The Coast of the Gulf of Mexico is highly vulnerable to flood inundation associated with coastal storms. Significant Federal and State government investments are required to complete risk reduction projects which require extensive engineering, construction, and maintenance. The wetland restoration and risk reduction benefits associated with these initiatives are the intended benefits, but there are other economic impacts from this spending. The Walton Foundation commissioned Mather Economics to estimate the ancillary effects of restoration and risk mitigation spending with an emphasis on employment.
Mather Economics collected data on economic performance metrics and analyzed this data in the context of proposed spending levels for coastal restoration and risk reduction projects. Econometric models were constructed that describe the relationships between economic such factors as federal spending, productivity, wages, employment, prices, and interest rates. Using these models, employment effects from increased spending are estimated:
- Direct Effects: employment impacts associated with the planning and implementation of projects
- Indirect Effects: employment impacts associated with the demand for materials, supplies, equipment, and other services needed to implement projects
- Induced Effects: employment produced when people employed in the direct and indirect sectors spend their incomes on goods and services
Mather Economics finds that federal spending on restoration and risk mitigation is positively associated with employment growth. The extent to which project spending increases employment is found to be heavily depended on the timing of the funding. The results of the analysis are consistent with results from similar studies on restoration and risk mitigation spending, and suggest that the ancillary benefits of these projects are substantial, with the total jobs created from funding estimated at over 77,000 over the lifetime of the proposed projects.
Our models indicate that federal spending is positively correlated with regional employment levels. Applying the models to levels of federal outlays, gross domestic product, consumer prices, wages, and federal funds rates, we conclude that the influx of additional restoration funds will have a significant and positive impact on regional employment over the course of the fifty-year study period. Comparing the results of the control and restoration models, under conservative macroeconomic assumptions, we project a significant increase in incremental employment due to restoration funding in the Gulf Coast region. Specifically, the “Moderate” model forecasts 77,453 incremental positions created over a fifty-year period from 2012-2062, for an average yearly increase of 1,549 jobs.An alternative metric of the employment effects and the cost per unit of employment is “employment-years,” which reflects the change in employment over the time period of restoration investments. For our “Moderate” model, we estimate that the $25 billion in total funding will generate approximately 3.25 million additional employment years, which translates into a cost-per-employment-year of roughly $7,700.