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Job-Creation: Comparing Transportation Spending to Other Investments

In the current economic crisis, unemployment has become a major concern, particularly in the United States. As governments look to combat this trend and get people back to work, identifying the most efficient ways to accomplish this is an important pursuit. For example, in 2009, the U.S. took a look at its job creation efforts through the American Recovery and Reinvestment Act. This act included a combination of direct federal spending, tax cuts, and state fiscal relief.

Looking back, the federal government has tried to estimate the cost of job creation through each strategy. Direct government investment has created jobs at an estimated price of $92,000 per job year. This includes employment that is direct, indirect, or induced. Tax cuts have created jobs at a rate of $145,000 each, and state relief has provided jobs at a rate of $117,000 each.

In 2007, the FHWA estimated that $1 billion of highway investment would create approximately 27,800 jobs. In comparison, investments in electricity generation and transmission yield around 14,500 jobs while investments in water infrastructure create about 19,800. Assuming that these jobs last at least one year, this comes out to about $36,000 per job for highway investment. This is based on four year old data, and an updated figure of the job output per dollar spent is almost certainly lower than the 2007 estimate. While the ARRA has other goals than raw job creation, these numbers indicate that investment in transportation is a competitive means of getting people back to work. As estimates are improved based on factors such as the current price of construction materials, close attention should be paid to which strategies are the most effective job-creators.

For additional information as well as sources from this edition of the RoadReady Newsletter and blog check out the following links:

Estimates of Job Creation from ARRA

Urban Mobility Report

The Economic Importance of the National Highway System

Employment Benefits of Highway Infrastructure Investment

Highways and the Economy

Freight Bottlenecks on the Highways

Investment and Job Creation

Understanding the Gas Tax

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