Today, the Alliance for American Manufacturing (AAM) and University of Massachusetts-Amherst's Political Economy Research Institute (PERI) released cutting-edge research on the importance of infrastructure investment in our nation's economic recovery.
Download the full report, "How Infrastructure Investments Support the U.S. Economy: Employment, Productivity, and Growth," by clicking here.
Congress will soon consider economic recovery legislation along the lines of President-elect Obama's proposal. Questions such as the overall size of the stimulus and the distribution (tax cuts, infrastructure, state aid, etc.) will be debated. The new AAM-PERI report concludes that investment in infrastructure such as highways, bridges, waterways, and transit provides the greatest return on federal spending for job creation and economic growth.
Click here for the AAM news release.
Infrastructure Investment Key Findings:
Overall Job Creation Based on U.S. Needs Assessments
- Job creation through baseline program. Infrastructure investments of $87 billion per year to meet baseline needs will generate about 1.6 million total new jobs within the U.S., including direct, indirect and induced jobs.
Job creation through high-end program. Investments of about $148 billion per year to accelerate the rebuilding of the U.S. infrastructure will generate about 2.6 million new jobs, including direct, indirect, and induced jobs.
Job Creation by sector
- Construction. The highest proportion of new jobs will be in construc-tion. For the baseline scenario, about 641,000 new construction jobs will be generated. The high-end investment scenario will generate about 1 million new construction jobs. Overall, about 40 percent of all new job creation through either investment program—including direct, indirect, and induced jobs—will be in construction. The construction sector has been severely hit by the recession, with unemployment in the industry rising from 9.4 to 15.3 percent between December 2007 and 2008.
Manufacturing. About 146,000 new manufacturing jobs will result through the baseline investment scenario, and the high-end investment scenario will generate about 252,000 new jobs. About 10 percent of the overall new job creation will be in manufacturing. Manufacturing has also been badly hit by the recession, with unemployment in the industry rising from 4.6 to 8.3 percent between December 2007 and 2008.
Job Creation and December 2008 Unemployment
- Baseline program. If 1.6 million new jobs were added to the December 2008 labor market, that would reduce unemployment from its actual rate of 7.2 percent to 6.2 percent.
High-end program. If 2.6 million new jobs were added to the December 2008 labor market, that would reduce unemployment further, to 5.5 percent.
U.S. Jobs and Imports
- Domestic supplies as major source of job creation. The main reason infrastructure investments create more jobs than an increase in household consumption is that the share of spending done within the U.S, as opposed to the purchase of imports, is significantly higher with infrastructure investments.
- Domestic spending and imports in manufacturing.
- The manufacturing sector will account for about 10 percent of the total spending resulting from infrastructure investments, corresponding to the 10 percent share of employment increases.
- With the manufacturing sector, imports represent a significantly higher share of total spending tied to infrastructure investments. Import purchases account for between 12 – 22 percent of manufacturing supplies among the four key areas of energy, transportation, school buildings, and water management infrastructure investments.
Raising domestic supplies up to 100 percent of total supplies would produce a total of 77,000 additional domestic jobs resulting from all infrastructure investment spending, an increase of 4 percent. But manufacturing jobs, by themselves, would account for 69,000 of the total 77,000 increase in jobs. The increase in domestic job creation within the manufacturing sector resulting from raising domestic supply purchases to 100 percent of total purchases would represent a 33 percent increase in manufacturing job creation.
Infrastructure Investments, Competitiveness, and Environmental Sustainability
- Competiveness. Public investment improves private sector productivity. The impact is proportionally larger for the manufacturing sector than for the private sector as a whole. Improving the U.S. infrastructure in all four main areas—transportation systems, public school buildings, water management, and energy transmission—will improve U.S. competitiveness by contributing toward a lower-cost environment than would be possible under our aging current stock of infrastructure.
- Environmental sustainability. Not all categories of public investments are aimed at producing direct environmental benefits, but some are. These would include public transportation, freight rail, and smart grid electrical transmission system that can more efficiently transport electricity from renewable energy sources. At the same time, all public infrastructure projects promote a clean-energy economy by raising the efficiency of production, and thereby lowering the overall demand for energy for a given level of production.