Job Loss and Infrastructure Job Creation
During the Recession
Linda Levine
Specialist in Labor Economics
March 17, 2009
Congressional Research Service
7-5700
www.crs.gov
R40080
CRS Report for Congress
P
repared for Members and Committees of Congress
Job Loss and Infrastructure Job Creation During the Recession
Summary
After the long economic expansion that characterized much of the current decade, the nation
entered its eleventh postwar recession in December 2007. The announcement by the Business
Cycle Dating Committee that a recession had begun preceded by one week the monthly
Employment Situation release for November 2008, in which the U.S. Bureau of Labor Statistics
reported the biggest one-month drop in employment in 34 years. This and other news of
deteriorating conditions in the labor market at the end of 2008 intensified congressional interest in
passage of legislation early in 2009 aimed at encouraging creation of new jobs and warding off
further loss of jobs. (For information on the American Recovery and Reinvestment Act, see CRS
Report R40104, Economic Stimulus: Issues and Policies.)
To mitigate all but one recession since the 1960s, Congress has chosen to increase federal
spending on infrastructure. But, there are a number of issues associated with using expenditures
on public works to quickly create jobs in times of recession. (See CRS Report R40107, The Role
of Public Works Infrastructure in Economic Stimulus).
Public works expenditures traditionally have gone chiefly to construction activities (e.g., building
highways and bridges, dams and flood control structures) which indirectly increase product
demand in industries that supply construction (e.g., manufacturing). Today, the definition of
infrastructure has been expanded to include so-called green jobs, which seemingly are those in
industries that utilize renewable resources (e.g., electricity generated by wind), produce energy-
efficient goods and services (e.g., mass transit), and install energy-conserving products (e.g.,
retrofitting buildings with thermal-pane windows).
A question that typically arises during congressional consideration of economic stimulus
legislation is which approach produces the most bang for the buck. In the instant case, this means
how many jobs might be supported by federal expenditures on traditional and green infrastructure
projects. After briefly examining the extent of job loss since the recession’s onset, the report turns
to an in-depth look at job creation estimates, including the limitations of the methodology often
used to derive them and the difficulties associated with developing job estimates for green
infrastructure in particular. The report will be updated periodically to reflect changes in
employment conditions during 2009.
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Job Loss and Infrastructure Job Creation During the Recession
Contents
Employment and Unemployment Through Job Loss.................................................................... 1
Infrastructure Spending and Job Creation Estimates .................................................................... 4
Job Creation Estimates: What Are They?............................................................................... 5
Some Caveats ................................................................................................................. 6
The Multiplier Effect....................................................................................................... 6
Job Estimates and Construction Spending ............................................................................. 7
The Federal Highway Administration .............................................................................. 7
BLS Employment Requirements Table ............................................................................ 8
BEA’s Regional Input-Output Modeling System (RIMS II) ............................................. 9
Job Estimates and Green Infrastructure Spending ................................................................ 10
Tables
Table 1. Payroll Jobs at Nonfarm Employers ............................................................................... 2
Table 2. Number of Payroll Jobs by Industry ............................................................................... 3
Table 3. Number of Direct and Indirect Jobs by State Dependent on an Expenditure of $1
Billion in the Construction Industry.......................................................................................... 9
Contacts
Author Contact Information ...................................................................................................... 12
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Job Loss and Infrastructure Job Creation During the Recession
fter the long economic expansion that characterized much of the current decade, the
nation entered its eleventh postwar recession in December 2007. The unemployment rate,
A which is a lagging economic indicator, did not start to rise until May 2008 when it
jumped 0.5 percentage points to 5.5%. By November 2008, it rose another 1.2 percentage points
to reach 6.7% according to data from the U.S. Bureau of Labor Statistics (BLS). In November
2008 alone, employment at nonfarm businesses fell by almost 600,000—the biggest one-month
drop recorded by the BLS Current Employment Statistics program (CES) since December 1974.
