General Electric's Impact on the State of Nevada’s

Economy

May 2017

An Economic Analysis Prepared by:

1

INTRODUCTION ................................................................................................ 2

NEVADA............................................................................................................... 4

TOTAL ECONOMIC OUTPUT ............................................................................................ 4

EMPLOYMENT .......................................................................................................................... 5

LABOR COMPENSATION ..................................................................................................... 6

CHARITABLE IMPACT ............................................................................................................ 6

RESEARCH METHODOLOGY ........................................................................... 7

DEFINITIONS .................................................................................................... 10

APPENDIX ......................................................................................................... 12

REFERENCES ..................................................................................................... 13

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General Electric's Impact on the State of Nevada’s Economy

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INTRODUCTION General Electric Company (GE or 'the company') is a diversified industrial

corporation that offers a wide range of products and services including aircraft

engines, power generation equipment, medical imaging, as well as industrial

financing. The company primarily operates in North America, Europe, Asia, South

America, Australia and Africa and employed approximately 100,000 people in the

United States in 2016.

GE has operated in Nevada for more than 50 years and is home to GE Oil & Gas

and GE Transportation, as well as other GE businesses. GE Transportation’s facility

in Las Vegas opened in November 2008 and has more than 50 employees. The

84,000-square-foot plant specializes in remanufacturing AC and DC motors, and

combos for locomotives. GE Oil & Gas also has a location in Minden, which is home

to more than 700 employees and serves as the headquarters of GE’s Bently Nevada

business. Nevada is a core market for GE Oil & Gas and is the state’s largest

exporter, specializing in rotor dynamics and thermodynamics behavior. GE Oil &

Gas continues to invest heavily in technology and plant equipment in its Bently

facility. In addition, GE Oil & Gas has maintained a strong presence in the

community, creating opportunities for people and supporting local charities and the

United Way.

In 2017, GE asked the business economic intelligence and research company, Frost

& Sullivan, to conduct an economic impact analysis (EIA) of the presence of GE’s

operations in the state of Nevada. This EIA tool, built by researchers at Frost &

Sullivan, can be used to assess various scenarios and identify the potential impacts

realized given the operational presence of GE in Nevada’s economy in terms of total

economic output impact, job creation, and charitable contributions.

Independent of which impact variable is explored, GE’s impact on the state of

Nevada’s economy can be measured and categorized into three levels of impact:

o Direct impact—the total number of GE jobs created, its associated total

economic output, paid wages, and charitable contributions generated from

GE’s production operations

o Indirect impact—the number of indirect jobs created, its associated

wages, and total economic output related to GE’s direct expenditures on

goods and services through its supply chain and from each US state’s local

economy. This is the economic activity generated by GE’s supply chain to

serve GE’s operational needs.

o Induced impact—the economic impact created as a result of local

spending by GE employees and families, its associated wages and GDP

produced from those induced wages. This is the economic activity

generated by the household expenditures of GE employees in the local

economy.

GE provides

substantial direct,

indirect, and

induced

socioeconomic

benefits to the

state of Nevada.

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To calculate these economic impacts, a pragmatic input/output (I/O) production

model was developed. The I/O model is based on the assumption that GE’s presence

in a given economy contributes to the total value of the economy, just like all other

economic actors in the economy and that each economic actor has a direct impact,

an indirect impact, and an induced impact on the total economy through the

economic decisions they make. Each of these types of impacts can be measured and

compared to the performance of the total economy. Consequently, economic

impact statements can be made regarding the relative and absolute benefit GE has

on the economy as a whole.

Note that this economic analysis only includes the impact of GE’s current operations

in the state of Nevada and does not include the additional economic benefits that

GE brings to the state through recent capital investments. These investments led to

additional construction and infrastructure jobs and economic activity which is not

covered in this report.

GE provides significant economic and philanthropic benefit to the state of Nevada.

In 2016, GE contributed a total of $1.008 billion in direct, indirect, and induced total

production output in the state. GE’s economic presence in the state of Nevada

supports 3,053 direct, indirect, and induced fulltime equivalent jobs. This is the same

number of people that can nearly fill the Grand Sierra Theatre in Reno, Nevada 1.5

times. GE employs 756 fulltime manufacturing and professional jobs in state of

Nevada and GE supports an additional 1,513 fulltime equivalent jobs in its supply

chain. An additional 784 fulltime equivalent jobs are supported by local companies

that serve the personal consumption needs of GE employee households.

