Getting the Nation on Track for Jobs
This appears to be a good season for investment in transportation. In September, President Obama proposed to invest $50 billion in the nation’s transportation infrastructure. Transportation Secretary Ray LaHood has already committed $776 million to bring buses and bus facilities into a state of good repair. Combined with the $8 billion investment in high-speed rail that was part of the February 2009 stimulus package, it seems that the nation is finally putting a down payment on a 21st-century transit system.
But these sums are a pittance compared with the need. The U.S. has yet to commit the money needed to create a world-class rail system, or to stimulate a transit-vehicle manufacturing industry that today depends mostly on imports. In reports we released this week in cooperation with the Apollo Alliance and Worldwatch Institute, we estimate that a serious investment in public transit could stimulate thousands of sorely needed manufacturing jobs. To appreciate how far we are falling short, consider the example of China.
China recognizes the economic links between developing rail lines and promoting manufacturing. In 2001, it began a $132 billion rail-construction project, which is scheduled for completion in 2012. During roughly the same period, the U.S. appropriated just $19 billion for rail construction, or about one-seventh China’s level.
As part of its recession-recovery package, China committed $88 billion in 2009 to railway infrastructure, doubling its 2008 investment. The goal: to create much-needed transportation links, to generate demand for 20 million tons of domestic steel, and to create 6 million new jobs overall.
To reach the government’s goal of 1.1 million kilometers (about 450,000 miles) of railroad by 2012, China will spend a total of $292.5 billion. Of this, 13,000 kilometers will be for high-speed rail. A key benefit: China’s two leading locomotive and rail-car manufacturers will employ more than 212,000 people combined to meet domestic goals. If transportation policy is to create domestic manufacturers and permanent manufacturing jobs, a steady and predictable level of investment is needed. The U.S. lost its domestic passenger rail-car industry by the late 1980s not because of high labor costs, but because of erratic demand. Most of the countries that dominate the industry today, such as Germany and France, have wages comparable to the U.S., but they have a comprehensive strategy that allows producers to anticipate stable demand for their products.
Annual domestic demand for production of rail cars in the U.S. bounced between a low of 268 units to a high of 1,067 units during the 1970s, according to Thomas Boucher of Rutgers University. And as demand for transit vehicles waned, U.S. companies couldn’t come up with investment dollars to keep up with state-of-the-art technology.
We analyzed the job-creation potential of investment in rail infrastructure and estimate that the U.S. could gain 79,000 jobs in rail and bus manufacturing and related industries under an investment scenario sufficient to double transit ridership in 20 years. An investment at levels similar to China — $24.4 billion per year over six years — would yield 252,213 jobs, including many well-paid blue-collar jobs of the kind that have been devastated over the past decade.
Reclaiming a domestic rail industry is part of a broader need to revive competitive manufacturing. Even in its weakened state, manufacturing accounted for $1.6 trillion (12%) of U.S. GDP in 2008 — more than real estate, finance, and insurance.
Manufacturing accounts for 60% of U.S. exports and 70% of private-sector research and development funding. Yet the U.S. goods deficit with the rest of the world in 2008 exceeded $836 billion. The annual trade deficit with China alone was $266 billion in 2008, with 75% due to the manufactured-goods deficit.
A high-quality passenger-rail system is a trifecta. It would attract more riders and cut dependence on private cars — in turn reducing the carbon emissions that cause global warming. More than that, a commitment to mass transit could promote the resurgence of a major manufacturing sector that we’ve lost, reducing our trade deficit and increasing domestic jobs.
Joan Fitzgerald is professor and director of the graduate program in Law, Policy and Society at Northeastern University. Joseph McLaughlin is a senior research associate at the Center for Labor Market Studies at Northeastern.