The Employment Impact of Differences in Dmand and Production

The VIS approach through the input-output framework yields important insights into the
employment requirements and their structure. Producing the final output of sector 1 generates
employment of 38.56 units across the economy as a whole, the major portion of this (27.18)
taking place in sector 3 and only 7.77 within sector 1 itself. Although sector 1 is much the
smallest in terms of numbers employed within it, involving only 10 of the 110 unit workforce, on
a VIS basis the production of its output involves more than one-third of all workers. Similarly,
sector 3 is the location of most of the economy’s workers, and in direct employment terms is
several times larger than sectors 1 and 2; but the employment generated across the economy to
produce its output, 40.73 units, is only marginally greater than the employment generated by the
final output of sector 1.

While this is a hypothetical example, the main message is a general one. The employment
generated economy-wide by the production of a sector’s final output depends on the entire set
of inter-industry relationships encapsulated in the inverse coefficient matrix B, and on the
employment-intensity n, of every sector. The resulting employment generated in the production
of the sector’s final output may be (much) greater or smaller than the number of jobs located
within the sector itself. Since the inverse matrix is highly non-linear, any simple relation such as a
(linear) correlation between a sector’s relative ranking on the two measures should not be
expected.

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