An important distinction to be made, which has significant implications to a city’s ecosystems, is the distinction between primary and secondary employers.
Primary employers are industries that produce more goods and/or services that can be consumed by the local economy and therefore export a significant portion of them.
City officials and many investors focus their attention on primary employers because the revenue they produce comes from outside the local ecosystem and is infused into the local economy. The new money then has a significant impact on employment and wages in the local economy. Much public time, money, and energy are expended in attracting and growing primary employers.
For example, a manufacturing company is considered a primary employer and this is the reason why governments want to so desperately hold on to manufacturing jobs. Primary employers bring in outside money. When the employer is paid for the products or services and new money flows in, The company redistributes that wealth locally through wages paid to employees, and through products and services bought from local suppliers.
Secondary employers are those businesses that serve the local community and essentially recirculate local dollars. An example of a secondary employer is a restaurant or a plumbing company that caters primarily to a local consumer market.
Secondary employers play a significant role in the local economy by providing goods and services to residents and primary employers. Secondary employers can create some level of gravity to attract primary employers to a community. However, secondary employers are often overlooked by government officials since they themselves do not directly bring in new money to the community.
In a community ecosystem, when a business or person buys a product or service that was not produced locally, the money leaves the community.
When you buy a product produced locally, buy a service delivered locally, or produce a product or service that is consumed locally, you are simply recirculating money through the local economy.
However, when you produce a product or provide a service that is consumed elsewhere, new money flows into the local economy.
You can think of a primary employer as focusing on the revenue portion of the ecosystem’s income statement while the secondary employer is focused on keeping the expense portion of the ecosystem’s income statement low so the community can profit.
At the very least, a balance needs to be struck between money coming in and money going out. If more money is exiting the local ecosystems, the community will eventually decay.
However, if more money is flowing in than leaving, the community will grow and prosper. Hence the reason many cities have economic development centers and look to economic gardening programs to bring in or grow primary employers.
If you are a secondary employer, while considered vital to a local ecosystem because you keep the money from leaving the ecosystem, you are often treated like a second class citizen when it comes to services being offered by local government and small business support organizations.
While both primary and secondary employers are vital to the local ecosystem, if you are contemplating a new business or operating one today, recognize that you might experience different treatment based on being either a primary or secondary employer.
Are you a primary employer looking for ways to bring more money into your local ecosystems or are you a secondary employer more concerned with keeping the money from leaving your local ecosystem?
