Transcript Impact on the Economy and Jobs by Cheryl Soon (pps)

July 13, 2010
Cheryl Soon, SSFM International
“Economic and Workforce Impact”
Three Important Dimensions
 What is the impact of the construction industry on
Hawaii’s economy?
 What would a $14 Billion investment over six years
mean to the current economy?
 What would it mean for workforce development?
1. WHAT IS THE IMPACT OF THE CONSTRUCTION
INDUSTRY IN HAWAII’S ECONOMY?
Hawaii’s Input-Output (I-O) Model, developed by the
State Department of Business, Economic Development
and Tourism, measures the inter-relationships among
industries, the impact on final users and factors of
production in the economy.
Input-Output Model Definitions
 Direct impacts– on the construction industry itself;
includes jobs in heavy civil engineering and
construction
 Indirect impacts – on other industries
 Multiplier effects on output, earnings, employment
(jobs)
 Induced effects – Effects due to overall expansion of
the economy. For example, you can look at earnings
and consumption expenditures to see the effect on
changes in household spending
 State Tax multipliers
Construction Job Impacts
 For every $ 1 million spent, there are 12.9 direct and
indirect jobs created
 For every $ 1 million spent, there are 3 direct jobs
created in construction
HIPA Report
 HIPA conservatively forecasts
over six years:
$14 billion in construction
spending for public
infrastructure
• Of this, $ 7.5 B (53%) is for new
facilities
• $3.8 B (27%) is for upgrades
• $2.9 B (20%) is for repair and
maintenance
HIPA $ 14 Billion Projection
 55% is for transportation, much of this
comes from Federal funds, which is
new money in the economy
 18% is for various water projects
 26% is for public facilities and
buildings
 1% is for energy and disaster
preparedness
Applying the I-0 model to this $14 Billion
Expenditure on Public Infrastructure
 14 B X 12.9 = 180,060 jobs (direct and indirect)
Of these….
 14 B X 3 = 42,000 direct construction jobs
Bottom Line - Impact on the Economy is
Good
 Adding 42,000 direct jobs over six years, averages out to
7,000 jobs per year
 The actual impact depends on
- Timing of projects
- Category of spending (e.g. wages versus equipment and
materials purchased)
- Sources of funding
- Is offset by some negative effects such as traffic
disruption
- Is offset by reduced personal consumption when the
source of funding is locally generated taxes
2. What would this investment
mean to Hawaii’s economy now?
According to the US Bureau of Labor Statistics, the
number of construction jobs in Hawaii has dropped
25% in three years
- 2007 40,000
- 2008 38,500
- 2009 32,000
- 2010
30,700
What are our current metrics?
 Real per capita personal income in Hawaii in 2010 is
$38,443, which is down from 2008
 4.8% of all mortgages are in foreclosure
 Housing starts are down 55%
 Median Household income is $64,000, yet
 8.7% are living below the poverty line and 7.7% have
no health insurance, which is typically provided
through employers.
Hawaii Unemployment
 In May 2010, the US Department of Labor reported the
Hawaii unemployment rate is 6.6%
 This is higher than December 2007 when it was 3%
 But it’s lower than the September 2009 high of 7%
 41,700 residents in Hawaii are counted as unemployed
out of a total labor force of 636,800
 Hawaii’s unemployment rate of 6.6% is better than the
national rate of 9.7%
 7,000 direct construction jobs and
9,000 other jobs would certainly help!!
STATE CIP IN 2009-10
 Last month, Russ Saito, State Comptroller reported
that over an 18 month period, State agencies has
awarded 827 projects amounting to $ 1.8 Billion in CIP
 This translated into:
23,884 direct and indirect jobs
5,554 direct construction jobs
STATE CIP IN 2009-10:
Geographic Distribution (Source: DAGS)
LOCATION
NUMBER
DOLLAR VALUE
Oahu
491
$ 978,295,682
Hawaii
149
$ 431,665,970
Maui
100
$ 283,318,510
Kauai
53
$ 108,063,444
Molokai
21
$
17, 166, 085
Lanai
9
$
16,398,233
Statewide
4
$
16,606,410
TOTAL
827
$ 1,851,513,340
STATE CIP IN 2009-10:
Distribution By Agency (Source: DAGS)
AGENCY
DAGS
NUMBER
DOLLAR VALUE
161
$ 225,923,212
Agriculture
8
$16,888,465
DBEDT
5
$ 11,980,223
Defense
6
$ 4,036,800
Education
375
$ 269,181,928
DHHL
26
$ 164,944,751
DHS
31
$ 53,066,441
DLNR
47
$ 67,357,085
Transportation
82
$ 789,471,682
UH
86
$ 248,642,743
HONOLULU RAIL PROJECT
 Construction value is $ 5.5 Billion
 According to the Final EIS published recently, number
of direct and indirect jobs created is:
YEAR
JOBS
YEAR
JOBS
2010
3183
2015
10,902
2011
8,209
2016
6,229
2012
11,680
2017
3,872
2013
17,290
2018
3,091
2014
15,020
2019
1,719
Source:
FEIS, pg 1-202 Table 4-35
“...if
work started on the rail line that would
probably have the effect of reducing
unemployment by one to two percent
because we’re a small labor market.”
Lawrence Boyd, Jr.
Center for Labor Education & Research
UH West Oahu
PBN, June 25, 2010
3. Impact to Workforce
Development
 If Hawaii is to add upwards of 6,000 jobs per year in
construction, workforce development has to start now
 Construction work requires a skilled, well-managed
and efficient construction industry
 The industry utilized 21st century technologies and
equipment which is constantly evolving
 Construction wages and benefits is substantially
higher than other sectors by as much as 150% when
construction is in a peak period
Types of Workforce Development
Needed
 All the skilled trades in construction
 Heavy Equipment operators
 Finance and accounting
 Project Management – to keep up with advances in
scheduling, risk management and mandatory
reporting of compliances
 Equipment Maintenance has acute shortages
Developing the Workforce
 Companies need to have methods for recruitment,
training and retention
 Outreach is needed to include minorities, women, the
currently unemployed and disconnected
 Workplace changes may be in order regarding child
care, schedules, and methods to reduce absenteeism
 Fortunately, Hawaii has several organizations and
resource agencies in place to draw upon
Other Parts of the Economy will
Benefit
$ 1 Billion in construction generates:
- $1.3 Billion in total output in the economy
- 12,400 other jobs
- $ 583,000 in household income and spending
Other Sectors
Thus, in addition to generating activity in construction,
activity is generated in
- Real estate
- Engineering
- Banking
- Medical care
- Eating and drinking
- Retail
- Transportation
Impact of the Completed Public
Infrastructure Projects
 Helps other business be more productive and efficient,
for example, when transportation facilities and
improved and congestion is reduced
Construction Forecasts
 According to EconPost March 18, 2010, Moody’s
states:
“Hawaii’s construction growth is set to grow 2.8% in 2010
and continue robust well into 2013”
• According to Pearl Imada Iboshi, State Economist:
“ Private construction declined in 2009, but State
government construction increased 15%”
• UHERO predicts construction will rise 4% in 2011
• An increased emphasis on infrastructure can bring an
economic boost