Consequently, GE’s economic presence in the state of Nevada has contributed to

the generation of $259 million in total direct, indirect, and induced compensation

in 2016 and its employees and its foundation contributed $189,738 in total

charitable contributions. Overall, GE has demonstrated its commitment to the state

of Nevada’s economy through its continued investment and rock-solid presence

today, and tomorrow.

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General Electric's Impact on the State of Nevada’s Economy

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NEVADA TOTAL ECONOMIC OUTPUT

GE provides significant economic and philanthropic benefit to the state of Nevada

due to its presence in the state. In 2016, the company contributed a total of $1.008

billion in direct, indirect, and induced total production output in the state of Nevada.

That is the same as $2.76 million of total economic production output per day,

$114,940 per hour, and $32 per second. The source of this total economic output

is derived from three sources; GE’s direct productivity contributed 29.7% of the

total economic impact, the productive output of GE’s supply chain, or the indirect

impact of GE’s presence in the state, contributed 63.2% of the total economic

impact, and the economic output of local businesses that serve GE employee

household consumption induced 7.1% of the total economic output created by GE’s

presence in the state of Nevada. GE’s economic output within the state of Nevada

is shown below in both absolute and relative terms.

Total Economic Output Attributed to GE’s Presence in the State of Nevada (Total

Direct, Indirect, and Induced), USD, 2016

GE's Impact on the U.S. State of Nevada – Total Economic Output, USD Million, 2016

Metrics Total Economic Impact

Direct $299.1

Indirect $637.2

Total Direct and Indirect Impact $936.4

Induced Impact $71.2

Total $1,007.6

PER DAY

$2.76M

PER HOUR

$115K

PER YEAR

$1.008B

PER SECOND

$32

$1.00 B

Direct

29.7%

Indirect

63.2%

Induced

7.1%

Relative Economic Output attributed to GE’s

Presence in the State of Nevada by Impact

Type (Direct, Indirect, and Induced), 2016

Economic Output Attributed to GE’s

Presence in the State of Nevada per $1

Spent on GE Employee Compensation,

USD, 2016

Source: Frost & Sullivan

Source: Frost & Sullivan

STATE OVERVIEW

Nevada is the 34th most

populous state in the

USA, with a population

of 2.94 million people.

Nevada’s economy is

largely based around

Clark County, which

houses nearly 75% of

Nevada’s population.

Due in part to Las Vegas

and legal gambling,

tourism is Nevada’s top

employer. Mining and

cattle ranching also play a crucial role in Nevada’s

economy.

Population: 2.94 million

GDP: $139.7 billion

Employment: 1.367

million

Unemployment Rate:

4.9%

$12.90 Total Economic Output

$1 Spent on GE Compensation leads to

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EMPLOYMENT

GE’s economic presence in the state of Nevada supports 3,053 direct, indirect, and

induced fulltime equivalent jobs. This is the same number of people that can nearly

fill the Grand Sierra Theatre in Reno, Nevada 1.5 times. In all, one GE job in the

state of Nevada supports an additional 3.04 fulltime equivalent jobs in Nevada,

independent of the industry sector.

GE employs 756 fulltime manufacturing and professional jobs in the state of Nevada

and GE’s supply chain supports 1,513 fulltime equivalent jobs in order to address

GE’s business activity needs. Furthermore, 784 fulltime equivalent jobs are induced

to serve the personal consumption needs of GE employee households. Specifically,

for every 100 direct fulltime equivalent GE jobs employed in the state of Nevada,

49 retail trade jobs (370 total FTE jobs) and 20 health care and social assistance jobs

(152 total FTE jobs) are supported. In addition, for every 100 GE jobs, 25 fulltime

equivalent accommodation and food service jobs (191 total FTE jobs) and 8

education services including teachers (58 total FTE jobs) are also supported by the

presence of GE and its supply chain partners in the state of Nevada.

GE's Impact on the U.S. State of Nevada – # of Additional Jobs Supported per 100 GE

Jobs Employed, USD Million, 2016

Industry Sector Measure

Professional and business services 69

Retail trade 49

Accommodation and food services 25

Health care and social assistance 20

Manufacturing 19

Educational services 8

All Others 114

Total Jobs Supported per 100 GE Jobs Employed 304

GE's Impact on the U.S. State of Nevada – Total Jobs Supported, Fulltime Equivalent

Jobs, 2016

Every GE job in Nevada

creates 3.04 additional

jobs within the state.