The Business Cycle Dating Committee of the National Bureau of Economic Research, the official
arbiter of peaks and troughs in the business cycle, announced at the end of November 2008 that a
substantial and widespread decline in economic activity had begun a year earlier. December 2007
marks both the end of the 73-month economic expansion that began in March 2001, and the
beginning of the latest recession. As part of its announcement, the committee noted that it “views
the payroll employment measure, which is based on a large survey of employers, as the most
reliable comprehensive estimate of employment. This series [the CES] reached a peak in
December 2007 and has declined every month since then.”
The committee’s announcement, which preceded by one week the monthly BLS Employment
Situation release containing employment and unemployment data for November 2008, intensified
congressional interest in passage of legislation aimed at encouraging creation of new jobs and
warding off further loss of jobs. (For information on the American Recovery and Reinvestment
Act, see CRS Report R40104, Economic Stimulus: Issues and Policies.)
To mitigate all but one recession since the 1960s, Congress has chosen to increase federal
expenditures on infrastructure (public works), thereby directly raising demand for goods and
services to offset the reduced demand of consumers. (See CRS Report 92-939, Countercyclical
Job Creation Programs, by Linda Levine). But, there are a number of issues associated with
using spending on public works to quickly create jobs during a recession. (See CRS Report
R40107, The Role of Public Works Infrastructure in Economic Stimulus).
When Congress has considered spending on infrastructure to help stimulate a flagging economy,
“how many jobs are created” is a commonly asked question. Although all spending increases
labor demand, the number and composition of jobs may vary. After first examining trends in job
loss since the latest recession began, this report focuses on job creation estimates associated with
increased spending on traditional and “green” infrastructure, placing a heavy emphasis on
explaining the methodology often used to derive them and the difficulties associated with
developing estimates for green infrastructure in particular. The report will be updated periodically
to reflect changes in employment conditions during 2009.
Employment and Unemployment Through Job Loss
As shown in Table 1, employment on nonfarm payrolls has steadily declined since December
2007. The number of job cutbacks intensified starting in late 2008. Of the 4.4 million jobs lost
since the recession’s onset, more than half (2.6 million) disappeared between November 2008 and
February 2009.
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Table 1. Payroll Jobs at Nonfarm Employers
(seasonally adjusted employment in thousands)
Year by Month
Total Employment
Private Sector Employment
2007
December 138,152 115,783
2008
January 138,080
115,689
February 137,936 115,515
March 137,814
115,373
April 137,654
115,203
May 137,517
114,029
June 137,356
114,834
July 137,228
115,691
August 137,053
114,497
September 136,732 114,197
October 136,352 113,813
November 135,755 113,212
December 135,074 112,542
2009
January 134,419(p)
111,856(p)
February 133,768(p)
111,196(p)
Source: U.S. Bureau of Labor Statistics, data from the Current Employment Statistics program.
Notes: (p) = preliminary.
As is typical during economic downturns, employees in the goods-producing sector have been the
most adversely affected. They saw their ranks shrink by almost 2.2 million between December
2007 and February 2009. (See Table 2.) Workers in the sector’s construction industry began
experiencing job losses before the economy-wide downturn began. Nonetheless, between the
recession’s onset and February 2009, construction firms cut over 900,000 jobs. Across all
manufacturing industries, employment fell by 1.3 million over the 14-month period. Although
manufacturing job losses have been widespread, two industries that produce durable goods—
fabricated metal products (e.g., hardware, wire, and screws) and transportation equipment (e.g.,
motor vehicles and parts)—have been particularly hard hit.
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Table 2. Number of Payroll Jobs by Industry
(seasonally adjusted employment in thousands)
Industry by Sector
Employment, December 2007
Employment, February 2009 (p)
Goods-producing sector
22,043
19,877
Mining and logging
743
781
Construction 7,523
6,619
Manufacturing 13,777
12,477
Service-providing sector
116,109
113,891
Trade, transportation and
26,725 25,615
utilities
Wholesale trade
6,045
5,782
Retail trade
15,568
14,960
Transportation and
4,555 4,302
warehousing
Utilities 557
570
Information 3,025
2,906
Financial activities
8,243
7,914
Professional and business
18,109 17,042
services
Education and health services
18,570
19,149
Leisure and hospitality
13,551
13,242
Other services
5,517
5,451
Government 22,369
22,572
Source: U.S. Bureau of Labor Statistics, data from the Current Employment Statistics program.
