Infrastructure Alternatives for 2005: Employment and Occupations
Andreassen, Arthur E., Berman, Jay M., Monthly Labor Review
More investment in the Nation's infrastructure would result in new jobs in construction-related industries; however, even under optimistic assumptions about future growth, the impact on total employment is not large
The Bureau of Labor Statistics recently published its biennial projections of the U.S. economy.(1) In a variation of the BLS moderate-case scenario that focuses on infrastructure spending for 2005, this article projects that an additional $41 billion in infrastructure investment would generate 833,000 new jobs. Most of these jobs would be in construction and related industries, as demand shifted into occupations with a close connection to working on the Nation's infrastructure.
As in the past, the BLS projections contain three alternatives covering the most plausible range of gross domestic product and its demand components, along with the expected change in employment by industry and occupation. Within this range of gross domestic product and employment are other paths the economy might follow if different events affect the distribution of demand. By varying the moderate scenario for 2005 to reflect other possible outcomes for selected demand categories, special assumptions can be derived and studied. In what follows, we analyze two such modifications of the moderate scenario, each focused on infrastructure spending.(2)
As will be shown, even under optimistic assumptions about future growth, the impact of infrastructure spending on employment is not great in total. However, this spending does affect certain industries, such as construction, very heavily. Note that the article focuses on infrastructure spending per se and does not examine the productivity increases this type of investment might have on other parts of the economy.
Two alternative spending paths are laid out around the moderate-growth projections: a low-investment version, reflecting a fixed infrastructure share of gross domestic product over the projection period,(3) and a high-investment scenario, reflecting an increasing share of gross domestic product allocated to infrastructure replacement and improvement. Each of these alternatives provides some answers to questions regarding the potential impact of that alternative on employment and presents a range of both direct and indirect employment related to infrastructure spending. Certain assumptions were made to establish bounds between which infrastructure expenditures might fall. This study does not attempt to choose which is the best or correct level of infrastructure spending, but quantifies some of the alternative levels that have been suggested by researchers knowledgeable in the area.(4)
The study concentrates on five categories of infrastructure spending: highway construction, local transit construction, railroad and airport construction, water and sewage construction, and the operation of existing water and sanitation facilities.(5)
Modifications from the moderate projections are developed to measure the impact of infrastructure investment on the level and distribution of employment by industry and by occupation. Two methodological approaches were taken. One assumes that any increase or decrease in infrastructure spending is offset by other categories of gross domestic product, resulting in no change in the total projected gross domestic product for 2005. The second approach allows total gross domestic product to vary with the changes in infrastructure spending. This approaches serves to highlight the industries and occupations that are sensitive to infrastructure spending. Assuing a constant gross domestic product, on the other hand, reflects the idea that the projected level of gross domestic product is the most likely to be attained, and, as a consequence, should a higher or lower level of one demand category take place, compared with its level in the moderate scenario, alternative offsets in other demand categories are more than likely to take place. …