Highway Operations Spending as a Catalyst for Job Growth (Page 2 of 5)
The creation of new jobs is a benefit of highway infrastructure investment. Economic models have been developed to estimate the number and type of jobs created by highway construction spending both directly (through contracts for construction labor and materials,) and indirectly (through increased spending by hired labor and productivity gains to society resulting from a new transportation facility.) To date, however, no models exist that estimate job creation resulting from spending on operations, except as a minor component of new construction. To fill this important void, the Federal Highway Administration (FHWA) sponsored research to develop a new model that will estimate the number and types of jobs created through highway operations expenditures.
This paper summarizes the results of research done in this vein. Specifically, the paper describes the structure of the new model, discusses the model's data requirements, and explains the key steps needed to process the required data.
The number and types of jobs created through operations spending differ significantly from those created through new construction (Appendix A). Specifically, operations jobs are often more electronics based, less dependent on the use of heavy equipment, and more labor intensive than are construction jobs. The skill set required of staff working at a traffic operations center open 24 hours a day, 7 days a week, is fundamentally different from that required of a road construction crew. Moreover, significant disparities in the number and type of jobs created per level of expenditure will result in a substantially different ratio of payroll to expenditures.
Operations expenditures on state-administered highways were approximately $10.4 billion in 2000, or 15.26 percent of total highway spending (Table 1).
|Expenditure (Thousands of Dollars)||Percentage Of Total Highway Expenditure|
|Acquisition of right-of-way||3,115,876|
|Preliminary and construction engineering||6,470,094|
|Highway construction and system preservation||34,483,168|
|Highway Operations Expenditure||9,543,848||15.26%|
|Traffic control operations||939,604|
|Snow and ice removal||1,139,028|
|Toll collection facility||1,289,969|
|Highway safety and driver education||706,608|
|Vehicle inspection and vehicle size and weight enforcement||744,918|
|Total expenditure of capital outlay, physical maintenance, and highway operations||62,558,928||100%|
|Total general administration and research & planning||5,473,540|
|Research and planning||804,066|
|General administration and research for highway operations||835,262||*|
|General administration expenses||712,562||*|
|Research and planning||122,700||*|
Data Source: U.S. Federal Highway Administration (2001) Highway Statistics 2000, page IV-56. Washington, D.C.: U.S. Department of Transportation.
*Note: General administration and Research & Planning expenses for highway operations are separated from their total expenses based on the share of highway operations in the total expenditure of capital outlay, physical maintenance, and highway operations.
As shown in Table 2, expenditures on highway operations in 2000 generated 184,854 full-time job equivalents (hereafter referred to as jobs). This translates to 17,810 jobs per billion (2000) dollars spent on average.
|Total Spending ($1,000)||Average Annual Employee Compensation||Direct Hiring||Employment Impact from spending on materials and services||Total Employment Impact||Employment Per Billion Dollars|
|Highway and traffic services||Traffic control operations||$939,604||$69,940||7,066||5,995||13,061||13,901|
|Snow and ice removal||$1,139,028||$36,886||17,510||2,936||20,446||17,950|
|Toll collection facility||$1,289,969||$52,244||15,145||5,876||21,021||16,296|
|Administration and research||General administration||$712,562||$50,555||8,337||5,186||13,523||18,978|
|Research and planning||$122,700||$68,432||779||829||1,608||13,105|
|Highway law enforcement and safety||Traffic supervision||$4,243,549||$57,331||51,260||27,240||78,500||18,499|
|Highway safety and driver education||$706,808||$41,195||6,633||5,072||11,705||16,560|
|Vehicle inspection and vehicle size and weight enforcement||$744,918||$41,315||11,191||3,177||14,368||19,288|
Traffic supervision accounted for the largest share (42.5 percent) of newly created highway operations jobs, followed by toll collection (11.4 percent), and snow and ice removal (11.1 percent). These three activities accounted for about 65 percent of the total jobs created as a result of spending on highway operations. A detailed breakdown of employment by activity and industry is provided in Table 3.