Notes: (p)=preliminary.
Employment in the service-providing sector most recently peaked in December 2007, when the
recession began. Although some service-providing industries have continued to grow—utilities,
education and health services—cutbacks elsewhere have far outweighed their gains. As shown in
Table 2, the two industries reported higher employment in February 2009 than at the start of the
recession. In contrast, the financial activities industry began to lose jobs before the advent of the
economy-wide downturn. This mirrors the above-mentioned trend in construction employment in
part because real estate is a component of financial activities and it, like construction, has been
hurt by the collapse of the housing market. Other components of financial activities, such as
brokerage firms that packaged high-risk mortgages and the investors (e.g., banks) that purchased
them, have been negatively affected by the housing market downturn as well.
Prospects for job growth resuming in the near-term look dim. Based on information gathered
from such sources as newspapers, trade publications, and Securities and Exchange Commission
filings, the outplacement firm of Challenger, Gray & Christmas reported that in 2008 companies
announced their intention to cut 1.2 million jobs—a level last reached in 2003.1 In January 2009,
1 “Employers Announced 1.2 Million Job Cuts in 2008, Most Since 2003, Challenger Says,” Daily Labor Report,
(continued...)
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the number of announced layoffs rose to 241,749, the highest level for a January in seven years.
Although employers announced fewer job cuts in February (186,350), the total for the first two
months of 2009 approached three times the level of January-February 2008.2 In addition, more
workers were let go as part of more extended mass layoffs (those involving at least 50 workers
separated for at least 31 days) in the fourth quarter of 2008 than in any quarter since the BLS
series began in 1995. Almost 1.4 million workers were separated from employers’ payrolls as part
of extended mass layoffs in 2008, a level last reached in 2001. And, the 7,818 extended mass
layoffs for the year marked a program high.3
The Blue Chip Economic Indicators reported the consensus forecast among the nation’s leading
business economists that the unemployment rate will continue to rise through 2009, and peak at
8.8% in the final quarter of this year or the first quarter of 2010.4 The unemployment rate in
February 2009 rose to 8.1% from 5.0% in December 2007, according to BLS data derived from
the Current Population Survey.5 Workers who lost jobs have been an increasing presence among
the unemployed, a group that also includes new entrants, reentrants, and job leavers. Job losers—
who numbered 3.8 million in December 2007—accounted for the great majority of workers added
to the ranks of the unemployed since the recession’s start. Of the 12.5 million workers
unemployed in February 2009, 7.7 million were job losers.
Infrastructure Spending and Job Creation Estimates
When in response to a recession Congress has acted to create jobs by raising demand for goods
and services through increased federal spending, it often has chosen to direct the funds to
infrastructure (public works) activities. Other means of direct countercyclical job creation—
employment tax credits, state revenue-sharing, and public service employment—have been relied
on much less often.6
A more expansive definition of infrastructure than was used in the past is now under
consideration. Historically, public works has been synonymous with heavy and civil construction
activities (e.g., road and bridge building, flood control structures and dam building). Today, it
includes so-called green jobs. Although numerous studies on the emerging green economy have
been released in the last several years, no consistent definition of green jobs exists at present.
Green jobs seemingly are those in and related to industries that utilize renewable resources to
produce their outputs (e.g., energy generated by wind, solar, and geothermal technologies) and
jobs in and related to industries that produce energy-efficient goods (e.g., Energy Star appliances
and equipment) and services (e.g., intra- and inter-city mass transit).7 For this reason, the
(...continued)
January 8, 2008.
2 “Planned Job Cuts Declined 23 Percent but Remain High, Challenger Reports,” Daily Labor Report, March 3, 2009.
3 U.S. Bureau of Labor Statistics, “Extended Mass Layoffs in the Fourth Quarter of 2008 and Annual Totals for 2008,”
press release, February 13, 2009.
4 “Blue Chip Panel Cuts 2009 GDP Forecast,” Daily Labor Report, February 11, 2009.
