Delta’s industry-leading profit sharing payout of $1.1 billion will have an even bigger impact on local communities than the numbers suggest because of what economists call “the multiplier effect.”
For example, in metro Atlanta, where Delta will pay its nearly 32,000 employees more than $392 million, the economic impact will actually be more than double: an estimated $957 million, according to University of Georgia economist Jeff Humphreys.
Jeff Rosensweig, professor of Goizueta Business School at Emory University and Director of the John Robson Program for Business, Public Policy and Government, explained the theory behind the concept:
“In the frequently cited ‘multiplier effect,’ the increased income earned by people selling goods and services purchased with money from Delta profit sharing is, in turn, spent partly on local products,” Rosensweig said. “Then, the people who sell those products will start a third round of spending, and so on.”
Rosensweig, who specializes in global economics, also noted that profit sharing guarantees that a sizable share of profits is injected directly into the communities where Delta employees live and work.
“Profit sharing by corporations is one of the best ways to help an economy,” Rosensweig said. “Although some of these increments to income will be saved or spent outside of the local economy, much of it will be plowed into increased purchases from local businesses. Further, given the location of many Delta employees in Atlanta, a significant amount of their spending will boost minority and women-owned businesses.”
As an added benefit of pumping more money into the economy, businesses are more able to hire and retain employees. Humphreys said that the payout in Atlanta supports the creation of nearly 4,000 full- and part-time jobs outside of Delta.
Other markets that saw top payouts include New York City, with more than $119 million and Detroit, with more than $100 million.
In addition, the airline has committed to give back to the communities where its employees and customers work and live by contributing one percent of its net income to charity each year.