Basic and non-basic are the two broad industry categories. Basic industries consist of small and large businesses that sell primarily to external customers. Non-basic industries consist of primarily small businesses that sell to local customers, including basic and non-basic businesses. Examples of basic businesses include big manufacturing and mining companies, while non-basic businesses include diners, service companies, small consulting companies and convenience stores.
Basic industries are critical to economic development because they bring in revenues from outside customers and support the non-basic businesses, according to Weebly. Economic strength affects employment, government budgets, private sector investments and urban planning. For example, a county with only non-basic industries is likely to feel the effects of an economic downturn, such as reduced employment and population.
The base multiplier – ratio of total employment to basic-industry employment – is a way to estimate the non-basic and basic employment of a region. For example, if an automobile plant – which sells the bulk of its production outside of its host county – employs 10,000 out of a total employment of 25,000, the multiplier is 25,000 divided by 10,000, or 2.5. In other words, each basic-industry job supports an additional 1.5 non-basic jobs, for 2.5 jobs. For an auto plant, these non-basic jobs may be at new and used car dealers, body shops and parts suppliers. Regions with several basic-industry businesses are likely to have high multipliers.