VALUE & ECONOMIC IMPACT OF BASQUE Summary of results
Introduction This is a summary report of the study carried out by the Research Company Siadeco for the Department of Education, Language Policy and Culture of the Basque Government. Objective The objective of the study is to know the contribution Basque Language has made to the economy of the Basque Autonomous Community, measure the economic wealth it generates and quantify the dimension and economic value of Basque language sectors. Many studies have been carried out on Basque from the viewpoints of sociology and philology; however, there are very few studies carried out from the viewpoint of economic science, with the aim of analyzing the market which moves around the Basque language in the economic context of the BAC and measure its impact. After recognizing the initiatives and voluntary work of social agents, which are vital in the Basque normalization process, this study clearly shows that Basque is another activity sector in the Basque economy. Besides public activity directed by the public administration, Basque language has an ever wider market, and its own industry, and these private market activities that are closely linked to Basque constitute activity sectors that generate employment in the Basque economy. The most used macroeconomic variables used to measure the importance of a determined sector in the economy of a country are employment, Gross Value Added (GVA), Production Value (PV) and Gross Domestic Product (GDP); therefore, the final result of this study will consist of the knowledge of these variables applied to the sectors of Basque and their comparison with general data of the BAC. Objective: measure the dimension and economic impact of Basque. 2
Sectors object of the study Besides the structures and services which public administrations have to promote Basque language and Basque culture, we also have to take into account employment and Value Added generated by Basque sector activities from the private economic sphere when measuring the importance of Basque as an economic sector. When carrying out this economic study four main sectors were distinguished which are linked to language; two of them may be considered as belonging to the private economy (language industry, culture industry and media in Basque), another is linked to the public administration and the fourth is mixed, i.e. it includes public and private institutions (education and university): Language Industry This first sector includes the teaching of Basque, translation and interpreting, language consulting, the elaboration and distribution of the corpus of Basque, and the activity sectors in the area of language technologies. In all these activities the language constitutes the object of the activity, and the sector is made up of companies, associations and institutions that offer products and services that work, teach, use or distribute Basque. Culture Industry and the media cultural sectors for which Basque is an indispensable element or resource; in particular: the book and music industry in Basque, audiovisuals in Basque, performing arts, bertsolarismo (Basque improvised poetry), media in Basque, Basque associations, and other agents in areas of communications, culture and society. Four main activity sectors in the study: language industry; culture and media industry in Basque; education in Basque; and services to promote Basque and Basque culture belonging to the public administration. Activities in the area of education and universities As language is an indispensable resource for teaching, being aware of the great importance of the education system in the transmission and use of a language, and bearing in mind the effort carried out by the public administration to Basquisize the education system in the BAC, employment and other economic variables of education activity carried out in Basque have been calculated, from infant and primary education to university studies. In the criteria used in this study, the concept education in Basque has nothing to do with education model D, which uses Basque as a foreign language; in this study all the language models have been considered, and in order to calculate which part of total employment in the education System corresponds to Basque, the number of hours taught in Basque in each language model and in each academic year have been taken into account. Following this criterion, in model B teaching staff who teach the subject of Basque and other subjects taught in Basque have been included; however, in model D the teaching staff of Spanish language or English who do not use Basque in their classes have not been included. Public administration Considering the importance of culture in Basque with regard to the volume of cultural industry of the BAC in general, in this fourth sector, besides structure and employment of services to promote Basque, part of the employment of public administration cultural areas has been taken into account. 3
