Tools for Assessing the Labor Market Impacts of Infrastructure Investment

Source: Josh Bivens, John Irons, and Ethan Pollack, Economic Policy Institute, Working Paper #283, April 7, 2009

The American Recovery and Reinvestment Act (ARRA) helped to kick off a renewed debate over the state of the nation’s infrastructure. For years, advocates for increased infrastructure spending had argued that the deterioration of the nation’s public capital stock was harming prospects for durable economic growth. When an ambitious fiscal policy response was necessitated by the steep recession beginning in 2008, the Obama administration used the opportunity to fund substantial infrastructure investments as part of its economic recovery package.

Advocates for increased infrastructure investment often stress its job-creation potential. In the debate over ARRA, for example, advocates often pointed to the short-run macroeconomic benefits that these investments would spur by creating jobs and lowering the overall unemployment rate. These advocates have also stressed that new jobs created by infrastructure investment over the longer-term could be a particular boon for communities traditionally disadvantaged in the U.S. labor market–including minorities, those working in areas like central cities or rural communities from where good-paying blue-collar jobs have moved, and workers who have not attended college.

These possible labor-market benefits stemming from infrastructure investment are, of course, just one (and probably not the most important) facet of their overall effect on the economy. For example, recent proposals to reduce both greenhouse gas emissions and reliance on external sources of energy could provide both climate and energy security. A modern transportation infrastructure could reduce transportation costs, fuel usage, and increase economic opportunities for many. In both cases, substantial infrastructure investments would be required, and the size of these investments would have clearly visible impacts on the U.S. labor market. Given this, it would be useful to know what these likely impacts would be. This paper suggests some tools that could be used to make these assessments. Forthcoming papers in what will be an ongoing research project at the Economic Policy Institute (EPI) draw on this methodology to “score” the jobmarket effects of various proposals for infrastructure investments.

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