5 Data from the Current Population Survey of households is available at http://stats.bls.gov/cps.
6 CRS Report 92-939, Countercyclical Job Creation Programs, by Linda Levine.
7 Related jobs include, for example, those in industries that manufacture wind turbines and install thermal-pane
windows.
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following discussion focuses on what is known about the job-generating impact of infrastructure
spending broadly defined.
The section below begins with an in-depth examination of how job creation estimates usually are
developed. The focus then narrows to look at two models that can be used to calculate the number
of jobs nationwide dependent upon demand in the construction industry among other industries,
and one model that can be used to calculate the number of jobs by state dependent on the
construction industry among other industries. The section ends by reviewing the difficulties that
researchers encounter in estimating the number of jobs supported by expenditures on green
infrastructure and the consequent caution that should be taken when utilizing these estimates in
particular.
Job Creation Estimates: What Are They?
Interest in how many jobs are created by a particular type of economic activity has surfaced when
the economy is in a downturn and policymakers seek to compare the relative advantages of
different stimulus options. It also has arisen when policymakers want to know the impact of
shifting expenditures from one federal budget category to another (e.g., away from defense and
towards social services programs). Unless there is an increase in total spending, however, the
number of jobs in the labor market would remain largely unchanged.8
Although there are other bases upon which to develop estimates of the number of jobs created by
a given economic activity, an input-output (I-O) model of the economy often is utilized due to its
cost-effectiveness.9 An I-O model describes the interrelationships between industries in the
production process, showing how the dollar value of a sale is distributed across industries at a
particular point in time. It thus reflects how much of the purchased product comes from final and
supplier industries. An I-O table might show, for example, the dollar value of roof trusses
produced by the veneer, plywood, and engineered wood products manufacturing industry and the
dollar value of bricks produced by the clay product and refractory manufacturing industry used by
the construction industry to erect residential buildings.
The output requirements from each industry must then be converted to employment requirements.
Employment requirements are derived from productivity estimates for each industry at a
particular point in time. The total employment requirement associated with a given type of final
demand (e.g., a water reuse program) is the employment in the industry producing the final
product or service and in the supplier industries. In other words, it is an approximation of both the
direct and indirect employment dependent upon/supported by the economic activity. It commonly
is expressed as the number of jobs per billion dollars of expenditures valued in a particular year’s
dollars.
Like an I-O table, an employment requirements table is a matrix of hundreds of columns and
rows. Each column displays the number of jobs supported in each of the industry rows by an
expenditure of one billion dollars in the column industry. For example, one billion dollars spent in
8 Small differences in the total number of jobs could occur at the same spending levels if the economic activities to
(from) which funds were being shifted were more (less) capital-intensive, for example.
9 Another basis for estimating the impact of policy and other changes on the economy is conducting surveys. According
to the U.S. Bureau of Economic Analysis (BEA), the advantage of the I-O approach to making impact estimates is the
accessibility of the data sources required to develop the I-O model.
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the construction industry supports (direct) employment in the various components of that industry
(e.g., residential and commercial building, highway and bridge building) and (indirect)
employment in the many industries that supply their goods and services to the construction
industry (e.g., asphalt shingle manufacturing, fabricated metal bridge section manufacturing). An
employment requirements table thus permits estimation of the varying impact of an expenditure
on different industries and the varying impact of different kinds of expenditures.
Some Caveats
I-O models freeze technology and productivity at a particular point in time. Thus, the job-
generating potential of an economic activity undertaken today could differ from that of an earlier
period if there were technological and productivity improvements in the intervening years.
Similarly, the estimates often are stated in terms of the number of jobs created for every billion
dollars of expenditures, but a billion dollars spent in one year could buy less (more) than a billion
dollars spent in another year depending on changes in price levels over time.
There also could be differences in estimated versus actual job creation because I-O models
assume that resources are unlimited. If, for example, the economy was performing at a fairly high
level with plants operating near full capacity and with fairly few workers unemployed, the actual
number of new jobs might fall short of the estimate due to capital and labor constraints. This is
less likely to matter during a broad-based economic downturn.
