In the federal government’s search for an elixir to slow, and eventually reverse, damage from the shocks that have been shaking the nation’s labor market, two areas hold special promise, according to companion reports issued today by the Economic Policy Institute.
The reports show that in the short run such spending would be a potent recession-fighter. Each $100 billion invested in transportation infrastructure and in green jobs would expand the economy’s annual output by about $160 billion and generate approximately 1.1 million jobs. Further, the labor market impacts of this spending would reap positive returns even after the U.S. economy recovers from the current recession by pushing back against forces that have led to growing inequality in the last 30 years. Specifically, both transportation and green investments disproportionately support jobs filled by workers without a 4-year degree (boosting demand for them) as well as improving their prospects for finding unionized work. These influences combine to improve their wages by 0.4 to 0.5% each year that the commitments to transportation or green investments are sustained.
“Transportation Investments and the Labor Market,” and “Green Investments and the Labor Market,” are jointly authored by EPI economists Josh Bivens, John Irons, and Ethan Pollack. The report notes that infrastructure spending outpaces nearly all other options in terms of providing effective economic stimulus in the near-term. Infrastructure spending returns $1.59 for every dollar spent, ahead of all other stimulus options except food stamps ($1.73) and unemployment benefit extensions ($1.64).
Bivens, Irons, and Pollack further explain that transportation and green spending proposals for economic stimulus may be even more effective as a jobs generator than the extant literature on infrastructure investments would indicate. One key factor is that the first focus is on repairing and/or retrofitting existing structures, whether to restore structural integrity or to increase energy efficiency. Such projects avoid many of the costs associated with new projects – acquiring land or rights-of-way, for example – that make new projects costlier and that take more time to get underway.
While fighting the current recession is a pressing goal in the near-term, in the longer-term transportation and green investments can generate lasting improvements in the nature and quality of jobs offered to American workers. By spurring growth in those sectors (construction and manufacturing, most notably) that disproportionately employ workers without a 4-year college degree and provide unionized work, these investments can lean against the rising inequality of hourly wages that has characterized most of the past 30 years in the U.S. labor market.
This combination of short- and long-term benefits makes green and transportation investments a win-win, as the authors describe it, that starts producing positive results almost immediately and that has the potential to create lasting benefits that over time.