|Traffic Control||Snow and Ice Removal||Other Services||Toll Highway||General Administration||Research and planning||Traffic Supervision||Highway Safety||Vehicle Inspection||Total|
|Agricultural, forestry, and fishery services||33||12||112||51||19||5||16||24||15||287|
|Metallic ores mining||4||14||1||5||1||0||1||1||1||28|
|Crude petroleum and natural gas||18||110||27||116||28||4||12||39||109||464|
|Nonmetallic minerals mining||4||67||8||45||4||1||3||3||5||140|
|Fabricated metal products and transportation equipment||91||39||30||123||25||7||136||58||27||537|
|Food and kindred products||9||23||4||7||16||2||28||9||9||107|
|Textile and apparel products||13||10||11||51||15||3||37||13||7||159|
|Lumber and wood products||32||17||13||177||22||8||12||35||33||350|
|Furniture and fixtures||2||1||0||2||0||0||1||2||1||10|
|Printing and publishing||191||29||34||50||35||99||24||640||109||1,211|
|Chemicals and allied products||36||892||71||140||25||10||58||33||19||1,282|
|Petroleum refining and related products||5||23||8||40||8||1||2||12||42||139|
|Rubber and miscellaneous plastics products||78||48||19||94||16||8||169||47||19||499|
|Footwear, leather, and leather products||1||0||0||1||1||0||48||4||0||56|
|Stone, clay, and glass products||30||349||6||106||13||6||17||11||17||555|
|Primary metal industries||77||33||12||86||13||3||20||23||16||283|
|Industrial machinery and equipment||506||46||20||219||25||13||35||41||22||927|
|Electronic and other electric equipment||571||17||21||114||20||10||31||42||22||849|
|Instruments and related products||24||9||4||12||11||3||18||19||5||105|
|Railroad, pipelines, state and local transit, and transportation services||44||44||47||102||22||8||35||46||38||386|
|Motor freight transportation and warehousing||76||124||72||146||29||15||44||89||33||629|
|Electric, gas, and sanitary services||37||60||14||182||38||6||22||43||22||424|
|Hotels and lodging places||130||41||33||52||14||18||189||107||184||769|
|Personal and repair services (except auto)||38||14||11||15||16||4||13||25||10||145|
|Eating and drinking places||150||42||39||54||-24*||19||140||115||179||715|
|Automotive repair and services||61||20||43||28||13||7||118||49||15||353|
|Educational and social services, and membership organizations||221||23||21||83||-238*||63||84||71||26||355|
|General government industry||0||0||0||0||4,766||0||25,214||0||0||29,979|
*Note: Negative numbers indicate that the services of these industries are provided rather than purchased by general government industry, which is used as a proxy for general administration for highway operations. Then, a negative employment impact is generated.
In terms of jobs created per billion dollars spent, the "Other Services" category ranked the highest. "Other Services" includes erosion prevention, litter removal, and highway beautification. The vehicle inspection and vehicle size and weight enforcement category, and the general administration category also showed employment gains resulting from operations expenditures.
For comparison purposes, the results of three similar studies on highway construction are presented in Table 4, which shows adjusted estimates of the effects on employment of federally aided highway construction investment, as originally reported in a 1996 FHWA study (Keane, 1996b). The total number of direct and indirect jobs created per billion (2000) dollars spent was 25,330, adjusting for inflation. The original estimates were based on 1995 dollars.
|Type of Employment||Jobs Created Per Billion (2000) Dollars*|
Source: Keane (1996b) The Economic Importance of the National Highway System. Public Roads, Vol. 59, No. 4 (available online).
*Note: These are adjusted numbers for which the BEA gross domestic product implicit price deflators are used. The original employment numbers are based on 1995 dollars. It is assumed that the same employment is required for the same work. However, one billion 1995 dollars spending is inflated into 1.0896 billion 2000 dollars. The employment numbers in this table are derived through the division of the original employment numbers by 1.0896.
Table 5 shows the adjusted estimates of employment in several construction-related activities reported by the Bureau of Labor Statistics (BLS) (Keane, 1996b). The adjusted estimates of total direct and indirect employment, based on 2000 dollars, show that 16,298 jobs were created per billion (2000) dollars spent. The original estimates were based on 1982 dollars.
|Type of Activities||Total Direct and Indirect Employment Impacts Per Billion (2000) Dollars|
|Private multi-family housing||15,362|
|Private single-family housing||13,512|
|Elementary and Secondary Schools||14,761|
|Federally Aided Highway||16,298|
|Civil Work, Land||12,960|
|Civil Work, Dredging||14,109|
|Federal Office Building||15,265|
|Commercial Office Building||13,734|
JOBMOD, a software program developed by the Boston University Center for Transportation Studies and Battelle, generated an estimate of 21,219 jobs created per billion dollars of highway construction expenditures. Table 6 compares the results of these three studies.
|Highway Operations||Highway Construction (FHWA)||Highway Construction (BLS)||JOBMOD (version 1.1)|
NA, not available.
By comparison, the average total number of jobs created directly and indirectly by highway operations expenditures is estimated to be 17,810 per billion (2000) dollars. While this employment figure is less than the adjusted numbers generated in the 1996 FHWA construction study (25,330) and by the JOBMOD method (21,219), it is greater than the adjusted BLS estimate (16,298.)
This study suggests that spending on highway operations generates more direct employment but much less indirect employment than does spending on highway construction per dollar. Almost 70 percent of the jobs generated by way of highway operations spending are direct hires. In contrast, more than 70 percent of the jobs generated through highway construction spending are indirect hires. This suggests that highway operations is more labor intensive but has less interdependence with other industries than highway construction.
Several caveats to the above conclusion must be noted. First, the analysis does not capture all the employment effects of highway operations spending. It is limited to spending on labor (direct employment) and spending on input purchases (direct and indirect employment.) The induced effect realized through household spending and the enabling effect through transportation network improvements are not included here. The effect on employment would logically be larger if induced and enabling effects were captured. Therefore, the estimated number of full-time job equivalents in this analysis is likely a conservative estimate.
Second, spending structures used for highway operations, with the exception of snow and ice removal, are borrowed from proxy industries because data on highway operations spending structures are either limited or unavailable. While the use of the proxies was necessary, real highway operations spending structures might be quite different. Third, average employee compensation is estimated based on proxy occupations or industries. As above, real compensation in highway operations may be different.
Finally, employment-output ratios are based on single-year data. The model assumed that these ratios do not vary over time. The methodology used implies that the observed year's data are representative of the relationship between employment and output in an average year. In reality, however, employment-output ratios change over time because of changes in economic conditions. Because of these caveats, the number of full-time job equivalents estimated in this analysis should be considered a best guess.