DOES UTILITY JOB CREATION HELP THE ECONOMY?

The above title raises a curious question. Certainly, we all know that the national economy has been weak for several years and continues to struggle. We also know that millions are without employment, job creation has been disappointing and many people have given up seeking employment.

Politicians are preaching that the economy and job creation are primary issues facing the nation today. Many involved in the water and waste water public utility industry, including USEPA, sound the alarm that billions of dollars are needed to invest in replacement and upgrade of aging water and waste water utility infrastructure. In turn, making such investment in infrastructure , it is claimed, will create thousands of jobs and presumably benefit the economy.

So, for example, USEPA claims that for every $1 billion spent on such infrastructure, 40,000 jobs will be created. In its press releases announcing grants for various purposes, EPA frequently suggests how many jobs will be created by its generosity. Another group has claimed that the Water Protection and Investment Act of 2012 (discussed in my September 7, 2012 posting) will create at least 169,000 jobs over 10 years. On the other hand, another group has stated that without such infrastructure upgrades, the economy will lose nearly 700,000 jobs by 2020.

No doubt, new public utility sector jobs should benefit those who occupy the jobs. But, will the economy be benefitted? An interesting article in Harvard Magazine discusses that question (September-Ocotober, 2012). In "Can America Compete", the magazine interviews scholars who participated in the Harvard Business School's U.S. Competitiveness Project.

The Project's findings appear to be that the problem with the economy is a long-term erosion of U.S. competitiveness in a more and more challenging world economy. It concluded that, for the past ten years, almost all new jobs were created in local businesses, such as government, healthcare and retail, not in businesses that compete internationally. The project defined U.S. competitiveness as the ability of U.S. companies to succeed in the world markets, while at the same time raising the living standards of Americans.

As one participant stated, "the rhetoric these days is all about jobs, jobs, jobs. It's easy to understand why: if you lack a job, it is all about jobs. But if you set out simply to create jobs for their own sake, you wind up investing in areas not where you're productive, but where you can create a lot of jobs quickly. Yes, we absolutely want jobs. But we want competitive jobs that can last in a demanding global economy."

Another participant added: "the sectors where you can generate the most jobs quickly tend to be in things like healthcare and construction--inherently local activities. But any economy is an interesting combination of what we call 'traded businesses'--like manufacturing, sophisticated services, and tourism that are exposed to international competition--and local ones. For any large population there are a lot of local needs--food, housing, utilities--but ultimately the vitality of an economy is heavily determined by the traded part....You want local needs to be met efficiently, but the ultimate wealth that feeds the local economy derives heavily from the traded economy."

One other point: where does the money come from that EPA and other governmental agencies give away for localized job creation? Does it not come from more debt, which in turn fuels a struggling economy that dampens investment needed for long run productive growth in the traded economy?