Further, I-O tables do not necessarily differentiate between imported and domestically produced
goods. As a consequence, the domestic employment impact of expenditures might be overstated
to the extent that inputs are imported. Similarly, I-O tables typically do not express employment
in terms of full-time equivalents (i.e., both full-time and part-time jobs are counted equally).
Thus, programs which draw upon industries that rely relatively more on part-time workers (e.g.,
retail trade) might appear to create more jobs than programs that draw to a greater extent on
industries employing relatively more full-time workers (e.g., manufacturing).
The Multiplier Effect
A complete estimate of the number of jobs created by a particular type of economic activity has
three components, namely,
• the number of jobs directly attributable to the activity,
• the number of jobs indirectly attributable to the activity, and
• the number of jobs induced throughout the economy as a result of the activity.
Induced jobs are those dependent upon the purchases of persons in direct and indirect jobs. For
example, workers who are directly or indirectly employed as the result of a highway construction
program might spend some portion of their wages in their communities at grocery stores, auto
repair shops, and movie theaters.
Estimates of induced jobs or the multiplier are considered tenuous. To calculate the multiplier
effect, one must estimate how much of the additional money earned by directly and indirectly
employed workers will likely be spent versus saved. The actual number of jobs created by this
added spending will further depend on economic conditions (e.g., the availability of labor, the
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inflation rate). As a result, there are widely varying estimates of the multiplier effect and those job
creation studies that include induced employment utilize different multipliers.
Job Estimates and Construction Spending
The Federal Highway Administration
Perhaps the most widely known estimate of the employment impact of federal spending on our
nation’s roads comes from the Federal Highway Administration (FHWA). Although the FHWA
twice updated its 1997 analysis, which estimated that $1 billion of federal-aid highway
expenditures plus a $250 million state match supported 47,575 jobs, some proponents of
stimulating job growth through increased federal spending on infrastructure continue to use this
figure. The most recent update by the FHWA to 2007 indicates that a $1.25 billion expenditure on
highway construction consisting of $1 billion from the federal government and $250 million from
state government could support 34,779 jobs. If a state match is not required, “then $1 billion in
Federal funds supports 27,800 jobs.”10 The jobs number has decreased over time in part because
of increases in the price of inputs, such as asphalt and diesel fuel.
The FHWA breaks down the estimate of 27,822 jobs per billion dollars of federal spending on
highways as follows:
• 9,536 construction-oriented jobs (i.e., jobs at construction companies working on
the projects and at businesses that provide direct inputs to the projects such as
asphalt, concrete, and guard rails);
• 4,324 jobs in supporting industries (i.e., employment at firms that provide inputs
to the industries directly providing the materials and equipment utilized in
highway construction such as producers of sheet metal who supply the
manufacturers of guard rails); and
• 13,962 induced jobs (i.e., jobs throughout the economy dependent upon
consumer expenditures from the wages of workers in “construction-oriented” and
“industry-supporting” jobs).
Thus, the multiplier effect accounts for one-half of the total estimate.
The FHWA notes one caveat about I-O analysis in addition to those mentioned above, that is, the
job estimate “utilizes the national average mix of construction materials and labor inputs. Specific
projects and local utilization ratios will alter the estimated number of jobs supported.”11 For
example, a different combination of materials and number of workers might be required for road
resurfacing projects compared to bridge building or commuter rail projects.
The FHWA also states that
10 U.S. Department of Transportation, Federal Highway Administration, Employment Impacts of Highway
Infrastructure Investment, pp. 1, http://www.fhwa.dot.gov/policy/otps/publications.htm.
11 U.S. Department of Transportation, Federal Highway Administration, Employment Impacts of Highway
Infrastructure Investment, p. 2, http://www.fhwa.dot.gov/policy/otps/publications.htm.