This positive feedback

helps to create jobs in a

wider variety of industry sectors.

Source: Frost & Sullivan

Manufacturing

514

Retail trade

370

Professional and

business services909

Educational

services58

Health care and

social assistance152

Accommodation

and food services191

All Others

859

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General Electric's Impact on the State of Nevada’s Economy

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LABOR COMPENSATION

GE’s economic presence in the state of Nevada has contributed to the generation

of $259 million in total direct, indirect, and induced compensation in 2016.

Furthermore, GE compensates its direct employees significantly more than the

average Silver State business. Specifically, GE compensates its average employee

1.62 times more than the state’s average compensation rate. This increased

compensation rate leads to a significantly greater economic output potential; $12.90

of total direct, indirect, and induced economic output was created for every $1 of

GE compensation expended in 2016.

CHARITABLE IMPACT

The benefits of GE’s presence in the state of Nevada go beyond the economy as

indicated in its direct contributions to the communities of Nevada. In 2016, GE

corporate, GE’s employees, and the GE Foundation contributed $189,738 in total

charitable contributions (equivalent to $251 per employee) and provided 304 hours

of pro bono volunteer hours to local charities in Nevada. Overall, General Electric

has clearly demonstrated its commitment to the state of Nevada’s overall economy

and its communities through its continued investment and charitable contributions.

GE's Charitable Impact – Monetary Donations and Volunteer Hours, Nevada, 2016

Metric Unit of Measure Measure

GE Monetary Donations USD $189,738

GE Monetary Donations

per GE Employee USD/person $251

Volunteer Hours Pro Bono Hours 304

$259 M

Total GE Attributed Direct, Indirect,

and Induced Employee

Compensation, Nevada, 2016

1.62x

Average GE Compensation

Relative to State Average per

State, Nevada, 2016

Source: Frost & Sullivan

GE contributed

$189,739 in total

charitable contributions

and provided 304 hours

of pro bono volunteer

hours to local charities

in Nevada.

GE compensates its

average employee 1.62

times more than the

state’s average

compensation rate.

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RESEARCH METHODOLOGY There are a number of approaches in measuring the economic impact of a given

company’s operational presence, but the most common and acceptable economic

model is the input-output (I/O) method, invented by Nobel Prize-winner Wassily

Leontief. The Leontief I/O model is based on using matrices that report the value

of inputs (in producer prices) delivered at the national and regional level by a set of

industry sectors used by the same set of industry sectors producing output at the

national and regional level (and also measured in producer prices). These matrices,

known as national input-output tables, are produced and published in the United

States by the Department of Commerce’s Bureau of Economic Analysis (BEA).

There are 3 types of economic impacts – direct, indirect, and induced – that are

generally recognized by economic practitioners of the I/O model:

Direct Impact—the total number of jobs created and its associated value-

add to the local economy, paid wages, and associated federal, state, and local

income taxes generated from the primary economic entity of importance.

The primary economic entity of importance can be a given

company/corporation, industry sector, project, or organization.

Indirect Impact—the number of indirect jobs created, its associated wages,

and generated federal, state, and local income taxes related to primary

economic entity of importance’s direct expenditures on goods and services

within its supply chain and from each region’s local economy. This is the

economic activity generated by primary economic entity of importance’s

supply chain in order to serve primary economic entity of importance’s

operational needs.

Induced Impact—the economic impact created as a result of local spending

by the households of employees of the primary economic entity of

importance. These expended wages are used to create new wages, new

GDP, and new federal, state, and local income taxes generated in order to

deliver goods and services to the households of employees of the primary

economic entity of importance. This is the economic activity generated by

the household expenditures of the employees of primary economic entity

of importance in the local economy.

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General Electric's Impact on the State of Nevada’s Economy

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I/O matrix tables are used to calculate economic impact multipliers used in the EIA

model. Multipliers are parameters that are used for calculating the total impact on

all industry sectors in an economy (including cascading effects derived from the

entire value chain) of changes in the demand for the output of any given industry

sector. These multipliers describe the expected, or average, effects and not marginal

effects. Thus, these multiples do not take into consideration economies of scale,

unused production capacity or technological change but they still provide a good

picture of the inter-relationships between industry sectors that supply valuable

inputs and industry sectors that use these inputs to make more valuable products.

