Highway Operations Spending as a Catalyst for Job Growth (Page 4 of 5)

Development of Spending Structures, Average Employee Compensation, and Employment-Output Ratios

The development of the spending structure, employee compensation, and employment-output ratios is critical to this analysis. The methods and procedures used in processing and analyzing the data are described below.

Spending Structure

No data for spending structure in highway operations activities are readily available. Therefore, proxies were used to approximate the spending structure for each highway operations activity. The major source of data utilized was BEA's 1992 Input-Output data. Similar industries were selected from the BEA data as proxies for eight of nine highway operation activities. For snow and ice removal, the proxy spending structure was garnered from the "Anti-icing Technology, Field Evaluation Report" published by FHWA in 1998. Justification for the use of these data as proxies for the spending structure for highway operations activities is rests on the assumption that technological relationships between commodity inputs in each of highway operations activities have been stable.

The calculation of spending structures includes all commodity inputs and employee compensation. For the selected industries that have data on both commodity inputs and employee compensation, the derivation of their spending structure is straightforward; the share of each input is the ratio of the value of the input to the sum of all commodity inputs and employee compensation. For industries bereft of data on employee compensation, the share of employee compensation must be derived on the basis of estimated employee compensation. That is, where employee compensation data is lacking in the IO model, an estimation of employee compensation is specifically stated.

Highway operations activities are categorized into three groups: 1) highway and traffic services, 2) administration and research, and 3) highway law enforcement and safety. The spending structure of each activity was determined as follows:

Highway and Traffic Services

There are four types of highway and traffic services. They Are: 1) traffic control operations, 2) snow and ice removal, 3) toll collection facility, and 4) other services (e.g., beautification, erosion prevention, litter control).

• Traffic control operations: Two IO industries were combined to serve as the proxy for traffic control operations; the first is 'Electric Utilities Repair and Maintenance and Construction', and the second is 'Computer Programming, Data Processing, and Other Computer Related Services.'
• Toll collection: IO industry 'State and Local Government Toll Highways' was used as a proxy for toll collection.
• Other services: IO industry 'Landscape and Horticultural Services' was used as a proxy for "Other Services."
• Snow and ice removal: The spending structure of snow and ice removal was derived using the data from the report on "Anti-icing Technology" (See Appendix C).

Administration and Research

Two categories of activities are included in Administration and Research. They are: 1) general administration, and 2) research and planning. In FHWA's annual report Highway Statistics, expenditures in these categories are not exclusively for highway operations. Rather, they cover highway construction, maintenance, and operations. Thus, the portion of the expenditures on highway operations needed to be isolated. Expenditures on administration and research for highway operations were separated from the total expenditures on administration and research (including construction and maintenance) according to the ratio of highway operations to total expenditure. This was approximately 15 percent in 2000. Table 1 shows highway expenditures by percentage for construction, maintenance, and operations; total expenditures on administration and research; and administration and research expenditures for highway operations.

The spending structure of state and local government, including government enterprises (98C, 99C, and 79) was used as a proxy for the commodity input structure of general administration. However, as no data on employee compensation for state and local government were available in the BEA 1992 Input-Output tables, compensation levels were estimated using data on state and local government finance and public employment and payroll published by U.S. Census Bureau and data on employee compensation from BLS. In state and local government finance, the total expenditure of current operations includes general administration of state and local government and government enterprises. Government enterprises accounted for roughly 13 percent of the total commodity purchases by state and local government enterprises in 1992. For consistency, the data on state and local government and government enterprises in the IO data were combined to approximate the spending structure of general administration.

Total employee compensation also needed to be estimated in order to determine the share of employee compensation in current state and local government operations. The Census Bureau provides data for full-time employment equivalents and for total expenditures on current operations, wages and salaries of state and local government. However, the Census Bureau's definition of "wages and salaries" is different from employee compensation in that it does not include all employee benefits. Thus, it is broader than the definition of wage used by the BLS.

Average annual employee compensation for state and local government was estimated using the average wages of state and local government and the benefit-compensation ratios of state and local government from BLS. Specifically, an average annual wage for state and local government was computed based on the data from the 2000 National Industry-Specific Occupational Employment and Wage Estimates (2000 National 3-digit SIC estimates for SICs 071 to 903,) as published by BLS. The average annual wage for state and local government employees is a weighted average of the industry average wages of state government and local government, adjusted with a benefit-compensation ratio of 29.2 percent in 2000. Next, average annual employee compensation and the full-time equivalent employment of state and local government are used to derive the total employee compensation of state and local government. The share of employee compensation is the ratio of the estimated total employee compensation to the total expenditure of state and local government on current operations. The estimated share of employee compensation was 59.15 percent based on the data in 2000.

