In the summer
issue of Local Insights we discussed the value of economic diversity and
the Hachman Index (a method used to measure industry diversification in the
labor market)[1].
The article states that:
The Hachman Index is derived from the
weighted average of the industry Location Quotients (LQ) in a region. A LQ
measures the regional concentration of employment in a given industry relative
to a larger geography. As a rule of thumb, an LQ of 1.2 or higher represents an
industry with a relatively high concentration of regional employment, while a
score of 0.8 or lower indicates sparse regional employment… Breaking the
Hachman Index into individual components provides insight into the distribution
of employment in a local economy.
Figure 2 in
that article resembles the charts to the right, except that the data in the
article was aggregated to the regional level. Combining the employment counts for
all three Bear River counties obscures the concentration of employment in
certain industries at the county level. This article sheds light on the
relative density of employment in each county.
When
examining the three charts, note the scale on the horizontal axis. In 2012, Cache
County had very few location quotient outliers. Four industries were within the
“normal” location quotient range, and only two industries had LQs greater than
1.2. Furthermore, the industries with above normal concentration of employment
in Cache (manufacturing and educational services) registered LQs substantially
lower than the highly concentrated industries in Box Elder and Rich counties.
Box Elder
County had five industries in the “normal” LQ range, but three of the four high-density
industries recorded LQs above 2. This means that the proportion of the
workforce employed in manufacturing, transportation & warehousing and agriculture,
forestry, fishing & hunting more than doubled the national percentage.
Lastly, Rich
County had the lowest Hachman Index among the Bear River counties. Among the 10
industries that meet disclosure standards, only two industries had employment LQs in
the “normal” range.
In Utah, there
is a correlation between the size of a county’s labor force and the degree of
industrial diversity in the county; in general, this means the more workers in a county the more diverse the economy of that county. So it is not surprising that Cache County has
less variance in its respective LQs compared to Box Elder and Rich counties.
Understanding
the relative concentration of employment by industry lends some insight into
the comparative advantages of a region. In terms of Bear River, we see that the
labor economy is moderately diverse compared to other counties in the state.