Specifically, these multipliers can be used to calculate the direct and indirect

economic impacts of a new investment in an economy or the size of the economic

importance of a company, product, project, etc. in terms of the value of total

production output (in producer prices), gross value added (which is also a proxy

for gross domestic product), the total employment (in terms of the number of full

time equivalent jobs created), total expenditures on labor compensation, tax

revenue generation, and shareholder profits.

An I/O matrix table models the organization of the United States’ entire industrial

production system in a given year. The row of an I/O table reports the value of

inputs sold to each industry sector for a given industry sector and the sum of a row

report’s the total value of sold inputs across all industry sectors. The column of an

I/O table reports the value of the inputs used and paid for by a given industry sector.

It is similar to a bill of material’s used by a given industry sector and the sum of a

given column equals the total expenditure on inputs used to create the given

industry’s output. Thus, I/O matrix tables show the relationships that exist between

industrial sectors in a given region.

An I/O table also includes expenditures paid out to various stakeholders for each

of the industry sectors, including total compensation paid out to labor for their help

in transforming the acquired inputs into valuable industrial output, expenditure to

federal, State, and local governments in the form of production and import taxes,

and payments to shareholders and creditors. The sum of all payments to the value

chain for inputs and all other stakeholders for their contributions in transforming

the inputs into valuable production output equals the total economic impact of the

given industry sector’s activity in the given region.

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As stated previously, the BEA provides national I/O tables that must be adjusted for

regional scale and variance since the size and mix of industrial sectors participating

in each region clearly varies from the aggregated national reporting. In order to

control for this variance, location quotient (LQ) weights can be applied to the

national table in order to scale and adjust the table. The LQ weight is calculated by

taking the ratio of a given industry sector’s share of regional earnings and the given

industry sector’s share of national earnings. If the LQ ratio is less than one, then the

ratio is multiplied by the regional share of the industry sector’s earnings relative to

the national earnings. If the LQ ratio is greater than one, then only the regional

share of the industry sector’s earnings relative to the national earnings is used as

the weight. In addition, primary research and expert judgment must be applied to

check to make sure that the weighted I/O table is truly representative of each state’s

economic interactivity between industry sectors supplying inputs and industry

sectors producing output. In other words, each intersection within the I/O table

must be reviewed and adjusted accordingly if newer or better information is

available.

The following inputs were utilized in this economic analysis:

o Total Production Output and Gross Value-Added of GE’s operations and

the U.S. State in general per U.S. state

o GE provided inputs, including the number of production-related and

professional jobs created per U.S. state and expenditures on goods and

services for local operations from the local economy

o Local employment trends per U.S. state

o Average compensation and wages per laborer in each U.S. state

o Number of employees per industry sector per U.S. state

o Production, Import, and other taxes paid per U.S. state

o Average household/personal expenditures on local goods and services

o Expenditure on local charities by GE and each U.S. state in general

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General Electric's Impact on the State of Nevada’s Economy

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DEFINITIONS This analysis looks at various measures of economic impact of GE’s presence in each

of the states under investigation in this report. The list below of economic impacts

shows the specific economic impacts measured for the purposes of this analysis.

Total Economic Output – Also called Total Value of Production Output, this

metric reflects the total value of all production activity of a given primary economic

entity of importance. A primary economic entity of importance can be a single

corporation like GE, a set of companies, or an entire industry sector. Specifically,

this measure is basically the value of all production activity, in producer prices,

related to presence of GE in the state and includes the value of production of GE

(direct impact), the suppliers of GE (indirect impact), and the businesses that serves

GE employee household personal expenditure (induced impact). The Total

Economic Output is also equal to the sum of all payments to all of GE’s stakeholders

including the raw material/input suppliers (payments for raw materials), direct

employees (compensation payments), and payments to other stakeholders including

governments (taxation), creditors (interest payments on debt), and profits

(payments to owners). In other words, this metric can be thought of as a proxy for

TOTAL REVENUE generated by GE plus TOTAL REVENUE generated by GE’s

supply chain plus TOTAL REVENUE generated by companies servicing GE and its

employee’s households. Total economic production output per time period can be

easily deduced.

Gross Value Added – This metric is the total value created by GE due to the

transformation of the sourced raw materials/inputs into something more valuable.

This metric is equal to the sum of all payments to employees (compensation

payments) and payments to other stakeholders including governments (taxation),

creditors (interest payments on debt), and profits (payments to owners). This

metric excludes payments to input suppliers.

