3:06pm: Hotline with Dave Weekley

Will 48,000 jobs really result from the WV road bond?

CHARLESTON, W.Va. — For months, Gov. Jim Justice has promised 48,000 jobs as a result of increased highways construction if a $1.6 billion road bond measure passes.

The certainty of the statements may conjure images of 48,000 construction workers fanning out across the state in unison, lunchboxes in hand. But it’s not quite so simple.

Because the bond money is to be let out over a period of years, the spending and the economic impact also will be spaced out over time.

And not all of the anticipated job creation will come directly from highway construction. Much of what’s calculated is from indirect spending. Even though it’s easier to think of it as a “job,” it’s really more like economic stimulus that makes portions of a variety of jobs sustainable for employers.

West Virginia voters go to the polls Saturday to approve or reject the road bond amendment. Polls open at 6:30 a.m. and close at 7:30 p.m. The Secretary of State’s office reported 37,434 voters participated in the early period that ended Wednesday.

Whatever the shape of the final job creation number, Justice has described the possible outcome as an improvement over the state’s current sluggish economy.

“If it passes we know we’ve got all kinds of new jobs,” Justice said this week during a “Roads to Prosperity” stop in Hurricane.

The governor continued, “It’s almost impossible to tell what the real economic benefit of this is. Really and truly, you could almost do this and hit the autopilot and say we’re on our way; let this drive the whole state.”

At a separate stop this week in Berkeley Springs, Justice took exception to a paper he’d been handed that included several items of criticism about the road bond issue.

“The paper they passed out was coming up with all kinds of bad stuff — that I corruptly came up with 48,000 jobs and all of that. That wasn’t us. That was a Duke study. The Duke study said that a billion dollars of road work that you start, you’ll create 20,000 jobs. It’s the most current study that’s out there.

“If that ain’t good enough for you and that number really comes in at 37,000 or the number comes in a 54,000 jobs — who cares? Who cares? It’s jobs. It’s giant revenue for our state. Who cares? We’re getting our roads fixed.”

ALSO READ: West Virginia weighs road bond costs versus opportunities.

ALSO READ: Will West Virginians get the highways jobs?

The study

The governor and others who support the road bond referendum have cited a Duke study for months. Justice is correct on the multiplier the study uses to predict job growth from infrastructure spending, but some of the details are more complicated.

For every $1 billion spent on transportation infrastructure, 21,671 jobs are created, concluded the 2014 report “Infrastructure Investment Creates American Jobs.”

That multiplier results in the ballpark of what Justice has touted, although it’s not right on. If you just do straight math of $1.6 billion times 21,671 you get 34,673. That also doesn’t take into account that West Virginia government also intends to fund more highways projects through increased Turnpike tolls and by raising the limit on Garvee bonds, which are leveraged against future federal highways dollars.

The researchers would agree it’s a significant economic impact.

Lukas Brun

“I think that’s valid,” said Lukas Brun, one of the researchers responsible for the 2014 Infrastructure Investment Creates American Jobs study.

“It just depends on what the project looks like. I would support your governor’s comments on what the jobs look like, assuming that spending occurs over a year’s basis.”

MORE: Read the infrastructure spending economic impact study.

The study was produced by Brun and other researchers at an arm of Duke called the Global Value Chains Center. The center studies global industries and their economic effects, working for a variety of groups. In other words, the research is sponsored, although Brun says the results are independent.

In the case of the transportation study, it was sponsored by the Alliance for American Manufacturing, a nonprofit partnership between corporate manufacturers and the United Steelworkers.

“Typically what happens, when we have organizations that sponsor research, they provide the funds to allow the research to occur. However, the outcomes of that research and the process of that research are up to us,” Brun said in a telephone interview.

“What we like to do is feed into those research questions organizations have, so they can communicate with their stakeholders.”

The research actually focused on federal highways spending, looking toward a possible uptick by the U.S. Department of Transportation. Brun said the conclusions would be just as applicable to state highways spending, though.

“Whether a billion dollars of spending by the feds is the same as a billion in spending by the state government, it really doesn’t matter,” he said. “A billion bucks is a billion bucks.”

Not all at once

The job growth anticipated depends on the amount being spent, though. So if all of the highways dollars are not flowing out the door at once then the economic impact would also be over time.

The ballot measure, known as Amendment 1, authorizes the state to issue bonds not exceeding $1.6 billion over a four-year period: $800 million in 2017, $400 million in 2018, $200 million in 2019, and $200 million in 2020.

“If spending is phased over years, then the effects will be phased over a number of years,” Brun said.

“What this measures is a billion dollars worth of spending and what the effects are within the economy.
If you’re not spending a billion dollars then reduce accordingly. Or if you’re spending a billion bucks in Year One, you’ll get those economic impacts, but if it’s only only a half-billion in year two then it reduces the effects it has.”

Steve White

Practically speaking, a surge of highways spending would be a challenge, suggested Steve White, director of the West Virginia Affiliated Construction Trades Foundation.

