Garrett-Peltier 2009).<sup>6</sup> The total impact of infrastructure investment on employment is likely to differ by the sector,<sup>7</sup> , the technology used, the percentage of imports (estimated around 12-22 percent of manufacturing supplies for energy, transportation, school building and water infrastructure), and the possible substitution effects.<sup>8</sup> Still, these estimates suggest that that the employment impact could be significant.

20. Second, manufacturing jobs are important for sustaining a strong middle class in advanced economies since the manufacturing sector provides employment opportunities in capital-intensive sectors where labor-productivity levels are consistent with the income levels of advanced countries. In many advanced economies, however, the manufacturing sector has been in a steady decline (Lin 2011c, Spence 2011).

21. Third, there is a significant infrastructure gap in some advanced economies. In London, over 20 percent of the main water pipes are more than 150 years old. In the United States, the median age of coal power stations exceeds 40 years (World Economic Forum 2010). The European Commission recently stressed the importance of continuing to invest in infrastructure (European Commission 2011). It estimates that the EU alone needs US$2.1 trillion to US$2.8 trillion in infrastructure investments over the next decade to remain competitive.<sup>9</sup> The American Society of Civil Engineers (2009) estimates that the United States needs US$2.2 trillion of infrastructure spending during the next five years, of which US$1.18 trillion has not been budgeted. While this could be an upper bound estimate, many government agencies<sup>10</sup> confirm that there is a need for significant infrastructure repairs and upgrades. The recently released Global Competitiveness Report of the World Economic Forum (2011a) ranks the United States 16<sup>th</sup> in the

> 6 Here, infrastructure investments refer to new investments and maintenance. The authors assume that for roads, for example, about 43 percent of public investment in roads went to expand the system and 57 percent toward maintenance. Estimates from the U.S. Highway Administration (2006) are even higher: they find that US$1billion in road construction generates a total of 27,840 jobs, of which are created 6,055 on site and 7,790 related to the manufacturing of equipment. This implies that about 14,000 jobs would be created through multiplier effects.

> 7 Heintz, Pollin, and Garrett-Peltier (2009) state that US$1 billion infrastructure investment in either energy, transportation, school buildings, or water creates 16,763, 18,930, 19,262 and 19,769 total jobs, respectively. They find that the highest direct and indirect employment impacts are associated with investments in mass transit systems. 8 For a detailed discussion, see Schwartz, Andres, and Dragoiu (2009).

> 9 The OECD (2006) estimates that global annual investment in telecommunications, land transport, water, and electricity will average 3.5 percent of GDP or approximately US$2 trillion in 2009 prices for OECD countries. 10 For example, see the Environmental Protection Agency on water infrastructure gaps at

> <u>http://www.epa.gov/ogwdw/gapfact.pdf or the Federal Highway Administration on roads http://www.fhwa.dot.gov/policy/2008cpr/index.htm.</u>

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