BCG-CG/LA report offers blueprint for prioritizing infrastructure projects

Washington, D.C. — The Trump administration hopes to create millions of new jobs through an additional $1 trillion investment in infrastructure. An investment of this magnitude could create 3 million or more jobs over the next five years if planners prioritize projects on the basis of their job creation potential and project criticality. If planners focus strictly on project criticality, however, they will squander the opportunity, creating as few as 1.6 million new jobs. That’s the key takeaway of a new study by The Boston Consulting Group (BCG) and CG/LA Infrastructure Inc.

The findings are detailed in a new report, A Jobs-Centric Approach to Infrastructure Investment, which is being shared at the Blueprint 2025 Infrastructure Leadership Forum, being held at the Ronald Reagan Building and International Trade Center in Washington, D.C. Organized by CG/LA, the Forum highlights 50 projects that are essential for creating jobs, competitiveness, and economic growth in the U.S. Study coauthors are Mark Freedman and Jeff Hill, senior partners at BCG, and Norman Anderson, president and CEO of CG/LA.

The study found that planners must adopt a comprehensive, portfolio approach to investment to capture the full array of benefits from infrastructure spending. A balanced portfolio would invest heavily in sectors that have high job creation potential (such as seaports, hospitals, and airports) but would include investments in sectors that, though they do not create a large number of jobs, are crucial to the US economy’s competitiveness and productivity. BCG and CG/LA estimate that a $1 trillion investment in a balanced portfolio would deliver about 3 million direct and indirect jobs (see the exhibit below). That number includes both temporary construction jobs and long-term operations and maintenance employment.

“Currently, policy makers have no way of assessing the impact of infrastructure investment on job creation,” says BCG’s Freedman. “Although advocacy groups and others offer up numbers, there is no scoring system that focuses primarily on job creation.” As a result, the federal government and the states are in the position of making huge investments without being able to fully gauge taxpayers’ return on investment in the form of new jobs.

“Maximizing job creation, with a heavy emphasis on long-term jobs generating tax revenues that will help offset the up-front costs to taxpayers, should be a key objective of an infrastructure investment program,” says Hill, who leads BCG’s infrastructure topic in North America. “Strategic project selection is the only way to ensure the creation of millions of infrastructure jobs that offer high-quality, long-term employment across the U.S.”

As part of their analysis, the authors evaluated more than 60 projects — including repairing Arlington Memorial Bridge (which opened in 1932), expanding Colorado’s I-70 mountain corridor, building a new airport in Orlando, and accelerating expansion of Savannah harbor — that could begin this year with the right support from Congress and the administration. These projects, expected to cost some $200 billion to $300 billion, could be used to jump-start the president’s initiative. If acted upon quickly, they could deliver real benefits by the first half of 2018, and perhaps even sooner.

Job creation varies among projects

Infrastructure spending today is responsible for about 15.5 million direct and indirect U.S. jobs that pay an average of $68,000 per year, which is 28 percent above the U.S. median income of $53,000, according to the Bureau of Labor Statistics. Most infrastructure projects create large numbers of up-front design, engineering, and construction jobs, but few long-term jobs. However, some projects, such as expanding seaports and airports, create large, ongoing, revenue-producing assets that, even after the construction phase, generate significant numbers of permanent jobs.

Infrastructure spending also creates huge numbers of indirect jobs: in manufacturing (steel, glass, and concrete, for example) and logistics and transportation (getting the goods to the job site when they’re needed). While many of these jobs likely would be created locally, within several hundred miles of the project, many others would be sourced from across the country, including from areas that have been hard hit by adverse changes in manufacturing. Planners often ignore or underestimate the reach and nationwide distribution of these employment effects.

Infrastructure Jobs Scoreboard

To support a jobs-centric approach, BCG has devised an “infrastructure jobs scoreboard” that offers a comprehensive view of all infrastructure-related employment in the economy by job category, wage level, and geographic location. This web-based tool visualizes the current distribution of infrastructure jobs across the US and the potential impact of additional infrastructure investment on these jobs. It captures both direct jobs (which tend to be local) and indirect jobs (which may be more widely distributed across the nation) on the basis of the sourcing of materials and equipment for a project. The scoreboard allows users to identify where new jobs are likely to appear in connection with a project.

The scoreboard can be accessed at https://infrajobs.bcg.com.

“To accelerate job creation, policy makers need to streamline regulatory and procedural hurdles and clarify roles between federal and state agencies,” says Daniel Acosta, a BCG partner and a coauthor of the report. “They must also create incentives for the development of new projects in sectors that deliver high-quality or long-lasting jobs — such as seaports, hospitals, and airports.”

Download a copy of the report at https://on.bcg.com/2pe3cKt.