How the White House calculates infrastructure jobs
A symbol based on the original Route 66 road signs is seen painted on the highway near an abandoned gas station and Cafe in Ludlow, California.
President Obama heads to New York's Tappan Zee bridge today. The crumbling, sixty year old span across the Hudson will be the backdrop for a speech on the nation's infrastructure.
Barring action from Congress, a federal fund for building and repairing roads, bridges and transit systems is expected to run dry in August, something the White House says could cost a lot of jobs.
As Transportation Secretary Anthony Foxx told a White House briefing on Monday, “Unless Congress acts, up to 700,000 Americans will lose their jobs over the next year and road work, bridge building, transit maintenance – all of these types of projects – may be delayed or shut down completely,”
How did he come up with that 700,000 number?
A Department of Transportation spokesperson directed me to an explanation on the DOT website, which breaks down the calculations a bit. According to the explanation there, the tally includes the number of “direct, indirect and induced jobs” that come from highway infrastructure investment.
A “direct” job would be the kind of work you see crews with hard hats doing, from laborers to engineers—the folks involved in the construction project itself. Paychecks for those jobs actually come out of federal coffers.
As for the “indirect” jobs, those involve manufacturing the materials-- the steel, concrete or paint, for example, which are used in an infrastructure project. The “cost of materials” line in the budget for a federal highway project would indirectly fund these sorts of indirect jobs.
And then there are those “induced” jobs—jobs created “elsewhere in the economy as increases in income from the direct government spending lead to additional increases in spending by workers and firms,” according to the DOT.
I asked Robert Puentes, director of the Metropolitan Infrastructure Initiative at the Brookings Institution, to help translate this one. These jobs, he says could be “everything from the food truck that's getting lunch” for the construction workers themselves, “to the guy that’s cutting their hair.”
A spokesperson for the DOT would not elaborate on how exactly it estimates the number of induced jobs created, but says that all the numbers are based on research from the White House's Council of Economic Advisers.
When the Council added up all these jobs-- induced, indirect, and direct—it found that about 13,000 jobs are supported for every $1 billion in federal highway and transit investment. Recently, the highway trust fund has spent about $50.9 billion dollars annually on infrastructure projects. So, multiply 50.9 by 13,000 and you get a little under 700,000 jobs.
But that may actually be a low estimate, according to research done by Standard and Poor's U.S. Chief Economist Beth Ann Bovino. She recently released a report that found a $1.3 billion investment in infrastructure would likely add 29,000 jobs to the construction sector alone. Meaning the $50.9 billion annual in federal highway trust fund spending would amount to more than 1 million jobs.
Construction jobs which are, by the way, the kind of “good” jobs that have been largely absent from the economic recovery so far, Bovino points out.
As her report puts it: “The American middle class, which suffered disproportionately during the recent economic slump, would benefit most from investing in transportation infrastructure because it creates what are traditionally middle-class jobs.”