Criteria used to define Basque sector activities Bearing in mind the four language sectors mentioned that have been included in this study, when including other economic sectors apart from services and activities related to the promotion and use of Basque (such as cultural industry and education), two criteria were taken into account in order to define which activities make up the Basque language sector and which do not. On the one hand, it has to be a service or product closely linked to the language, and on the other, Basque language has to be an indispensable resource of the activity or the product. Direct, indirect and induced impact This study does not measure the economic impact of services and activities developed in Basque, but the impact of activity sectors closely linked to the language. In economic studies in order to measure the economic impact or influence of a sector on the economy of a country we have to take into account the direct, indirect and induced impact. Therefore this study was carried out in the same way with referenceto Basque language sectors. 1. Direct impact : linked to direct employment generated by Basque industry service companies, cultural sectors linked to Basque, education in Basque and public administration Basque services. In first place the personnel employed in Basque activity sectors have been calculated (teaching staff at euskaltegis-basque language schools, translators, Basque media journalists, language normalization personnel of the public administration 7), to subsequently calculate the remaining economic figures that correspond to direct employment (volume of turnover, Production Value and Gross Added Value). 1. Indirect impact: all expenditure and investment carried out by Basque sectors and activity branches have an impact on production, on employment and income, both of these sectors and the remaining sectors of the productive economy of the BAC. An increase in the production level of the media or of books in Basque, indirectly, affects graphic arts or the paper industry. Insofar as Basque sectors are supplied by companies from other sectors located in the BAC, the production of Basque sectors also has an impact on the production of these sectors, creating an indirect economic impact. Direct, indirect and induced economic impact. 1. Induced impact: Part of family income that corresponds to direct and indirect employment generated by Basque, is earmarked for internal consumption, and therefore to calculate the induced impact of Basque the impact that this internal consumption generates on the productive economy of the BAC has been measured The induced impact measures the impact of the production of all family consumer products (food, housing, leisure, etc) in the different economic sectors of the BAC. 4
Gross Added Value and Gross Domestic Product When calculating the economic impact of a specific sector in the economy of a country, the three most used economic variables are employment, Gross Value Added (GVA) and the importance of the sector for the Gross Domestic Product(GDP) of the country. Gross Added Value, represents the Value Added to a product or service in the production process; therefore, in the Gross Added Value that corresponds to a specific economic sector, economic transactions made to another economic sector or intermediate consumption are not included; if in the production of a product we include the costs corresponding to intermediate products or services, we would be double counting the economic resources of a country, as the production of certain sectors would also be included in the production of others. For example, more than one sector is involved in the productive chain of a book (author, printer, editorial, distribution, sales ), and each link in the chain invoices the one before, both their own work and the work already paid for from the previous link; if we add the turnover volume of all these sectors, the economic valuation of certain tasks would be counted more than once. The Production value is obtained by adding to the Gross Added Value the value of intermediate consumption. The volume of turnover may not coincide with the Production value, when all that has been produced has beensoldor when asubsidized productthatissold for lessthanthecostof production. Gross Domestic Product (GDP) is the most used economic magnitude to measure the wealth of a country and the evolution of the economy, and to express the amount of a total economic activity during a year of a country. The calculation, both annual and quarterly of the GDP of the Basque Autonomous Community, corresponds to the Eustat. An increase in year on year GDP represents a positive evolution of the economy; a decrease in GDP, however, represents an economy in recession. GDP is also used to compare the situation of different countries, and to obtain economic indicators such as debt, deficit or expenditure on R&D. The reference variables to measure the economic impact are employment, Gross Added Value and Gross Domestic Product 5
