A Jobs-Centric Approach to Infrastructure Investment

The Trump administration has proposed investing an additional $1 trillion in infrastructure to create millions of new jobs. But creating millions of jobs will not be easy.

If $1 trillion were invested over the next five years, the additional $200 billion in annual spending would represent an increase of more than 25% over current annual spending of about $700 billion. But this investment would equate to roughly 1.6 million new jobs at current ratios of GDP to employment. A better goal would be to target something closer to an equivalent 25% increase in infrastructure-related employment by 2021, translating into the creation of 4 million new jobs and raising the overall total from 15.5 million (12% of total US jobs) to 19.5 million (14%). To achieve an increase of this magnitude, planners must systematically select the right projects to undertake.

To ensure that the administration achieves or exceeds its job creation objectives, policy makers need to adopt a “job-centric” approach for prioritizing investments in infrastructure projects on the basis of their job creation potential, and not exclusively on the projects’ criticality. A jobs-centric approach has four key elements:

• Focus on direct and indirect jobs creation. The emphasis is on jobs that can be estimated and counted accurately (rather than on approaches that involve gauging broader, “induced jobs” effects).
• Follow the money. Analysts must examine the division of project spending between labor and nonlabor costs.
• Consider the geographic spread of jobs across the US. Success involves looking beyond the project site to the entire project supply chain.
• Drive accountability. The number of jobs must be estimated on the basis of common definitions and validated by the project owner; once that estimate is in place, the figures can be tracked over time to ensure that the projects are creating jobs as planned.