Surveying & Mapping Industry Economics: Part 2—Payroll and Revenue

A 1.379Mb PDF of this article as it appeared in the magazine—complete with images—is available by clicking HERE

This article continues an inquiry into the economic conditions of the Surveying and Mapping industry (NAICS 541370) using data from the U.S. Census Bureau. This time we will look at payroll and revenue. The data comes from the Economic Census conducted every 5 years on American businesses. The last Economic Census was conducted for the year ending December 2012. The data is based on samples and therefore subject to sampling errors. The US Bureau of Census publishes data with various caveats. From time to time the agency modifies the data format; therefore a user must manipulate the data in order to combine data sets as I have done. As a result, please view this data with some caution. The goal is to present information that will stimulate further research and discussion into matters that are relevant to the future of surveying.

Two applications are available on the Census website that provide access to a summary of the data this article explores. The Census Business Builder (CBB) was launched in 2016 and comes in 2 versions. The Small Businesses Edition is designed to analyze a certain type of business in a specific location. The Regional Analyst Edition is designed to analyze one or more sectors of the economy within a regional area. These can be accessed from the CBB icon. The Industry Statistics Portal (ISP) provides data for a specific industry. Select an industry and click on the map below Selected Visualizations and a snapshot of the industry will be presented as tables and charts. This snapshot offers some insights into economic performance over a period of years. Go to American FactFinder in order to obtain data for specific geographic locations or on certain sizes of businesses.

The 2007 Recession in terms of Revenue and Payroll
The prior article presented some data about the economic characteristics of the Surveying and Mapping industry. One of the charts showed the change in the number of establishments and people in the workforce over a period of years. Figure 1 shows changes in the Surveying and Mapping industry between 2007 and 2012 at the national level in terms of establishments and employees, as well as, revenue and payroll.

For anyone involved in surveying and mapping, these numbers are mind boggling. The industry did more than slow down during the recession; it appears to have lost a decade or more of growth. Rebuilding this market depends on a number of factors, some of which the industry lacks control over. This can be a bit unsettling for those who want to start a career, open a business or expand operations. No doubt this is why surveyors are expressing concerns about the future. While I am optimistic about the future of surveying and mapping, it is clear there is much work that needs to be done. Businesses will need to be formed and surveyors will need to be developed. Achieving these ends depends on an economic engine and fortunately one exists. A review of some census data will help determine if this engine is up to the task.

Employees and Establishments–1972 to 2012
Figure 2 covers a longer timeline and fewer data points than the prior article. The data is at 5 year rather than 1 year intervals. There is an upside and a downside to analyzing less data sampled over longer periods of time. It simplifies a complex phenomenon which makes it easier to understand, but it omits relevant detail. The goal of this presentation is to look for patterns in the data that are worth exploring further. Additional numerical analysis can generate some useful metrics; however the challenge is to develop a narrative that explains what the numbers mean. For example, behind these numbers are the activities of surveyors, businesses and clients. These activities are influenced by a variety of factors which help or hinder the outcomes derived from these activities. It is worth mentioning that scaling two data sets on the same chart can make interpretation a bit more challenging. For example, on average each establishment employs about 6 people. When each data set is scaled to the same time period the graphical relationships between data sets will need to be viewed with some caution. This is less of a concern when the data is expressed as a percentage.

Figure 2 shows growth in the number of establishments and employees between 1972 and 2012. In 2007 the recession started. The County Business Pattern data indicates the loss of firms and employees ended in 2011 and a recovery was underway in 2012. I encourage you to look at the prior article to get a sense of the recover since 2012.

Figure 3 shows establishment and employee data in terms of the rate of change between each consecutive 5 year census. This shows the relative consistency in growth or decline. While Figure 2 shows an increase in the number of establishments between 1972 and 2007, Figure 3 shows the rate of increase is declining. The employee data is less consistent. The 1987 census appears to be an anomaly and will require more research to understand what is going on.

Payroll and Revenue­1972-2012
Counts of establishment and employees and payroll are converted to revenue and payroll through a monetizing process. The effectiveness of this process is important to the future and to a limited extent this will be analyzed. Figure 4 shows payroll and revenue. Most businesses establish base billing rates relative to wage rates and this seems to be reflected in the consistency between the respective rates of change. It is worth noting that the revenue and payroll seem to be diverging after 2002.