Gross Added Value and Gross Domestic Product Gross Domestic Product is obtained by adding net taxes on products to Gross Added Value; to calculate the amount of net taxes, the difference between income obtained by public administrations in taxes on products and granted subsidies must be calculated. In order to calculate net taxes corresponding to Basque, firstly, income obtained by the public Treasury with VAT linked to the turnover for Basque sectors has been estimated; and subsidies granted for the promotion of Basque and Basque culture have been discounted from this amount. Bearing in mind that the object of this study is to measure the contribution of Basque to the Basque economy, the importance of GDP linked to Basque on total GDP of the BAC measures the importance of Basque in monetary terms in the economy of the BAC, and allows us to compare it with the contribution that corresponds to other sectors of the BAC. Based on the information provided by Eustat, for example, we know that expenditure on health at the level of the BAC represents 8.8% of GDP, expenditure on education is 5.5% of GDP, investment in R&D&i accounts for 2.1% of GDP and tourism contributes 5.8% of GDP. Some other references of economic impact studies carried out within the BAC are: activity developed by Bilbao Exhibition Centre-BEC generates an economic impactintermsof GDP of105million euros; theportof Bilbao generates 500 million euros and activities linked with Basque Technology Parks contribute 5% to GDP. The share of GDP of Basque on total GDP of the BAC shown in monetary terms, the importance that Basque has in the Basque economy. 6
Methodological steps Methodology of work: to calculate economic figures for the economic impact, the results of the collection of direct information carried out for this study by Siadeco has been united with the economic data obtained by Eustat. 1 Define language sectors & subsectors. Here is the methodology used to carry out this economic study and the main steps of the process carried out: 4 general language sectors and 20 subsectors. 2 Define the universe of work; complete a directory of companies, associations and organizations of each sector and subsector. Starting with the Directory of Economic Activities 2014 by EUSTAT, a list of establishments that belong to the area of activity of this study was created, including 10,195 establishments. Then the list was completed using several sources of information, and 309 establishments were added that were not included previously. The database carried out for this study accounts for 10,504 registers altogether. 3 Classify the activity branches according to employment applicable to Basque. While the employment of some branches of activity is linked in total to Basque, as is the case of the euskaltegis (Basque language schools), in other branches of activity only a part of employment has been charged to Basque, as occurs in the case of the Official Language Schools or companies and workers or self employed workers of the translation sector. 7
4 Analysis by sectors of study data and sources of information. Using studies and sources of information according to subsectors and branches of activities, the most data possible was collected to obtain information about employment and estimate employment to charge to Basque. 5 Direct data collection and company surveys in order to get to know employment and the value of relative production for Basque. 6 Calculate the coefficients of Basque applicable to the employment of each branch of activity. 7 Calculate employment corresponding to Basque. In companies of sectors in which the necessary data was not obtained for the estimation of employment chargeable to Basque, a survey was carried out. This was a survey aimed at a strategic sample of 336 establishments altogether. The coefficients of Basque to apply in each branch of activity were calculated, using on the one hand, the results of the company surveys, and on the other hand, economic data by sectors collected previously, as well as data on the level of production in Basque. The Basque coefficient indicated the percentage corresponding to Basque with regard to total employment of each branch of activity. Employment directly related to Basque has been calculated, multiplying the data about total employment in companies, associations and institutions of each branch of activity with the coefficient of Basque calculated previously. 8 Calculate economic macro figures of the economic value of Basque. Once employment directly related to Basque is known and using the ratios of economic data from the Survey on services obtained through EUSTAT, the variables that indicate the economic value and dimension of Basque were calculated: employment corresponding Basque sectors, personnel costs, Gross Added Value and turnover volume. 9 Measure the indirect economic impact of Basque sectors. Expenditure and investment of companies of these branches of activity carried out in the same sector or in others sectors were calculated, applying the technical coefficients of EUSTAT Input/Output tables for the BAC. This expenditure and investment was considered as indirect economic impact of the sectors of Basque. 10 Calculate the induced impact. In order to calculate the induced impact, Leontief coefficients of the Input-Output tables were used. The induced impact depends on the impact of income generated by employment related directly and indirectly to Basque and the consumption derived from this income with its effecton the final demand of the economic sectors of the BAC. 11 Calculate the importance of Basque, as an economic sector, in the Gross Domestic Product of the BAC. After adding net taxes on products to the total Gross Added Value of the direct, indirect and induced impact of the sectors of Basque, the part corresponding to sectors of Basque in the whole of the Gross Domestic Product the BAC was calculated. In order to calculate the amount of the net taxes on products, first the amount collected by tax on Gross Added Value (depending on the type of VAT corresponding to each product or type of service) was calculated, and then, the amount of subsidies to promote Basque and culture in Basque granted by the public administrations was subtracted. 8
