Employment Impacts of Highway Infrastructure Investment
NOTE: This estimate does not represent an estimate for the highway construction expenditures under the American Recovery and Reinvestment Act. FHWA is reviewing the parameters of the legislation and will up date this estimate as necessary.
For many years, the Federal Highway Administration (FHWA) has periodically estimated the employment impacts of highway capital expenditures. For 2007, on average, a $1 billion of Federal highway expenditure supported 30,000 jobs. The employment estimate includes direct, supporting, and induced positions, defined as:
- Construction oriented employment, including all jobs that are created either by the construction firms that work directly on the project or by the firms that provide direct inputs (paving materials, steel, concrete, etc.) to the construction project;
- Supporting industries' employment, including jobs in firms that provide inputs to the industries that directly provide materials and equipment used in highway construction. For example, a firm that produces guard rails is counted as 'construction oriented' employment but the firm that provides the sheet steel to make the guard rails is considered part of 'supporting industries' employment; and
- Induced employment, which includes all of the jobs supported by consumer expenditures resulting from wages to 'construction oriented' and 'supporting industries' employment.
The 2007 estimate shows $1 billion of Federal-aid expenditure supported 10,300 construction oriented jobs; 4,675 supporting industries' jobs; and 15,094 induced employment jobs. The analysis also estimated that the total jobs equated to employment income of $1.15 billion.
The 2007 update of employment supported by Federal-aid highway expenditures can be estimated using two alternative assumptions – one with and one without the purchase of right-of-way. To the extent that a highway project requires purchase of additional right-of-way there is a reduction in the number of jobs supported. Historically on average the Federal-aid highway program utilizes 7 percent of funds used for right-of-way purchase. The chart below shows the impacts of $1,000,000 highway expenditure historically and using the alternative assumptions for 2007. The number of jobs supported has decreased in the past two years due to input price increases, including a 56 percent increase in asphalt and a 24 percent increase in the cost of diesel fuel.
| 1997* | 2005 | 2007 includes 7% right of way | 2007 no right of way purchase | |
|---|---|---|---|---|
| Construction Oriented Employment Income | $589,363,200 | $428,842,412 | $394,814,237 | $426,826,202 |
| Construction Oriented Employment Person-Years | 15,667 | 10,057 | 9,536 | 10,300 |
| Supporting Industries Employment Income | $222,576,800 | $192,752,000 | $175,067,903 | $189,262,598 |
| Supporting Industries Employment Person-years | 5,551 | 4,483 | 4,324 | 4,675 |
| Induced Employment Income | $545,182,400 | $548,154,400 | $492,090,698 | $531,989,944 |
| Induced Employment Person-years | 16,841 | 14,648 | 13,962 | 15,094 |
| Total Employment Income | $1,357,124,800 | $1,169,750,400 | $1,061,972,839 | $1,148,078,745 |
| Total Person-years | 38,000 | 29,190 | 27,800 | 30,000 |
*The 1997 report refers to a total of 47,500 jobs supported, that included a 20% state match of funds so that measured the impact of $1.25 billion.
Cautions about the use of the job employment and income figures
- The estimated jobs figure should be used carefully --
- The FHWA analysis refers to jobs supported by highway investments, this includes 'new jobs' to the extent unemployed labor is hired; 'better jobs' as currently employed workers move into jobs with better compensation and/or full time positions; and 'sustained jobs' as current employees are retained with the expenditure.
- The distinction needs to be made between jobs directly related to highway construction — about one-third of the total jobs — and the supporting industries' and induced employment jobs.
- The estimated job support utilizes the national average mix of construction materials and labor inputs. Specific projects and local utilization ratios will alter the actual employment supported.
- The FHWA analysis assumes there is slack capacity in the markets for labor and for goods and services. If there is not excess capacity, some of the employment will be met by workers shifting from other jobs.
- For this employment estimate, a "job" is counting "person years." For example, 100 person-years may translate into 50 jobs supported for 2 years or 100 jobs supported for 1 year. The temporal aspects of the jobs will correspond to the nature of the construction project.
- Although input-output models such as the one used for this analysis do not identify the geographic location of employment it is reasonable to assume that the majority of the construction oriented employment will occur in or near the jurisdiction of the project. In addition, a portion of the induced employment will occur in and around the work site jurisdiction as construction workers spend their incomes purchasing goods and services in the local economy.
