What’s the Return of a Dollar When You Spend it on American Made?

Many Americans prefer to buy domestic products to benefit from higher quality and durability. What many don’t know, however, is that when they spend money on American made products, they’re contributing to a much greater cause.

Among the many reasons to buy local is the certainty that you’re helping your local economy. Whenever $1.00 is spent in manufacturing, another $1.82 is added into the economy.

The multiplier effect in manufacturing is higher than any other U.S. sector.

So, what is the multiplier effect? When you buy an American made product, it doesn’t just benefit the manufacturer. Because manufacturing has such a large supply chain and demand, its success can stimulate economic activity across a number of other essential sectors. When factories are producing more goods, they require more materials and services from suppliers, generating income and creating jobs in all sectors involved, such as transportation, communication, retail, construction, and so many others. This is called backward linkage.

For example, a car from your local dealership would have backward linkage to companies in the glass, steel and rubber industries. You can rest assured that your purchase is supporting jobs in these areas.

On the other hand, manufacturing also has a high forward linkage because of how many people are directly and indirectly employed within the sector. Forward linkage happens when manufacturing and supply chain employees spend their hard-earned money, putting it back into the local economy.

In other words, buying local recirculates more money into your local economy than buying from an absentee-owned business or foreign franchise. Thus, bringing more income and jobs into your area.

When consumers take the alternative route and spend money on foreign goods, they are not contributing to the multiplier effect–however, they are not throwing away all of their money as some people might think. A study by the Federal Reserve Bank of San Francisco found that, although Chinese-made products make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. On average, of every dollar spent on an item labeled “Made in China,” 55 cents go to services produced in the United States–but 45 cents is still taken out of U.S. circulation.

This is the diminishing effect of buying outsourced products. Every time you buy a product from China, an average of 45 cents is lost to Chinese manufacturers. Instead of creating money within the local economy, you take money out of local circulation and overseas.

So, the choice is clear if you care about our country. Buy local when possible to support domestic workers and help our economy grow stronger.

The power of change is in your pocket.


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