DIRECT INDIRECT INDUCED Corresponding to expenditure and investment in other sectors by branches of activity of the sector of Basque Depends on consumption generated in the BAC by direct and indirect employment income and the production of the BAC destined to this consumption Procedure: 1. Link economic data by sectors (Gross Added Value and employment) to branches of activities from Input- Output tables. Input-Output Tables 4. Apply technical coefficients from the symmetrical IO table: relate the production value and intermediate consumption of each IO branch. 6. Based on direct and indirect production value, and applying the coefficient of the payment of salary/production value of each IO branch, calculate the amount of salaries corresponding to direct and indirect employment. 2. Based on direct employment values and according to epigraphs CNAE-09 collected for each IO branch, calculate the coefficients of each IO branch of the employment directly related to Basque. 5. Calculate the economic impact that extends to all branches of activities provided by sectors of Basque, applying technical coefficients, IO multipliers: indirect impact of Basque. 7. Subtract from gross income of employees the average rate of income tax and workers Social Security contributions: amount available to families for savings or consumption. 3. Calculate DIRECT employment and production values corresponding to GVA, according to IO branches. 8. Subtract from available income the amount destined to savings: amount destined to consumption. 9. Divide the total amount of household consumption of families according to IO branches of the symmetrical table, after subtracting taxes on products. 10. Applying Leontief coefficients corresponding to each branch (GVA by production value, employment by production value): data on induced impact; production value, GVA and employment. FINAL RESULT : TOTAL GROSS ADDED VALUE OF BASQUE 11. Estimate the amount of gross tax on products, according to GAV of each IO branch and VAT corresponding to type of activity. 12. Subtract from the calculated amount, subsidies for the promotion of Basque and culture in Basque granted by the public administrations of the BAC: net tax on products. GROSS DOMESTIC PRODUCT calculated by adding net tax on products to Gross Added Value 9
Final Results As the results on the value and economic dimension of Basque show, the contribution to the Basque economy by sectors of Basque is significant. 6.3% of employment generated by the economy of the BAC and 4.5% of Gross Added Value are linked to Basque. As an economic sector, 4.2 % of the Gross Domestic Product of the Autonomous Community corresponds to Basque, the importance approaching that of the tourism sector in the Basque economy (5.8 % of GDP). Industry of language If we observe the direct employment of companies and institutions considered in the area of language industries, the activities of this Basque sector generate 2,500 jobs in total, most of these jobs being employees of euskaltegis (1,316) and translators (485). The volume of annual turnover of work and services linked to Basque within the industry of language is slightly above 136 million a year, producing Gross Added Value of 107 million. We must bear in mind that this economic data does not correspond to the whole of the industry of language, but to economic activities linked to Basque. industry of language 2,541 jobs Industry of culture and the media Direct employment related to Basque language within the area of cultural production and the media amounts to 4,550 jobs altogether. This second sector of Basque moves around 407 million euros a year. These are the activities which employ Basque most: cultural service leisure and social associations and companies, (764 jobs); companies from the area, media and advertising (627 jobs); self employed creators of culture (616 jobs). The area of culture and the media in Basque generates Gross Added Value amounting to 227 million a year. industry of culture and the media 4,550 jobs 10
