U.S. Department of Transportation: Employment Impacts of Highway Infrastructure Investment

The most recent official estimate of the impacts of infrastructure investment on employment was generated by Council of Economic Advisers (CEA) within the Executive Office of the President. The CEA estimated that every $1 billion in Federal highway and transit investment funded by the American Jobs Act would support 13,000 jobs for one year. ref. https://www.whitehouse.gov/blog/2011/09/09/american-jobs-act-state-state.

This figure is also cited in briefing materials for the Administration's reauthorization proposal, the GROW AMERICA ACT http://www.dot.gov/sites/dot.gov/files/docs/Workforce_DOT_Reuth_FINAL_2014.pdf

and the Department of Transportation's 2014 TIGER Notice of Funding Availability (NOFA), https://www.federalregister.gov/articles/2014/03/03/2014-04627/notice-of-funding-availabilityfor-the-department-of-transportations-national-infrastructure#footnote-3

The total jobs number includes the number of direct, indirect and induced jobs:

• A direct job is the job created by the actual government expenditure and the wages are paid for from the funds for the project. • An indirect job is the job created by the expenditures the suppliers make to produce the materials used for the project. The cost of this would be included in the cost of the materials. • An induced job is the job created elsewhere in the economy as increases in income from the direct government spending lead to additional increases in spending by workers and firms.

In analyses developed for the America Recovery and Reinvestment Act of 2009, the CEA had estimated that 64 percent of the job-years represent direct and indirect effects while 36 percent of the job-years are the induced effects https://www.whitehouse.gov/administration/eop/cea/estimate-of-jobcreation/.

It is important to note that the employment impact of infrastructure investment does not remain constant over time. Any increase in construction materials prices and wages over time will tend to reduce the number of jobs supported by each $1 billion invested. Other factors such as changes in worker productivity and consumer's typical rate of savings will also affect the average number of jobs supported.

The Federal Highway Administration (FHWA) has periodically estimated the employment impacts specifically associated with highway capital expenditures; the most recent estimate was that each $1 billion of Federal-Aid highway capital expenditure in 2007 supported 27,800 jobs. However, this figure is now considered to be out of date, and is no longer used in FHWA analyses. FHWA continues to conduct research in this area, and may issue an updated highway construction-specific value in the future. It should be noted that any such update would undoubtedly produce an estimate that is lower than the previous FHWA estimate for the year 2007, and would likely produce a figure much closer to the CEA estimate.