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[t]he employment figures have recently been used as a justification for including highway
spending in an economic stimulus package. But with the exception of short-term resurfacing
and preservation projects, highway funds spend out slowly, with only 27% of a project, on
average, outlaying in the first year.12
BLS Employment Requirements Table
In recognition of the fact that “people want to assess the impact on employment of different
policies or actions,” the U.S. Bureau of Labor Statistics (BLS) makes available electronically
free-of-charge to the public the employment requirements tables it develops as part of its
employment projections program.13 I-O and employment requirements tables developed and
utilized by others often are proprietary and not made widely available.
The employment requirements tables are based on the official I-O tables for the nation that the
U.S. Bureau of Economic Analysis (BEA) develops every five years. BLS takes the latest
national I-O table available from BEA – in this case, 1997 – and updates it to reflect more recent
production and distribution technologies. It then utilizes the updated I-O table and recent labor
productivity data to develop an employment requirements table. Because the base year for the
most recently published employment projections is 2006, the latest employment requirements
table reflects 2006 technologies of production and distribution as well as labor productivity.
The BLS employment requirements table provides information for the construction industry as a
whole. The construction industry, according to the North American Industry Classification
System, is composed of three major subdivisions:
• construction of buildings (residential and nonresidential),
• heavy and civil engineering construction (highway, street, and bridge
construction; utility system construction; construction of flood control structures,
dams, and hydroelectric power generation facilities), and
• specialty trade contractors (foundation, structure, and building exterior
contractors; building equipment contractors; building finishing contractors).
The BLS employment requirements table shows 11,768 jobs directly and indirectly dependent
upon $1 billion of spending on construction. A majority of the jobs are in the construction
industry itself (i.e., 6,925 direct jobs).
The figure from the BLS employment requirements table for construction expenditures (11,768)
is somewhat lower than the direct and indirect jobs figure for highway expenditures from the
FHWA (13,860). Potential explanations for the disparity include differences in industry definition,
data sources, method of updating the model, and time period.
The employment requirements available from BLS do not break out other types of construction
that have been discussed as part of a federal job creation package (e.g., public school
construction). BLS formerly conducted surveys to estimate full-time year-long employment
12 U.S., Employment Impacts of Highway Infrastructure Investment, U.S. Department of Transportation, Federal
Highway Administration, p. 2, http://www.fhwa.dot.gov/policy/otps/publications.htm.
13 U.S. Bureau of Labor Statistics, Layout and Description for 201-order Employment Requirements Tables,
Washington, D.C., December 2007, p. 3, http://stats.bls.gov/emp/empind4.htm.
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associated with a variety of different construction activities, including new schools, hospitals,
water and sewer facilities, roads, mass transit, and maintenance and repair construction. The
survey information was last updated a few decades ago, however.
BEA’s Regional Input-Output Modeling System (RIMS II)
From its Regional Input-Output Modeling System (RIMS II), the BEA produces estimates by
geographic area of the employment, earnings, and output dependent on additional spending in
hundreds of different industries. 14 For a fee to most parties, BEA currently utilizes either the 1997
benchmark I-O for the nation or the 2006 annual I-O for the nation adjusted by 2006 data from its
regional economic accounts to provide these estimates at the subnational level.15
As shown in Table 3, the number of jobs directly and indirectly supported by an expenditure of
$1 billion in the construction industry in a given state ranges widely. The main reason for the
disparity in job creation estimates is that each state has a different mix of industries within its
borders. As a consequence, one state varies from the next in its capacity to supply all the
intermediate goods needed to carry out construction projects. A secondary explanation is that
earnings vary by state.
Table 3. Number of Direct and Indirect Jobs by State Dependent on an Expenditure
of $1 Billion in the Construction Industry
State
Number of Jobs
State
Number of Jobs
Alabama 15,851
Montana
16,127
Alaska 11,009
Nebraska 13,946
Arizona 12,238
Nevada
11,459
Arkansas 15,306
New
Hampshire
12,374
California 12,289
New
Jersey 11,118
Colorado 12,575
New
Mexico 14,279
Connecticut 10,709
New
York
10,106
Delaware 9,518
North
Carolina
15,555
District of Columbia
1,874
North Dakota
13,500
Florida 13,127
Ohio
14,391
Georgia 14,224
Oklahoma 16,232
Hawai 11,614
Oregon
13,184
Idaho 15,860
Pennsylvania
12,390
Illinois 11,916 Rhode
Island
10,767
14 For additional information on RIMS II see BEA, Regional Multipliers: A User Handbook for the Regional Input-
Output Modeling System, http://www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf.
