Is Infrastructure Spending Good for the Economy? It’s Complicated.

Setting job creation as an objective of infrastructure spending can also undermine the economic value of projects. At the time of the 2009 stimulus, unemployment was around 10%. With more workers looking for jobs, spending on infrastructure during a recession may arguably bring labor off the sidelines, while also taking advantage of the temporary wage drop due to the joblessness spike. In short, the state can get more infrastructure built for less, and put people to work who would have been otherwise unemployed. Today, however, unemployment is around 4.7%. Competition for labor is up, and with it construction wages. And without slack in the labor market, new projects are more likely to shift employed workers around, not add new jobs to the economy.

Our current surface transportation system is not just in need of repair. In most parts of the U.S., our system connects everything worth connecting, and does so as cost-effectively as possible. There’s little need for new infrastructure, but great urgency to rehabilitate the infrastructure we already have.

Local and state governments are largely responsible for preserving existing infrastructure. They can use additional federal support. But we should be sure that any support is pushed toward maintenance, not new infrastructure which largely serves as a distraction. We all know that maintenance, repair, and reconstruction are not sexy. They do not result in ribbon cuttings with smiling politicians getting their pictures taken and posted in the local news. Yet on a per-dollar basis, fine-grained maintenance work employs more people than large-scale greenfield construction.