The share of "wages and salaries" in the expenditure of current operations was relatively stable over the 1992 to 2000 period, ranging from 43 percent to 46 percent. BLS data show the benefit-compensation ratio to have been in the neighborhood of 30 percent with a deviation of less than one percentage point. This suggests that the share of employee compensation in state and local government is also quite stable. Therefore, it was deemed to be reasonable to apply the estimated share of employee compensation in 2000 to the BEA 1992 Input-Output data for state and local government to arrive at a spending structure for state and local government.

The IO industry Noncommercial Research Organization was used as a proxy for the function of research and planning in highway operations.

Highway Law Enforcement and Safety

Four types of activities are included in this category of highway operations: 1) traffic supervision, 2) highway safety and driver education, 3) vehicle inspection, and 4) vehicle size and weight enforcement. 'State and Local Government – Police' is used as a proxy for the structure of commodity purchases in traffic supervision. However, there are no available statistics on the number of police specifically engaged in traffic supervision. For this analysis, it is assumed that all full-time sworn police officers in field operations are involved in traffic supervision. Total employee compensation for traffic supervision in 2000 was calculated using the adjusted average annual compensation for a police officer. The share of total compensation for state highway traffic supervision was combined with the data on State and Local Government Police Consumption to derive the spending structure of traffic supervision.

IO industry Social Services is used as a proxy for highway safety and driver education. Vehicle inspection and vehicle size and weight enforcement were combined and treated as one activity. Fixed Facilities and Inspection and Weighing Services for Motor Vehicle Transport industry was used as a proxy for the combined activity.

Average Annual Employee Compensation

Two steps were involved in estimating average employee compensation. The first step was to identify an appropriate proxy occupation or industry for each highway operations activity. The second was to translate an average wage into average compensation using an appropriate benefit-compensation ratio. Table 7 provides a summary of the estimation of average annual employee compensation for all of highway operations activities.

Table 7. Wage and Compensation Data

Activities	Sources of Wages	Proxy Occupation or Industry Wage	Wage ($)	Benefit-Compensation Ratio (%) (4)	Average Annual Compensation
Traffic control operations	(1)	Weighted Average Wage of SIC 173 and 737, industry total	52,105	25.5	69,940
Snow and ice removal	(2)	Highway maintenance workers	27,480	25.5	36,886
Other services	(1)	SIC 078 Landscape and horticultural services, industry total	24,120	25.5	32,376
Toll collection	(3)	Illinois Toll Industry Average	37866 (5)		52244 (6)
General administration	(1)	Weighted average wage of State and Local Government (SIC 902 and 903), industry total	35,793	29.2	50,555
Research and planning	(1)	SIC 873 Research, development, and testing services, industry total	48,450	29.2	68,432
Traffic supervision	(2)	Sheriff and police's patrol officers	40,590	29.2	57,331
Highway safety and driver education	(1)	SIC 839 Social Services, not elsewhere classified, industry total	30,690	25.5	41,195
Vehicle inspection	(2)	Automotive service technicians and mechanics	30,780	25.5	41,315

With the exception of toll collection, the average employee compensation for all highway operation activities is based on the 2000 Occupational Employment and Wage Estimates (U.S. Bureau of Labor Statistics) or 2000 National Industry-Specific Occupational Employment and Wage Estimates (U.S. Bureau of Labor Statistics). An occupational average wage was used when an occupation was identified as being a highway operation activity. Otherwise, the average wage of a corresponding industry was used in lieu of a highway operations activity. As indicated in Table 7, occupational wages are used as proxies for average wages for snow and ice removal, traffic supervision, and vehicle inspection and vehicle size and weight enforcement. Industrial average wages are used as proxies for average wages in traffic control operations, other services, general administration, research and planning, and highway safety and driver education.

The average wage was converted to average employee compensation using appropriate benefit-employee compensation ratios published by BLS. The benefit-compensation ratio for state and local government was applied to general administration, research and planning, and traffic supervision. The benefit-compensation ratio for private sector service-producing industry was applied to traffic control operations, snow and ice removal, other services, highway safety and driver education, and vehicle inspection.

Average employee compensation for toll collectors was calculated using data from a report by Illinois Toll Highway Authority (2000). It is a cross-occupational average from the Illinois Toll Highway Authority. The national average wage or compensation for toll highway employees is not available.

Employment-Output Ratios

The employment-output ratios equal employment per unit of industrial output. They were developed using industrial output data from U.S. Transportation Satellite Accounts for 1996 (U.S. Bureau of Transportation Statistics and Bureau of Economic Analysis, 2000) and the 1996 seasonally adjusted non-farm employment data from U.S. Bureau of Labor Statistics. The industrial output is based on two-digit input-output industry codes. Industrial employment is based on two-digit SIC codes. Annual employment is an average of the seasonally adjusted monthly employment. In order to compute employment-output ratios, the two data sets were adjusted accordingly so as to be compatible with one another.

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