Activities in the area of education and universities Activities of the area of education and universities 34,122 jobs The economic variables for the whole of the education system in Basque, the university and other educational activities in Basque are very high; in formal pre-university education, employment estimated for all education levels, from Infant Education to the termination of Baccalaureate or Technical Training amounts to 31,000 jobs. To this figure we have to add employment linked to credits taught in Basque at university, i.e. another 3,000 jobs. The education system in Basque employs 34,000 people altogether; around 20,000 people in Infant and Primary Education, 11,000 in Secondary Education (including Baccalaureate and Technical Training) and another 3,000 in university studies. Public Administration Public Administration 1,511 jobs According to data from the study by the Vice Ministry for Language Policy of the Basque Government on human resources available in public administrations and economic resources granted for the promotion of Basque, the number of administration employees that work for different services and areas of Basque is 716. In addition, based on the study by the Basque Culture Observatory of the Basque Government, in this study we have included part of public administration employees that work in the area of culture, bearing in mind the importance of culture generated or distributed in Basque in each cultural sector. It is estimated that employment attributable to Basque from the area of culture in the public administrations is 795 jobs. Therefore, Basque generates 1,511 jobs altogether in the public administration. 11
Economic dimension of Basque The sum of the economic data calculated for the four sectors of Basque included in this study shows us the size of the value and the economic dimension of Basque. The sectors of Basque generate almost 43,000 jobs altogether (direct employment) and a Gross Added Value of almost 1,900 million a year. The economy of the Basque Autonomous Community generates employment for 894,000 jobs altogether and, bearing in mind that direct employment of activity sectors related to Basque amounts to 42,700 jobs, employment linked to Basque constitutes 4.78% of total employment in the BAC (only direct employment). Almost 80% of direct employment corresponds to the education sector, around 10% of employment related to Basque is generated in the culture sector and the media, 6% in the industry of language and the remaining 4% corresponds to direct employment in the public administration. The annual Gross Added Value of the economy of the BAC is around 61,000 million euros. The annual GVA of the economy of the Basque is 1,900 million, so that Basque constitutes 3.07 % of Gross Added Value in the BAC (taking into account only the direct impact). With regard to employment of the BAC (direct employment) 4.78 % With regard to GVA of the BAC (direct impact) 3.07 % 12
Indirect and induced impact Based on employment generated directly by sectors of Basque and the data on Gross Added Value, and applying the technical coefficients of the EUSTAT Input-Output tables of the BAC and the Leontief coefficients, the indirect impact of Basque and economic data of the induced impact were calculated. It is estimated that economic activities of the sectors of Basque generate, indirectly, 3,478 jobs in other sectors. In addition, the economic effect caused by consumption and demand generated from income corresponding to direct (42,724) and indirect employment (3,478) of the sector of Basque generate another 9,670 jobs in the productive economy of the BAC (induced impact employment ). With regard to Gross Added Value, 233 million euros a year of Gross Added Value from other sectors of activity in which the sectors of Basque carry out economic transactions correspond to Basque (indirect impact); by which the GVA of the induced impact would be almost 651 million euros. Direct Indirect Induced Employment 42,724 3,478 9,670 GVA (million ) 1,867 233 651 13
Contribution of Basque language to the Basque economy These are the final macroeconomic results of the direct, indirect and induced impact of the sectors of Basque: Employment 6.28% of total employment of the Basque economy is generated by Basque language sectors; total BAC employment comes to 893,952 jobs and employment for the sector of Basque language amounts to 56,142 jobs, bearing in mind direct, indirect and induced employment. Of this amount, almost 43,000 jobs were generated directly by activities related to Basque, almost 4,000 corresponding to indirect impact and another 10,000 derived from induced impact. With regard to the BAC 6.28 % Gross Added Value 4.5% of Gross Added Value of the BAC economy is related to economic activities linked to Basque. Total GVA of the BAC is almost 61,000 million euros and GVA corresponding to sectors of Basque language is over 2,751 million euros. With regard to the BAC 4.5 % Gross Domestic Product 4.19% of Gross Domestic Product in the BAC corresponds to economic sectors directly or indirectly linked to Basque. The GDP of the BAC altogether is 66,775,970 thousand euros (2012) and that corresponding to Basque is 2,800,634 thousand euros. With regard to the BAC 4.19 % In view of the above macroeconomic variables, we can conclude that the data for the economy generated both directly and indirectly by Basque are significant, and that Basque language has a great value in economic terms. Apart from the employment and resources linked to the administration, economic sectors that work with Basque language generate a lot of employment and high Added Value. Taking into account that the contribution of all the activities linked to Basque Technology Parks is 5% of the GDP and the contribution of the activities linked to the tourism sector is 5.8%, it could be concluded that the contribution of 4.2% of the GDP of Basque language sector is a very significant result. 14