15 More specific detail by industry is available from the 1997 benchmark I-O than from the annual I-O. Therefore,
Table 1 (Number of Direct and Indirect Jobs Per $1 Million of Output Produced by the Water, Sewage and Other
Systems Industry) in CRS Report R40107, The Role of Public Works Infrastructure in Economic Stimulus, was drawn
from the 1997 benchmark I-O because the 2006 annual I-O provides data only for the utilities industry as a whole.
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State
Number of Jobs
State
Number of Jobs
Indiana 13,747
South
Carolina
15,319
Iowa 14,330
South
Dakota
15,316
Kansas 13,625
Tennessee 14,556
Kentucky 15,039
Texas
12,985
Louisiana 13,731
Utah
14,692
Maine 15,988
Vermont 14,883
Maryland 10,687
Virginia
12,085
Massachusetts 10,714
Washington
12,171
Michigan 13,354
West
Virginia 13,834
Minnesota 12,998
Wisconsin
13,673
Mississippi 15,357
Wyoming
13,091
Missouri 13,241
United
States 14,315
Source: Prepared by CRS from RIMS II estimates supplied by the BEA Regional Product Division.
Job Estimates and Green Infrastructure Spending
Estimating the number of jobs dependent upon green infrastructure activities presents a greater
challenge than estimates related to infrastructure projects as traditionally defined. The basis for
most data collection by U.S. statistical agencies is the North American Industry Classification
System (NAICS). It currently does not identify separately so-called green industries (e.g., those
that utilize renewable resources to produce their outputs, those that manufacture goods which
minimize energy use). For example, the NAICS disaggregates the electric utility industry into
hydroelectric, fossil fuel, nuclear, and other power generation, transmission, and distribution.
Such renewable sources of energy production as wind, solar, and biomass are not uniquely
recognized; they are included in the “other” category. If harnessing the wind to produce
electricity and plant material to produce biofuel requires a substantially different mix of inputs
than relying on coal and gasoline, for example, the conventional I-O model does not seem well-
suited as a basis for estimating the number of jobs supported by these green activities. Similarly,
within NAICS, the construction industry does not have a unique category for retrofitting (e.g.,
installing additional insulation, fluorescent lighting, or energy-efficient heating and air-
conditioning systems). Retrofitting likely requires a combination of inputs from supplier
industries that differs from the mix for the top-to-bottom construction of buildings, once again
making use of conventional I-O models problematic.
This recognized difficulty generally is either not mentioned, or how it is dealt with is not
described, in the analyses of green job creation. One study, commissioned by the Center for
American Progress that is discussed in more detail below, does address the problem. The
researchers explain that because “the U.S. government surveys and accounts that are used to
construct the input-output tables do not specifically recognize wind, solar, biomass, building
retrofitting, or new mass transit as industries in their own right,” they created synthetic industries
by combining parts of industries for which data are available. The researchers provided an
example in the case of the biomass “industry:” they constructed it by combining the farming,
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forestry, wood products, and refining industries; then they “assigned relative weights to each of
these industries in terms of their contributions to producing biomass products.”16
Further complicating the matter is the context and manner in which estimates of green jobs
generally are presented. Studies often develop employment projections based on differing sets of
assumptions and time horizons. For example, the number of direct and indirect jobs some 10 or
more years in the future supported by an assumed increase in the demand for energy that is met
by an assumed shift during the projection period from coal to wind and geothermal power
generation. Some reports also include induced employment, but this is not always made clear. In
addition, some analyses relate to a particular state. Their results may not be generalizeable to
other areas because state economy’s have different mixes of industries and may not be able to
provide any or all of the inputs for a particular green output. Additionally, the assumptions and
methodologies underlying the job creation estimates often are not clearly articulated, which
makes thoughtful review of the results very difficult. For these reasons, policymakers considering
which if any green infrastructure programs to fund to create and preserve jobs in the near term to
mitigate the recession’s impact on U.S. workers may not find helpful many green economy
studies.
