The Infrastructure-Manufacturing Connection

In my recent book 200 Best Jobs for Renewing America, I describe six large fields whose growth will be essential for the United States to remain competitive in the world economy. These fields are education, infrastructure, health care, information and telecommunication technologies, green technologies, and advanced manufacturing. For each, I describe the current state of the field, give examples of initiatives (mostly governmental, but also some in the private sector) that promise to renew the field, identify the occupations that employ the largest number of people in the field, and finally rank occupations in the field that are best in terms of their earnings, job growth, and number of job openings.

Although my scheme using six large fields was useful for organizing the book, the real world of work is not neatly divided into industries. Some occupations, such as industrial engineers, are employed in all industries. And growth (or stagnation) of industries does not happen in isolation. Often, when one industry grows, it stimulates growth in other industries.

This last point was driven home for me by a report by the Alliance for American Manufacturing, which is a partnership between several large manufacturers and the United Steelworkers union. The report, How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth, was written by three economists at University of Massachusetts–Amherst’s Political Economy Research Institute. It analyzes the need for repairs and upgrades to the nation’s infrastructure, including roads, rail, aviation, mass transit, inland waterways, drinking water, wastewater systems, dams, and distribution of electricity and natural gas. It notes that total public assets, excluding defense, were valued at $8.2 trillion in 2007, which is equal to approximately 50 percent of the stock of all non-residential private assets. Infrastructure thus represents one of the main pillars of our economy.

Yet, as the report points out, public investment in the infrastructure started to decline in the 1970s, has not returned to previous levels since then, and generally has lagged behind overall economic growth. The economists measure the needs for investment in the infrastructure in dollar terms and envision two possible scenarios for a response: one a low-end investment of $87 billion per year, the other a high-end investment of $148 billion per year. In each case, the ratio of public to private investments would be roughly two to one.

The report then looks at the impacts on job creation that can be expected from these two scenarios: direct effects, meaning jobs that are created to do the actual work; indirect effects, meaning jobs that are created to supply the projects; and induced effects, meaning jobs that are created because of the overall uptick in economic activity. The economists estimate that the low-end scenario would mean 1.6 million total new jobs, and the high-end 2.6 million new jobs.
The industry gaining the greatest number of jobs (about 40 percent of the total impact) would be construction, with 641,000 new jobs under the low-end scenario and one million under the high-end scenario. My book is consistent with this prediction, in that most of the occupations that I rank and profile in the section about infrastructure are construction jobs.

But what is especially relevant to the theme of today’s blog is the size of the expected impact on manufacturing: 146,000 or 252,000 new jobs, depending on which scenario you look at. This represents about 10 percent of the total predicted impact.

Accelerated construction and repairs of roads, bridges, pipelines, and other parts of the infrastructure would create great demands for manufactured goods, creating many new jobs: under the high-end scenario, 38,000 jobs in fabricated metals; 21,000 in concrete and cement; 15,000 in glass, rubber, and plastics; 9,000 in steel; and 8,200 in wood products.

The budget that the Obama administration passed for 2010 comes close to or even exceeds the low-end scenario, depending on whether or not you define some expenditures as infrastructure projects. A total of $72.5 billion was allocated for transportation. Some of the $47.5 for housing and urban development, the $26.3 billion for energy, and even the $42.7 billion for homeland security also count as infrastructure.

The authors of the report note that the proposed infrastructure investments "also can become a key driver in building a clean-energy economy." In this way, the infrastructure field is linked to yet another pillar of the American economy of the future, green technologies—one of the six fields in the Renewing America book and the sole focus of a book I’m working on right now.

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