Labor Compensation – This metric is the total wages and benefits created and

paid out directly by GE (direct impact), the indirect labor payments of GE’s supply

chain, and any wages and benefits created and paid out by the local companies

servicing the needs of GE employee households (induced impact). This is a

component of Gross Value Added. Using the results of the I/O model developed

for this report, the average GE labor compensation relative to the given state’s

average labor compensation (ratio of GE compensation relative to average state

compensation; $GE wage/$ average state wage).

Employment – This metric is the total number of fulltime equivalent jobs created

by GE (direct impact), the total number of fulltime equivalent jobs created by GE’s

supply chain as a consequence of servicing the raw material needs of GE (indirect

impact), and the total number of fulltime equivalent jobs created by local companies

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servicing the needs of GE employee households (induced impact). All employment

findings reported in this analysis are measured in fulltime equivalent jobs. Using

multiples derived from the I/O model, types of jobs created by industry sector can

be deduced. In addition, the number of indirect and induced jobs created due to

GE’s presence per one GE job created and total direct, indirect, and induced jobs

created relative to total state jobs can be deduced.

Charitable Impact – This metric measures the total direct charitable expenditure

by GE and its employees in the form of payments to local charities (momentary

donations) or through donated time (charitable pro bono hours). Charitable Impact

can be measured per GE employee and in total terms.

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General Electric's Impact on the State of Nevada’s Economy

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APPENDIX General Electric's Impact on the U.S. State of Nevada – Economic Impact Summary

Table, USD Million, 2016

Metrics

Total

Economic Impact

Gross

Valued Added

Rest of

Value Added*

Labor Compensation

Employees (People)

Direct $299.1 $103.9 $25.8 $78.1 756

Indirect $637.2 $199.9 $50.4 $149.5 1,513

Total Direct and Indirect Impact^

$936.4 $303.8 $76.1 $227.6 2,269

Induced Impact@ $71.2 $63.2 $31.8 $31.4 784

Total $1,007.6 $367.0 $108.0 $259.0 3,053

* Includes estimated government tax types (Federal, State, and Local; Corporate, Income, Property, Sales, and Others), payments to creditors, and payments to owners (profits)

^ Excludes Second-order Induced Wholesale Trade and Construction Jobs. All Jobs are Full-Time Equivalent. @ GE + Upsteam Value Chain Partners

General Electric's Impact on the U.S. State of Nevada – Number of Jobs Supported by

Industry Sector, # of Employees, 2016

Industry Sector Direct Jobs Indirect Jobs Induced Jobs Total Jobs

Manufacturing 370 144 -- 514

Retail trade -- 24 346 370

Professional and business services 386 523 -- 909

Educational services -- -- 57 58

Health care and social assistance -- - 152 152

Accommodation and food services -- 170 21 191

All Others -- 652 207 859

Total 756 1,513 784 3,053

Note: Excludes Second-order Induced Wholesale Trade and Construction Jobs. All Jobs are Full-Time Equivalent. Source: Frost & Sullivan Analysis

General Electric's Impact on the U.S. State of Nevada – Charitable Impact, USD, 2016

Metrics Grand Total Volunteer Hours

Nevada $189,738 304

Note: NPISH = Nonprofit Institutions Serving Households

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REFERENCES Angelos Pagulatos and Kurt R. Anschel. (October 1981). An I-O Study of the Economic

Structure of Appalachian Kentucky. Growth & Change. Wiley-Blackwell

Dan S. Rickman. (April 2001) Using Input-Output Information for Bayesian Forecasting of

Industry Employment in a Regional Econometric Model. International Regional Science

Review 24, 2: 226–244

Information Sources: Bureau of Economic Analysis; U.S. Department of Commerce.

Retrieved at https://www.bea.gov/iTable/index_regional.cfm

Miller, Ronald E.; Blair, Peter D. (2009). Input-Output Analysis: Foundations and

Extensions. Cambridge, GBR: Cambridge University Press 10. Retrieved at

http://site.ebrary.com/lib/mitlibraries/Doc?id=10329730&ppg=44

Rebecca Bess and Zoë O. Ambargis (2011) Input-Output Models for Impact Analysis:

Suggestions for Practitioners Using RIMS II Multipliers. Presented at the 50th Southern

Regional Science Association Conference. March 23-27, 2011, New Orleans, Louisiana

U.S. Department of Commerce (1997) Regional Multipliers. A User Handbook for the

Regional Input-Output Modeling System (RIMS II). Third Edition. March 1997

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General Electric's Impact on the State of Nevada’s Economy

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