Energizing California - Chevron

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Energizing California Milken Institute Chevron's economic impact summary California, 2007 Total Multiplier Direct impact Chevron impact Employment (number of jobs) 6.9 9,934 68,674 Earnings* (US$ millions) 3.2 $1,223 $3,909 Output (US$ millions) 2.0 $4,543 $9,203 Tax** total (US$ millions) --- $1,953 --- Pension (US$ millions) 1.6 $207 $331 Sources: BLS, BEA, Moody's Economy.com, Chevron. *Earnings include bonuses; **Includes state and local taxes only. Cumulatively, over the six years from 2002 to 2007, the company was responsible for $9.6 billion of state and local tax revenue, either directly or through the personal income tax payments of its employees. These taxes provide a flow of revenue that helps to sustain government programs and state infrastructure. Chevron’s pension distribution should also be accounted for when calculating the company’s full impact. The state benefits in numerous ways from having the company’s headquarters located here. The advantages of high-paying jobs extend well beyond the active period of employment. Upon retirement, employees are given either a lump sum or an annualized amount in accordance with their pension plan. That money is likely to stay in California, generating additional positive impacts. In 2007, the company paid out a total of $206.6 million in lump sum and annuity payments combined. Since these Chevron retirees are no longer in the work force, nor are they tied to the specific industry of which they were once a part, their expenditures would stem directly from the household sector (see Appendix on Methodology). Although their spending on goods and services would produce a relatively lower impact, it nonetheless yields additional economic activity. For every dollar spent from their pension amounts, an additional 60 cents in output would be generated across all sectors of local economies. In 2007, the company’s pension distribution was responsible for generating an additional $124 million in gross state product after rippling through all sectors of the economy, amounting to a total impact of $331 million. The pension impacts are an ongoing contribution to the state’s long-term wealth, as money gets recycled back into the state economy. As a point of comparison, the industry-wide employment multiplier in California is 4.7; that is, each job created within the energy industry (as defined by the eleven NAICS codes that make up Chevron’s operations in California) generates an additional 3.7 jobs in other sectors of the state’s economy. The difference between Chevron’s multiplier and the industry-wide multiplier depends on how the industry-mix (the concentration of specific activities and job types) varies between Chevron and other firms. For example, 64.8 percent of Chevron’s California employees are engaged in petroleum refining, while the industry average in the state is just 19.5 percent. 15
Energizing California Milken Institute Some 65,000 people are directly employed by the broader energy industry in California, with an additional 239,500 jobs produced indirectly. The industry’s statewide earnings totaled almost $5.8 billion, with an additional $10.5 billion in indirect earnings, as earnings spread through various sectors of the state’s economy. Industry-wide economic impact summary California, 2007 Total Multiplier Direct impact industry-wide impact Employment (number of jobs) 4.7 64,924 304,454 Earnings* (US$ millions) 2.8 $5,777 $16,274 Output (US$ millions) 2.0 $23,033 $46,297 Sources: BLS, BEA, Moody's Economy.com. *Earnings include bonuses. The secondary impacts add significant value to California’s overall wealth and provide a huge boost to the state’s economy. State-wide, the industry was responsible for a total of almost $46.3 billion in output in 2007. Of this amount, more than $23.0 billion in output is created directly by the industry, while $23.3 billion is generated via indirect impacts. It is worth noting that Chevron accounts for nearly one-fourth of the total job and earning impacts of California’s energy industry. The firm also represents about one-fifth of the total impact in terms of industry-wide output. Historically, Chevron has been a leading presence in the state’s energy industry. Not only has Chevron served as an anchor for other firms in the region, but it has also been able to sustain its job base over the years. Since 2002, the company’s overall employment base relative to the industry in California experienced moderate growth, increasing by 1.4 percentage points, from 13.9 to 15.3 percent. In fact, the company has captured a larger share of the industry-wide base in terms of earnings and output, having increased by 2.0 and 4.1 percentage points, respectively. Chevron's share of employment and output California, 2002 vs. 2007 Percent share of industry 20.0 19.0 18.0 2002 2007 17.0 16.0 15.0 14.0 13.0 Employment Output Sources: BLS, Moody's Economy.com, Chevron, Milken Institute. 16
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Energizing California - Chevron

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