It should be noted that many of the studies by green economy proponents were not conceived for
the purpose of quickly stabilizing or increasing the number of jobs in the nation or in industries
particularly hard hit by the current recession. Job creation estimates from two organizations that
have proposed broad-based green economy strategies intended in part to stimulate the
deteriorating labor market are briefly described below.
• The September 2008 report, Green Recovery: A Program to Create Jobs and
Start Building a Low-Carbon Economy, was commissioned by the Center for
American Progress (a research and educational institute). It represents an
acceleration of a 10-year program included in a 2007 report (Capturing the
Energy Opportunity: Creating a Low-Carbon Economy). The 2008 report’s
authors at the Department of Economics and Political Economy Research
Institute (University of Massachusetts – Amherst), who relied on I-O analysis,
estimate that almost 2 million jobs (935,200 direct jobs, 586,000 indirect jobs,
and 496,000 induced jobs) could be created or preserved by a two-year $100
billion “green economic recovery program.” The program involves retrofitting
buildings with energy-efficient products and equipment, extending the reach of
mass transit and freight rail networks, constructing smart electric-grid
transmission systems, increasing the use of wind and solar resources in power
generation, and developing next-generation biofuels. Of the $100 billion total,
$46 billion would be in the form of federal spending for such activities as public
building retrofits, mass transit and freight rail expansion, and smart electrical grid
development. Much of the remainder would be in the form of tax credits to
encourage businesses and homeowners to retrofit commercial and residential
buildings. The authors acknowledge that not all of the green activities
16 Robert Pollin, Heidi Garrett-Peltier, and James Heintz, et al., Green Recovery: A Program to Create Good Jobs and
Start Building a Low-Carbon Economy, Center for American Progress, Washington, D.C., September 2008, p. 20,
http://www.americanprogress.org.
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Job Loss and Infrastructure Job Creation During the Recession
can contribute equally to a short-term green economic recovery program. Some ... strategies
are clearly capable of delivering within a year, while others will require as long as two years
to be implemented.17
• In December 2008, the Apollo Alliance (a coalition of labor, environmental,
business and community leaders) proposed The Apollo Economic Recovery Act.
It is an initial step toward achievement of a 10-year $500 billion program to
create 5 million green-collar jobs, which had been released in September 2008.
The new initiative calls for federal spending of about $50 billion to create or
maintain more than 650,000 direct jobs and 1.3 million indirect jobs. The
derivation of these job creation figures is not always clear, appearing to rely
much of the time on spending-to-jobs relationships estimated by other
organizations (e.g., Surface Transportation Policy Project, FHWA , and
Cambridge Systematics). A selection of the proposed allocation of federal funds
and associated job estimates follows.
1. $6 billion retrofitting buildings: 267,600 direct and indirect jobs
2. $10 billion to improve the efficiency and reliability of the electric
transmission grid: 131,000 direct and indirect jobs
3. $6 billion on ready-to-go public transit projects: “would create or retain more
than 246,000 jobs, including 59,000 direct jobs and more than 162,000
indirect jobs”18
4. $8 billion to repair roads and bridges: 278,000 direct and indirect jobs
5. $8 billion to encourage localities to replace aging buses and trains with U.S.-
made clean-energy vehicles: 37,600 direct jobs in vehicle manufacturing and
167,000 indirect jobs.
Author Contact Information
Linda Levine
Specialist in Labor Economics
llevine@crs.loc.gov, 7-7756
17 Robert Pollin, Heidi Garrett-Peltier, and James Heintz, et al., Green Recovery: A Program to Create Good Jobs and
Start Building a Low-Carbon Economy, Center for American Progress, Washington, D.C., September 2008, p. 5,
http://www.americanprogress.org.
18 Apollo Alliance, Data Points: Economic Outcomes of The Apollo Economic Recovery Act, 2008, p. 3,
http://apolloalliance.org/apollo-14/data-points-the-new-apollo-program-fact-sheet/.
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