“By statute it can’t go out all at once. There’s many other choke points,” White said. “I’d say the number one choke point is engineering.”

By that, White meant, the highway and bridge work can’t just appear. Somebody has to perform the design work, and that will take some time.

“What are we bidding on? You don’t just point and say ‘Give me a price on fixing that bridge. The problem on the highways side is they have been cut to the bone. They have not filled positions. They don’t have people sitting around. That will take time. They will farm out some of that design work, but still.”

White agreed that not all the jobs are likely to be produced at once.

“They’re typically gonna be job years,” he said. “Because there’s a whole slew of things that model takes into account. Direct and indirect jobs. There’s all sorts of things, and they’re all pieces of jobs.”

He concluded, “While we’re all in a hurry to get the economy going, realistically it will not all flow Day One. We’re talking about a three-, four-year accelerated pace. In that mix comes the Garvees, which are already partially out, the Turnpike tolls — that won’t happen until next year. That’s good. Three, four years is a short period of time to put this money out. It’s not a lightswitch.”

The jobs

The Duke study concludes that three waves of jobs are created by highways spending.

One is direct employment — those directly involved in work on highways and bridges.

Another is indirect impacts are created by inter-industry spending. In other words, suppliers.

And yet another is induced impacts — the spending that may occur in a community because of the highways work, allowing for economic growth and spinoff jobs possible as a result.

“It’s like throwing a pebble or a rock into a still pond and measuring the effects of that rock– the rock being the spending,” Brun said. “So the first level of splash is the direct jobs, the second level is the indirect, occurring as a result of the purchasing and the third is, how does household spending change as a result of that spending. The impact is all three of those ripples.”

To simplify what the research team did, they put spending into some widely-accepted economic impact models and reached their overall conclusion.

“The model has those impacts in terms of what is direct employment — what is the number of construction jobs? — but what are the service and manufacturing jobs related to the purchase?” Brun said.

In West Virginia, the ACT Foundation has run its own models, determining that about 5,000 construction jobs may be produced.

“That’s about a doubling of what we have,” White said.

At that, the construction industry is preparing to ramp up.

“The good news is we do not have that many people just sitting around unemployed,” White said. “Under the right circumstances, we will be able to take in, train and put people to work who are not working today. It could be laid off coal miners, returning veterans, underemployed folks. We have a great training system that can accommodate a number of folks. That would be great news.”

The study by the Duke researchers compared their own work to other similar academic work.

Quick! Get to your Google!

They are the American Public Transportation Association’s (APTA) 2014 “Economic Impact of Public Transportation Investment”; the University of Massachusetts – Amherst 2009 (sponsored by AAM) “How Infrastructure Investments Support the U.S. Economy”; and the American Society of Civil Engineers (ASCE) 2011 “Failure to Act: The Economic Impact of Current Investment Trends in Surface Transportation Infrastructure.”

The point is, each of those studies also concluded similar economic impact results from infrastructure spending.

The first concluded the economic impact per $1 billion spent was between 18,983 and 21,830 jobs. The second tallied a baseline of 18,391 jobs per $1 billion. The third concluded the employment effect would be about 30,000 jobs per billion in spending.

Those who have been traveling the state with the governor agree with the assessment that the economic impact will be a boost for the state.

Chris Hamilton

“We have today about 12,000 coal miners,” said Chris Hamilton, who leads both the West Virginia Coal Association and the West Virginia Business and Industry Council. “Passage of this road bonds amendment will establish upwards of 45,000 new jobs. It’s not a number that’s made up. Its’ actually 48,000. It’s based on a study that Duke University has done.

“We don’t know of anything else capable of infusing 48,000 new jobs, and we’re hoping they’re all West Virginians who get those jobs,” Hamilton said in Hurricane. “We have all the reason in the world to believe that the majority of those jobs will go to West Virginians.”

Hamilton pointed to West Virginia’s workforce participation rate, which is the worst in the nation. Only about 50 percent of the noninstitutionalized West Virginians over age 16 are working or looking for work.

“Think of the workplace participation rate we have,” Hamilton said. “It’s the worst in the country. Only one of two people capable of holding a job are holding a job. It’s the worst workforce participation rate. It’s right about 50 percent. We lead the nation.

“And we have an opportunity simply by voting yes to bring in 48,000 jobs around the state. We have the potential to bring people home. We have the potential to get people who have been furloughed or had to move out of state or some other dislocation back here to get ‘em on the roads program.”

Speaking in Moorefield, the governor said even if the economic growth can’t be pintpointed he believes an effort to attain it will be worthwhile.

“We can all think of some little extra we’d like to have or some little part of this that doesn’t quite fit,” Justice told the crowd that had gathered to hear him speak.

“I say to you, just point blank as I can say, how’s it working for you now? What’s getting done now? If it creates 10,000 jobs instead of 48,000 jobs and if we build 400 projects instead of 600 projects isn’t that a whole lot better than none?”

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