Transportation’s Economic Impact, a more complete picture

This is a cross-post with the Young Professionals in Transportation Blog.

When the economic impact of transportation investment is discussed, the typical focus is on job creation. It is obvious that when roads are repaired or new transit systems built that many jobs are directly created. There are also jobs that are indirectly created through transportation investments. Each new transit agency employee or highway construction worker will generate new spending not only on essentials such as food and housing, but also on non-essentials such as entertainment, and these expenditures will support other jobs in the private sector.

Over the past year we’ve witnessed the power of transportation and infrastructure investments to generate quality jobs that cannot be outsourced for hundreds of thousands of Americans through the American Recovery and Reinvestment Act (ARRA). An American Association of State and Highway Transportation Officials study reported that in its first year ARRA directly supported 280,000 transit and highway jobs, and that including indirect and induced jobs it supported 890,000 jobs. An October 2009 report evaluating the economic impact of public transportation investment prepared by the consulting firm Economic Development Research Group for the American Public Transportation Association (APTA) found that on average for every $1 billion of spending on public transportation operations in the United States, 41,140 jobs are created, and for every $1 billion spent on transit capital expenditures, 23,788 jobs are created. When transit operations and capital expenditures are combined, an estimated average of 36,000 jobs are supported for each $1 billion invested in public transportation.

While the number of jobs supported by investments in transportation infrastructure is a critical indicator of transportation’s economic impact, this indicator alone does not provide a complete picture of how transportation and economic development are linked. Accessibility, the measure of the number of activity sites (school, work, places of worship, retail stores) that an individual can reach within a certain travel time, is and will remain an important determinant of economic opportunity for Americans in every type of occupation.

Despite repeated predictions, exemplified in the 2001 book Death of Distance by Francis Craincross, that geographic distance would cease to be an inhibiting factor in economic collaboration and trade, the region remains the center of economic activity and collaboration in the United States and around the world. The world economy is essentially a collection of regional economies. The Internet Era has not hastened the demise of geographical proximity as a requisite for individual or firm economic success. While I cannot do justice in this short blog to the all of the literature in geographical economics and economic geography that explore the many reasons for the pre-eminence of regional economies, I would like to touch on a few aspects found in academic research that underscore the importance of place and accessibility for individual, firm and regional economic success.

First, trust is an importation foundation of human economic interaction, and trust is built primarily through repeated face-to-face (F2F) interactions. When you trust someone, you are more willing to exchange information with them, and collaborate on individual projects. While competition and firm rivalry are often cited as an important factor in regional economic dynamism, the reality is that in many sectors of today’s economy a more common paradigm is to find firms that partner on some projects, and compete on others. Trust and F2F interactions also allow for a key type of information exchange, tacit knowledge transfer. Tacit knowledge is knowledge that cannot be codified or exchanged without co-presence, and the exchange of tacit knowledge is often considered to be dependent upon a shared social and cultural space. (For a more in-depth consideration of the importance of these three factors on regional economic success, please see pgs. 30-33 in my paper, Tucson’s Clustered Connections).

F2F, trust and knowledge exchange, tacit and codified, form the foundation of regional networks that support regional economies. For knowledge workers having access to a number of actors within their industry’s regional network and a robust personal network is an important determinant of how successful they may be personally. For firms, the ability to access industry knowledge and talent is critical. If transportation investments increase accessibility and subsequently the ability of knowledge workers to interact, there will be a positive impact on the economy. It is important to note that not all types of transportation investments really do this, some may only increase mobility, or the ability to move between activity sites. (While there is an inherent urban bias to accessibility, it can’t be said that an intensely developed place is required for economic dynamism, Silicon Valley and its suburban office parks are an important example).

Accessibility is also an issue that acutely affects low-income workers. In the second half of the 20th century, entry-level jobs in service industries were increasingly located in the suburbs while many low-skilled workers remained in central cities, creating a spatial mistmatch of jobs opportunities and low-income workers. Accessing job opportunities in the suburbs often requires the use of a private automobile, a mode of transportation too expensive for many low-income workers. As a result many government and non-profit agency programs have sought to provide reliable transportation to low-income workers seeking to travel jobs that are not accessible via public transportation. For some individuals the ability to access these types of programs can mean the difference between being employed and unemployed.

In the first decade of the 21st century the issues presented by the spatial mismatch and access to reliable, low-cost transportation for low-income individuals has been exacerbated by the growth in suburban poverty. The Brookings Institution recently released a report on the suburbanization of poverty that found that between 2000 and 2008, “suburbs in the country’s largest metro areas saw their poor population grow by 25 percent—almost five times faster than primary cities and well ahead of the growth seen in smaller metro areas and non-metropolitan communities.” In the coming years, transportation and economic development professionals will be challenged to work together to create dynamic, accessible and equitable communities that will provide the foundation for continued national economic success.