Thursday, December 9, 2010

Transportation Investments: Prolific Job Creation

The Economic Policy Institute (EPI) released a report in October looking at the effectiveness of investments in transportation on job creation. They specifically focused on public transit and rail systems. They were motivated by a recent report by the Federal Transit Administration which estimated the backlog in capital spending in these areas. This scenario involves bringing current systems into a state of good repair. They also looked at another scenario, the Apollo Alliance’s Transportation Manufacturing Action Plan, which is designed to expand public transit service and “build out a national intercity and high speed rail system.” The details of these plans are of interest in general, but what is of concern here is the efficiency of job creation claimed by EPI.

They claim each billion dollars of investment in this area creates 15,500 jobs. That works out to one job per $64,500. To put that in perspective, the $800B stimulus package would have created 12.4 million jobs at that efficiency.

The summary results of their study are:

Transit Backlog Scenario
“An annual investment of $27.3 billion over six years into public transit capital would support 15,554 direct and indirect jobs for each billion dollars of transportation investment (or 2.5 million jobs from the entire proposal). Of those jobs, this funding scenario would generate 403,961 direct and indirect jobs specifically in the manufacturing sector (Pollack 2010). It should also be noted that this does not represent the full job impact of such investments, as it does not include jobs created from the re-spending of new employees’ incomes back into the economy.”

“Overall, this type of transit investment supports jobs targeted toward the lower and middle parts of the wage distribution, which have been hit the hardest by this recession. Over half of the jobs would go to those with a high school education or less. Yet these jobs are well-paying, with only 15% falling in the bottom wage quintile, and over two-thirds falling in the middle three quintiles. This funding scenario also supports a higher share of unionized jobs (50% more than the overall economy), which often translates into higher benefits and greater job security.”
Transportation Manufacturing Action Plan Scenario
“Investing $30 billion into public transit capital and $10 billion into intercity/high-speed rail annually for six years would support 15,524 direct and indirect jobs for each billion dollars invested (or 3.7 million jobs for the entire proposal). Of those jobs, this funding scenario would generate 605,352 direct and indirect jobs specifically in manufacturing.”

“Like the “transit backlog” scenario above, the TMAP transportation investment would support jobs targeted toward the middle class, with over half of the jobs going to workers with a high school education or less, and provide jobs with wages mainly in the middle of the wage distribution. This proposal would also create a similarly high share of unionized jobs.”

If these results are anywhere near to being correct, then the response is obvious. This is an area of great need, and it is probably are most efficient means of creating jobs. Let’s get moving!

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