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Economy and Jobs

Farm with Mt. Rainer in the background
Strong Economy and Good Jobs

Transportation’s link to economic development is vital. Roadways, airports, ferries, transit, water ports, and railways are all necessary for a strong economy, providing access to businesses, jobs, and world markets, as well as moving freight and commerce.

Economic benefits of transportation investment fall into four categories:

  • Basic user benefits (mainly reduced operating and production costs, reduced passenger and freight delay and reduced accidents)
  • Jobs from project construction and the multiplier effect*
  • Economic productivity increases that help expand the state economy 
  • Development for local or regional economies (through improved land access and support for tourism)
“The most important competitive investment the state of Washington can make is to improve its transportation infrastructure. Washington’s currently overwhelmed transportation system threatens jobs and economic vitality, wastes people’s time and money, diminishes quality of life, and degrades our environment.” – Washington Competitiveness Council Report

This Web page examines the structure of the state’s economy, what research says about quantifying the benefits of transportation infrastructure investments and the role of the transportation system in supporting the economy. The discussion in this folio is closely related to the Web pages about Moving Freight and Bottlenecks and Chokepoints.

*The multiplier effect is a measure of the economic consequences of the change in one sector of the economy upon the other sectors of the economy. It incorporates the direct effects (project construction jobs) plus those supported through project purchases of goods and services (indirect jobs) plus the effects to the rest of the economy due to household spending (induced jobs).

Washington’s Economic Structure

Per capita income is a real indicator of the state’s economic growth. In Washington per capita income was $31,984 in 2003, which ranked 14th nationally. Over the long run, growth in per capita income in Washington has trended closely with, and usually above, the national average.

In March 2004 the state’s unemployment rate of 7.6 percent was higher than the national rate of 5.7 percent (reflecting the severity of the recession on Washington’s economy).

Most economic sectors are expected to see steady growth in the next 20 years, but the structure of Washington’s economy is shifting. Following a national trend, services are expected to increase to almost 40 percent of non-agricultural employment by 2020, up from 25 percent in 1980. Most other sectors are projected to keep near their historical shares.

While remaining relatively steady in the number of jobs, manufacturing employment is expected to drop from 19.4 percent to 9.9 percent of all non-agricultural employment between 1980 and 2020. Even with this drop in share, Washington out-performs the nation in manufacturing.

In 2003, Washington manufacturers grossed $88.3 billion, 21.3 percent of the total state gross business income. This sector employed more than 285,000 workers in 2002 (11 percent of Washington’s jobs). Employment in the manufacturing sector has been down since 1998 mainly due to a downturn in the aerospace industry, though Washington is expected to see an average growth rate of 0.4% in manufacturing employment through 2030.

Agriculture is big business in Washington, even though it only employs about 3 percent of our workforce. In 2002, Washington produced $5.6 billion in food and agricultural products, ranking ninth nationally as the number one producer of 11 crops.

Agriculture employed more than 87,000 people in Washington in 2002. Eighty percent of all agricultural employment is located in Eastern Washington. Yakima County accounts for 24 percent of statewide agricultural employment.

Quantifying the Economic Benefit of Transportation Investments

Research shows that transportation is linked to the economic health of a locality, state or region. Transportation infrastructure is a necessary but not sufficient factor for economic development. Transportation investments alone cannot prescribe the duration or magnitude of a specific economic improvement. Other factors are important and may overshadow the transportation investment. Transportation benefits are grouped into the following four categories.

Basic User Benefits
Improving safety, reducing delay, and lowering operating and production costs are examples of basic user benefits from making a transportation infrastructure investment. These are experienced directly by travelers and businesses.

Jobs, Project Construction, and the Multiplier Effect
The workforce that designs and builds transportation projects sees a direct benefit as additional funding for transportation projects is secured. Economists also show that there is an indirect benefit, or multiplier effect. Transportation infrastructure investment supports high paying jobs in the professional and construction sectors of the economy as well as additional jobs in the sectors that support transportation construction through the purchase of goods and services.

Wages paid to this workforce translate into jobs in other trade and service sectors through household expenditures.

Statewide Economic Productivity Increases
Transportation investments have linked producers to new markets leading to statewide productivity increases and economic growth and expansion. Continued investment has contributed to improved business efficiency through new practices such as just-in-time delivery.

Research by Nadiri and Mamuneas establishes the link between the highway network and economic performance. Their work provides empirical analysis about the historical contributions of roads to the U.S. economy. From 1950 to 1991, U.S. industries realized annual production cost savings averaging 18 cents for each dollar invested in the road system. This analysis captured the significant benefit that building the interstate system provided for economic growth and productivity. Decreased investment since the building of the interstate system has slowed transportation’s contribution to productivity increases, but highway investment has remained a contributor to economic productivity growth.

Local and Regional Economic Development
Most importantly, transportation provides access and opportunities for local or regional economies to compete in larger areas of state, national, or world markets. Producers have greater opportunities to capitalize on their natural assets whether it be labor force, tourism, or other competitive advantages. Transportation access is necessary for the expansion of home-grown industries and the attraction of new industries.

Washington’s Economic Clusters

In 2001 a study by the Washington Department of Community, Trade and Economic Development summarized the state’s economic clusters. The study’s intent was to encourage others to think about economic vitality issues in the framework of the clusters. An economic cluster consists of a lead or final product industry and suppliers, often concentrated in a particular region of the state. The state’s economic vitality plan calls for supporting the needs of these industry clusters.

Washington’s Top Three Economic Clusters

Ranked by Gross Business Income 2000

  • Aerospace - $37.81 billion
  • Health Care - $13.2 billion
  • Tourism - $10.2 billion

Ranked by Employment 2000

  • Tourism - 261,625
  • Health Care - 216,618
  • Aerospace - 88,079

Aerospace and Technology
Regionally, an interesting shift occurred in technology job growth. Established technology-rich communities like Seattle, Vancouver and Spokane saw a drop in technology jobs over the last two years. While Bellingham, the Tri-Cities, and Bremerton all exhibited strong technology job growth over the past two years.

Technology industries account directly for more than 12 percent of Washington’s total employment. Washington retains a highly educated workforce, critical to the technology industry, ranking twelfth for states with residents who have higher education degrees.

Since 1988, total high-tech employment fluctuated with the economic cycles of the aerospace industry, while non-aerospace high-tech employment showed steady growth during that same period.

Washington’s system of 129 airports generated 171,311 jobs, over $4 billion in wages, and over $18.5 billion in annual sales output.

The Tourism Cluster
Transportation has a clear and inseparable link to the tourism cluster by providing several statewide services and programs including: infrastructure such as highways, airports, ferries, passenger rail, safety rest areas, and viewpoints. Traveler information services include highway signing for destinations and businesses, roadside interpretation, traveler information, traffic cameras, interactive communications, and publications.

The Ferry System
The Washington State Ferries is a component that links central Puget Sound with the Olympic Peninsula. The ferry system is a tourist attraction with a ridership of 2.75 million in August 2003. In 1980, total ferry ridership was 16.7 million; in 2002 it increased 50 percent to 25.1 million. These volumes are projected to continue to increase to 43.4 million by 2020.

Scenic Byways
Washington’s scenic byways are destinations for tourists. In the 2002 findings by the USDA Forest Service’s National Survey on Recreation and Environment reports that 56 percent of Americans participate in driving for pleasure in rural or natural areas. In 2002, travelers in Washington spent $11.2 billion generating $3.5 billion in earnings and providing 139,200 jobs. In 2003 this increased to $3.9 billion.