Transportation investments and the labor market: How many jobs could be generated and what type?

Source: Josh Bivens, John Irons, and Ethan Pollack Economic Policy Institute, EPI Issue Brief #252, April 7, 2009

In February, Congress passed a $787 billion stimulus package–the American Recovery and Reinvestment Act (ARRA)–which included substantial new funding for infrastructure investment. From a macroeconomic perspective, this is good news: infrastructure spending as economic stimulus provides a high economic “bang-for-the-buck” (that is, extra output and employment created through each dollar increase in the federal deficit) and stands near the top of the list of proposals to spur economic recovery.1 The largest chunk of this investment focuses on transportation infrastructure, which is likely to provide even more bang-for-the-buck than generic infrastructure investment.

Over the longer-run, if the ARRA represents a broader and more permanent commitment to the maintenance and improvement of the nation’s transportation infrastructure, it could have large labor market implications beyond just lowering the unemployment rate in the current recession. For example, since the mix of jobs produced by transportation investments–relative to the overall economy–tips toward sectors that disproportionately employ workers without a college degree and unionized workers, the long-run job-market impacts of transportation investments may push back against the growing economic inequality that has characterized the U.S. economy for decades.

This Issue Brief summarizes some findings on the job impact–both the number and the kinds of jobs created– from investments in transportation infrastructure. In particular, we estimate that each $100 billion of new infrastructure spending targeted to modernize the American transportation sector would yield:
• Approximately $160 billion in additional economic output, which translates into roughly 1.1 million net new jobs created in the next two years.

• An increase in the relative wages of those 70% of U.S. workers without a college degree by almost 0.4% each year each year the the increased commitment to transportation persists. While modest, this amount does represent a wage increase for high school graduates that is roughly 40% as large as the entire increase this group has seen since 1979.

• An increase of roughly 125,000 unionized jobs in the United States, even if all of the jobs supported through this transportation spending merely displaced currently existing jobs (which is unlikely).

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