Public Investment

For three decades, the nation’s most urgent needs have been neglected. The country needs a large-scale infusion of capital to repair and expand our networks of highways, electrical grids, waterways and rail lines. Investing in these needed projects will also create millions of jobs at a time when joblessness is approaching the highest levels in a generation.

Public infrastructure is a key driver of economic growth and opportunity. Unfortunately, in the last few decades public investments in infrastructure have fallen as a share of the economy, resulting in a inadequate and often crumbling roads, bridges, electrical grids, rail lines and waterways. Significant investment is needed to not only reverse the decades of neglect but also to modernize our transportation, energy, and communications systems to meet the needs of the 21st Century. The recent recovery package approved in February will provide a small but important downpayment on these national infrastructure needs.

The recovery package will also help grow the economy by putting more Americans back to work. These investment dollars are used to hire construction workers, planners, architects, engineers, project managers, and foremen, who in turn use their new income to boost their own spending. This effect is not limited to the industry directly receiving investment funds—for example, every construction job directly supported in the construction industry on average supports two additional jobs in supplier industries, such as accounting, office supplies, and construction capital manufacturing. As newly hired workers spend their income back into the economy, even more jobs are created across industries. Overall, each dollar of infrastructure investment provides about $1.59 in additional economic growth, a relatively high bang-for-the-buck.

Infrastructure investment can also slow and even reverse the growing wage inequality in our society. Transportation and green infrastructure investments in particular provide job opportunities to the 70% of workers who lack college degrees, thus helping to narrow the growing wage gap between college and non-college educated workers.  Furthermore, because many of these jobs are covered by unions, they provide more economic security. These two labor market effects are significant because the growing college wage gap and deunionization have fueled the growing wage inequality over the last few decades.

At a time when budget woes have forced many states to halt ongoing construction, investments in infrastructure offer a way to quickly restart these programs and get more people back to work. It is also worth emphasizing that these infrastructure projects are investments that will have to be made at some point: The American Society of Civil Engineers says the country’s infrastructure is dangerously inadequate and will need $2.2 trillion in new investments over the next five years. For the nation’s infrastructure and overall economic health, it’s now or never.

Featured Research and Commentary:

In two reports, EPI Researchers Josh Bivens, John Irons, and Ethan Pollack examine the impact of transportation investment and green investment on the labor market and outline how policymakers can ensure that the jobs created are good jobs. “Rescue plan for Main Street,” by John Irons and Ethan Pollack, explains why infrastructure investments are effective economic stimulus and an integral part of a successful economic recovery package.  Ethan Pollack also gives a clear account of the timing of infrastructure spending during a recession and counters the claim that it is too slow to be effective stimulus.

In addition, EPI offers a method for measuring the jobs created by infrastructure investments and outlines how those jobs can help reduce income inequality.