Office of Operations Freight Management and Operations
Home > Analysis, Data, and System Performance > Economics > Page 1

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.[1]) 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.

Research Results

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).

Table 1. Highway Operations Expenditure for State-Administered Highways
empty cell Expenditure (Thousands of Dollars) Percentage Of Total Highway Expenditure
Capital outlay 44,069,138 70.44%
Acquisition of right-of-way 3,115,876 empty cell
Preliminary and construction engineering 6,470,094 empty cell
Highway construction and system preservation 34,483,168 empty cell
Physical Maintenance 8,945,942 14.30%
Highway Operations Expenditure 9,543,848 15.26%
Traffic control operations 939,604 empty cell
Snow and ice removal 1,139,028 empty cell
Other services 479,972 empty cell
Toll collection facility 1,289,969 empty cell
Traffic supervision 4,243,549 empty cell
Highway safety and driver education 706,608 empty cell
Vehicle inspection and vehicle size and weight enforcement 744,918 empty cell
Total expenditure of capital outlay, physical maintenance, and highway operations 62,558,928 100%
Total general administration and research & planning 5,473,540 empty cell
General administration 4,669,474 empty cell
Research and planning 804,066 empty cell
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.

Table 2. Summary of the Analysis of the Employment Impact of Highway Operations (full-time job equivalents)
empty cell empty cell 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
Other services $479,972 $32,376 9,029 1,593 10,622 22,130
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
Total empty cell $10,379,110 empty cell 126,950 57,904 184,854 17,810

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.

Table 3. Employment Impact of Highway Operations by Activity and Industry (full-time job equivalents)
empty cell 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
Coal mining 4 6 1 21 6 1 2 4 2 48
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
Construction 92 59 53 1,513 162 18 29 99 256 2,281
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
Tobacco products 0 0 0 0 0 0 1 0 0 1
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
Paper products 59 33 16 29 16 33 32 110 19 347
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
Miscellaneous manufacturing 12 5 3 21 8 2 17 33 7 107
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
Water transportation 3 4 2 5 3 1 17 6 2 42
Air transportation 76 20 93 27 18 13 16 52 76 391
Communications 159 19 29 65 25 12 49 150 73 580
Electric, gas, and sanitary services 37 60 14 182 38 6 22 43 22 424
Wholesale trade 514 241 207 327 79 41 138 222 198 1,966
Retail trade 106 24 19 253 33 8 13 99 50 605
Finance 136 41 49 196 48 13 56 111 86 736
Insurance 36 19 31 108 7 5 23 47 144 420
Real estate 66 17 25 27 9 16 13 95 86 353
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
Business services 2,199 329 368 1,161 238 336 291 2,225 1,155 8,303
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
Amusements 48 12 15 19 -8* 5 12 213 40 357
Health services 1 1 1 2 -387* 1 2 3 2 -375
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
Direct hire 7,066 17,510 9,029 15,145 8,337 779 51,260 6,633 11,191 126,950
Total 13,061 20,446 10,622 21,021 13,523 1,608 78,500 11,705 14,368 184,854

*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[2] was 25,330, adjusting for inflation. The original estimates were based on 1995 dollars.

Table 4. Employment Impacts of Investment in Federally Aided Highway
Type of Employment Jobs Created Per Billion (2000) Dollars*
Direct 7,250
Indirect 18,080
Subtotal 25,330
Induced 13,308
Total 38,638

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.

Table 5. Employment Impacts of Construction-Related Activities
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
General Hospitals 15,688
Elementary and Secondary Schools 14,761
Federally Aided Highway 16,298
Sewer-Line Work 14,615
Sewer-Plant Work 14,225
College Housing 14,520
Civil Work, Land 12,960
Civil Work, Dredging 14,109
Public Housing 15,133
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.

Table 6. Comparison of Employment Impact of Highway Operations and Construction Spending (full-time job equivalents per billion dollars*)
empty cell Highway Operations Highway Construction (FHWA) Highway Construction (BLS) JOBMOD (version 1.1)
empty cell Employment % Employment % Employment Employment
Direct employment 12,231 68.7 7,250 28.6 NA NA
Indirect employment 5,579 31.3 18,080 71.4 NA NA
Total employment 17,810 100 25,330 100 16,298 21,219

NA, not available.

*All estimates are based on 2000 dollars, except for that of JOBMOD for which the information of a specific year cannot be found in the materials 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.

  1. See Weisbrod (2000) for a comprehensive review of the literature on the impact analysis of transportation investment.
  2. Induced employment was also estimated in the FHWA study but is excluded here for comparison purposes.

previous | next
Office of Operations