An important factor in job estimation: A nonlinear jobs-to-sales ratio with respect to capacity utilization

Many tools for economic impact evaluation, such as input-output models and computable general equilibrium models, rely on the jobs-to-sales ratio (JSR) to convert direct, indirect and induced effects of sales into employment. For service sectors, this ratio is strongly influenced by capacity utilization and exhibits a nonlinear pattern, especially for short-term tourism applications that involve dramatic demand fluctuations as a consequence of mega events, natural disasters or societal instability. The purpose of this study is to decompose the relationship between capacity utilization and the JSR so that the underlying factors that cause the instability of JSR can be identified. Time-series data from the Taiwanese tourist hotels and aviation sectors are adopted to discuss the strength of the relations between price per unit and capacity utilization, total employee numbers and utilization, service capacity and utilization, and labor efficiency and utilization, respectively. The results indicate that the adjustment of labor efficiency is the prominent factor in determining the stability of the jobs-to-sales ratio, while price, to employee number and service capacity are relatively stable in response to demand, leading to changing JSRs.