Figure 5 shows payroll and revenue data in terms of the rate of change between each consecutive 5 year census. The rate of change in payroll tends to be consistent with the rate of change in revenue. While Figure 4 shows an increase payroll and revenue between 1972 and 2007, Figure 5 shows the rates of change tend to vary. The 1987 census data continues to suggest an anomaly. Between 1972 and 2007 the rate of increase seems to be declining. It is worth noting the economy periodically goes through periods of expansion and contraction. The contractions last about 1 year. Some contractions are categorized as recessions and these happen at roughly 4 year intervals. Since this census data is on 5 year intervals, the data has the potential to be distorted by these cycles of expansion and contraction. The County Business Pattern data that was presented in the prior article is at 1 year intervals and tends to show these cycles.

Productivity = Revenue/ Payroll­1972-2012
Figure 6 shows productivity as a measure of output (revenue) relative to input (payroll). Productivity has improved over time and particularly after 2002. These productivity metrics are encouraging. As mentioned above, the numbers quantify a complex phenomenon at given points in time. Behind the numbers is a story that needs to be told in order to understand how payroll is transformed in to revenue and in the process productivity is increased.

Payroll/Employee and Revenue/ Employee­1972-2012
The employee is the basic production unit in a business. Figure 7 expresses payroll and revenue relative to an employee. While Figure 7 shows an increase in the payroll per employee and the revenue per employee, Figure 8 shows the rate of change tends to vary. Between 1972 and 1997 the rate of change is declining. Between 1997 and 2002 the rate of change increases. After 2002, there is a shift. Figure 8 also shows the rate of change in Consumer Price Index (CPI). In theory there is some correlation between CPI and payroll, although the demand for labor may exert more influence on changes in pay.

What do the census numbers mean?
The primary purpose of looking at census data is gain an understanding of economic activity. This knowledge can be used to start a business, consider a career, chose a place to live or make a variety of other decisions. This inquiry focuses on the Surveying and Mapping Industry; an established industry in which technological innovation is driving change and a recent recession has disrupted business as usual. The practice of professional surveying resides in this industry; therefore other issues come in to play. Business enterprise is the primary means by which the public has access to professional services and practitioners pursue a livelihood. Business organizations also play an important role in developing and perpetuating a cadre of competent professionals. In many respects, the profession’s wellbeing is a function of economic conditions and business practices. The census data offers some quantitative measures related to these matters.

A limited amount of data has revealed a prolonged pattern of growth, as well as, the adverse consequences of the 2007 Recession. The rate of growth appears to be slowing. Growth can slow for a variety of reasons and additional research would likely provide further insights. An obvious place to look is the periodic contractions in the economy which have a tendency slow down activity, put downward pressure on prices/ wages and destroy capital. Productivity and revenue generation appear to be increasing. This is good news! Multiple factors, including productivity and pricing, influence revenue generation. Productivity tends to improve with investments in technology, work processes and skill building.

For a moment imagine you are operating an enterprise that has been in business more than 40 years, grown to offices in 8,000 locations, employing more than 46,000 people and generates about $5,594,247,000 in revenue annually. Do you think you could figure out how to move forward after the 2007 recession? I suspect so and you would probably compile some data, build some financial models, draft a business plan and get to work. This undertaking would be a bit more challenging for 8,000 independent small businesses, but the basic approach would be similar and in many respects simpler. My point here is the need for the development of a business plan no matter the size of the business.

In the recent past, surveyors have been opining about the decline and demise of the surveying profession. They point to a decline in the number of surveyors as supporting evidence. The census data confirms there are periodic declines in the number of surveyors and the establishments that employ them; however this is only part of what is going on in the industry. Despite a decline in counts, the productive capacity of the industry seems to be improving. This phenomenon is common in any industry that invests in labor enhancing technology. This allows a smaller workforce to produce more goods/services. When productivity in an industry increases, the market needs to expand in order to maintain the size of the workforce. Until 90,000 2007 the market was expanding, however the rate of expansion 70,000 was erratic. I suspect this is because the 50,000 surrounding economy was undergoing cycles 30,000 of expansion and contraction every few years–which 10,000 causes growth to suffer–although there are other factors worth exploring. It seems to me surveyors are confronting a problem which could be summarized as productive capacity in search of markets with healthy economic conditions. No doubt this overgeneralizes the problems confronting surveyors, but it seems a good a place as any to start a conversation on the subject.

Lee Lovell is a registered land surveyor in Colorado and Nebraska and has accumulated 34 years of professional experience. He resides in Parker, Colorado where he was part of Western States Surveying for 20+ years.

A 1.379Mb PDF of this article as it appeared in the magazine—complete with images—is available by clicking HERE