysis to determine a list of applicable commodities for the various categories. The following categories are included in the ACPSA account: Arts and Entertainment, Arts Education, Information, Professional Services, Other Services and finally Other Commodities. Table 1 below identifies the commodities included in each respective category. Examination of the table reveals that arts and cultural production activity can be found in thirty-six different commodities as identified by the BEA. The table illustrates the importance of creating this and other satellite accounts for industries which exhibit inter-industry production relationships.

Table 1: ACPSA Category and Commodity Designations
Other Commodities / Information
Printing / Motion Picture and Video
Jewelry and Silverware / Sound Recording
Other Manufacturing / Broadcasting
Wholesale Trade / Telecommunications
Retail Trade / Internet Publishing and Broadcasting
Construction / Other Information Services
Government / Publishing
Rental and Leasing / Software Publishing
Professional Services / Arts and Entertainment
Interior Design / Theater
Industrial Design / Dance
Graphic Design / Opera
Fashion Design / Symphonies
Other Design / Circuses
Architectural Services / Museums
Advertising / Other Arts and Entrainment
Photography
Photofinishing
Other Services / Arts Education
Grant-Making and Giving / Fine Arts
Unions / Other
Source: NEA Guide to the Arts and Cultural Production Satellite Account

Within the industry categories, the BEA analyzes earnings and other employment data and divides ACPSA into three categories. Tier 1 contains core occupations representing the primary sources of arts and cultural creativity. Tier 2 is designated for supporting occupations, and includes technical and supporting occupations required to assemble and distribute arts and cultural products. Finally, Tier 3 consists of management occupations not specific to arts and cultural industries, but are required for their production. Examples from Tier 1 include performing artists, media occupations, and architects. Museum and library technicians, motion picture and video technicians, and printing occupations fall under the Tier 2 designation. Tier 3 contains television broadcasting managers, museum managers, and motion picture marketing managers.[3]

In addition to estimating GDP for each tier, employment and earnings also can be estimated. The key difference between measuring employment in the ACPSA and the Occupation Employment Statistics Program (OES) from the Bureau of Labor Statistics (as used in the standard industry accounts) is that ACPSA employment includes self-employed works where they are excluded by the OES. Additional differences include the ACPSA differentiating between workers in a general industry and workers in a given industry engaged in arts and cultural production and the satellite account does exclude general employment by occupation. Once comprehensive employment estimates for the ACPSA are established, wage and earnings data from the OES can then be utilized to estimate earnings for the arts and culture industry.

Some of the important findings from the national analysis are related to US GDP and contributions from several categories. Arts and cultural GDP during 2012 was $698.7 billion, representing 4.3% of total U.S. GDP.[4] Concerning the tiers, described above, $129.01 billion and $547 billion of GDP was produced in the core and supporting tiers respectively. Advertising represents the largest contributor to the core tier with GDP of $29.29 billion during 2012. Broadcasting generated$121.09 billion GDP for the supporting tier. Furthermore, the arts and cultural sector employed approximately 4.7 million workers who earned $334.94 billion during the same year.

With a comprehensive picture of how arts and cultural industries fit into the national economy, the approach developed by the BEA can applied to estimate the economic impact of arts and culture in individual states or smaller local regions. In the next section the BEA template will be applied to the Florence-Muscle Shoals MSA to estimate the economic impact of arts and culture in the local area. In addition to estimating GDP, employment, and earnings, the following section also examines local sales taxes generated by arts and cultural production.

Arts and Cultural Production: Florence-Muscle Shoals MSA

The Florence-Muscle Shoals area has a vibrant history of arts and cultural production. Most notable is the music industry, as documented in many works such as the documentary Muscle Shoals. World renowned recording artists such as the Rolling Stones, Rod Stewart, Aretha Franklin, the Allman Brothers, and Bob Seger produced notable contributions to modern rock/R&B in Muscle Shoals in the 1960s and 1970s. The Muscle Shoals Sound section of backing musicians and Fame Studios were staples of that era in popular music. Prior to that, W. C. Handy (the “Father of the Blues”) and Sam Phillips (producer of Elvis Presley and Johnny Cash) paved the way for the Shoals music scene. The Shoals remains home to well respected songwriters such as Walt Aldridge, Gary Baker, and Mac McAnally. The area is also home to the Alabama Music Hall of Fame (Tuscumbia) which was located based on this rich history of success in music recording.

In addition to the music industry, the Shoals is home to the Kennedy-Douglass Center for the Arts, the Tennessee Valley Museum of Art, and the Frank Lloyd Wright-Rosenbaum House. Numerous live entertainment events occur in the Shoals throughout the year include the Shoals Symphony, Shoals Community Theatre, and the George Lindsay Theatre at the University of North Alabama. During the summer months, regular live productions of The Miracle Worker are performed at Ivy Green – home of the world famous Helen Keller. Various festivals also occur throughout the year, including; the W.C. Handy Music Festival, the Helen Keller Festival (which features arts, crafts and live music), and the Oka Kapassa Native American Festival (celebrating culture and traditions of American Indians who once flourished in the area).

Given the recent interest in estimating the economic impact of arts and cultural production around the world and the rich history of arts and culture in the Florence-Muscle Shoals MSA, it is instinctive to question how this industry contributes to the local economy. The remainder of this report examines the economic impact by applying national averages for arts and cultural production to the local economy. This process necessarily assumes that arts and cultural production in the local area operate and interact in exactly the same manner as found in the national ACPSA data. It should be noted that following this process can only provide an educated estimate of the economic impact of arts and cultural production in the area. Simply applying national averages may overstate estimates in some areas and understate the impact of this industry in areas with a vibrant arts and cultural sector similar to Florence-Muscle Shoals. Nevertheless, desiring a measure of the economic impact of arts and culture production and lacking area specific data for this industry, utilizing such average estimates for the U.S. economy will produce a practical, conservative representation for the economic impact of arts and culture production in the local economy.

The remainder of this report is organized as follows. Following the outline of the NEA report, arts and cultural Gross Regional Product is examined first. Employment estimates are then examined, followed by earnings projections. The fourth section projects county and city sales tax estimates. The final section summarizes.

Gross Domestic Product

As detailed in the BEA regional account data, total GDP in F-MS was $4,813 million during 2014. Manufacturing is the largest industry in the area, accounting for $1,113 million or approximately 23% of GDP. Contrastingly, GDP generated by Arts, Entertainment, and Recreation sector totals only $14 million, which is less than one percent (< 1%) of total GDP. However, the BEA report indicates that GDP estimates for Performing Arts and related activities are not available at the regional level. Thusly, the current accounting method does not yield a complete picture of how arts and cultural production impact the local economy. Therefore, national ACPSA trends will be employed to obtain a clearer picture of how this industry fits into the F-MS economy.