New Data Indicates Economic Benefits of Infrastructure Stimulus Investments

For every billion dollars invested in new infrastructure products, personal earnings would increase by $1.1 billion, and national GDP would increase by $3.4 billion, according to national and state-by-state data released by the Arlington, Va.-based Associated General Contractors of America (AGC).

The statistics, based on federal data and economic research conducted for the association, show the "unmistakable" benefit of including infrastructure investments as part of President-Elect Barack Obama's stimulus package, says Stephen Sandherr, AGC's CEO.

"There's been huge interest in how much real economic stimulus you would get from money into construction and into infrastructure in particular," adds Kenneth D. Simonson, the association's chief economist. "We hope the data will persuade Congress to put a substantial amount of money into funding infrastructure at a time when there is a lot of excess capacity among construction workers, idle equipment, and also falling prices for most construction materials. It's a rare opportunity for public and private owners to get a real bargain in terms of materials and quality contractors available to go to work right away."

AGC anticipates a dramatic increase in construction-related jobs to accompany increased spending on infrastructure. According to the data, more than 28,500 jobs will be created or saved nationwide for every billion invested in projects designed to improve highways, water systems, educational and health facilities, and energy systems. Of those jobs, 9,700 would be for construction-related work; 4,600 in associated fields, such as suppliers; while another 14,300 of the total would contribute to the broader economy.

Not everyone, though, is convinced that infrastructure incentives will lead to such tremendous job creation. "Unfortunately, national infrastructure incentives are typically all about roads, bridges, highways, power plants, schools, etc. and will have little impact on the typical 'construction worker' who is out of work," says Jeff Burton, president of Junction City, Kan.-based American Dream Development.

The need to improve infrastructure, of course, goes well beyond job creation. "We are under-investing in infrastructure, and we are seeing the catastrophic consequences such as the fallen bridge in Minnesota," says Robert Dunphy, senior resident fellow for transportation and infrastructure at the Washington, D.C.-based Urban Land Institute.

A stimulus package would be a welcome first step toward infrastructure improvement, Dunphy says. "When we talk stimulus, it's easy to talk spending," he adds. "You can go out and pave a road anywhere and get the short-term economic impacts. The longer-term case is that these really, truly are investments that lead to greater productivity, great economic development, and greater quality of life for communities. That point is easily lost when the focus turns exclusively to short-term stimulus."

Burton agrees?legislation should focus on the long-term outlook and not solely on short-term spending. "Remember that the industry is in starvation shock," he says. "A stimulus package has the potential of being horded by a very narrow band of specialized large-scale infrastructure contractors, while not having the historic trickle-down effect that is desired. I like the concept of replacing infrastructure at a sustainable pace?3 percent to 7 percent a year?to allow these jobs to exist beyond the initial stimulus period."

Big Impact

Here's a look at the state-by-state impact of stimulus funding on GDP, personal wages, and employment.

Sources:AGC of America; Bureau of Labor Statistics; Stephen Fuller, George Mason University