How many people does it take to build a tunnel?

At a recent BDCP meeting, economist Dr. David Sunding estimated that during its seven year construction period, the spending to build a tunnel under the Delta will create between 74,000 and 130,000 jobs, depending on the size of the tunnel.  He estimated that each million dollars spent on construction would create 10 jobs, and each million spent on operations and maintenance would create 7 jobs.

Dr. Jeffrey Michael of UOP’s Business Forecasting Center notes that the jobs are measured in employment years.  Thus a construction job that lasts 7.5 years counts as 7.5 jobs, not one.   In other words, the project would create an average of 10,000 to 17,000 jobs statewide over a 7.5 year construction period.

(To put it another way, building a big tunnel won’t provide employment for 130,000 individuals, although that is what Sunding’s estimate may suggest to people who are not economists.)

Any public investment will create jobs.  The question is, Which investments most benefit the public, in the long term as well as the short term?

In 2008, the Alliance for Water Efficiency, a non-profit located in Chicago and dedicated to the efficient and sustainable use of water in the U.S. and Canada, published a position paper titled  “Transforming Water: Water Efficiency as Stimulus and Long-Term Investment.”

Researchers modeled a wide range of possible water/energy efficiency programs.  They looked at indoor and outdoor efficiencies and at water systems across all sectors that use water.  Included were investments in things like high efficiency toilets, showerheads, dishwashers, and smart irrigation controllers, as well as commercial and industrial retrofits and replacements and leakage control.

The modeling confirmed that efficiency programs could have broad economic stimulus benefits.  Researchers found that for every million dollars of direct investment,

  • Economic output benefits ranged between $2.5 and $2.8 million.
  • Gross Domestic Product (GDP) benefits ranged between $1.3 million and $1.5 million.
  • Employment potential ranged between 15 and 22 jobs.

The position paper notes that stimulus benefits from efficiency investments are comparable to other public infrastructure investment options; can be deployed in a short time frame and easily scaled to local needs; and have the added advantage of reducing energy use associated with pumping, treating, and delivering water.  (Drinking water treatment and distribution accounts for close to 20% of California’s energy use.)

Dr. Michael notes that “Comparing 15-22 jobs per million dollars from efficiency investments to 7-10 jobs per million invested in conveyance, it looks like efficiency delivers double the job stimulus bang per buck as new conveyance.”

So the job creation of conveyance is not actually impressive relative to the spending.

Some other points to consider:

  • Construction jobs evaporate when the conveyance is finished.
  • From the perspective of resources, efficiency investments result in water savings.  Conversely, in Sunding’s estimate, a lot of operations spending is for electricity, so this methodology counts burning energy as an economic benefit.

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