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Hawaii Institute of Public Affairs Infrastructure Summit

Hawaii Institute of Public Affairs Infrastructure Summit. 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?

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Hawaii Institute of Public Affairs Infrastructure Summit

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  1. Hawaii Institute of Public AffairsInfrastructure Summit July 13, 2010 Cheryl Soon, SSFM International “Economic and Workforce Impact”

  2. 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?

  3. 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.

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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.

  12. 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!!

  13. 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

  14. STATE CIP IN 2009-10: Geographic Distribution (Source: DAGS)

  15. STATE CIP IN 2009-10: Distribution By Agency (Source: DAGS)

  16. HONOLULU RAIL PROJECT • Construction value is $ 5.5 Billion • According to the Final EIS published recently, number of direct and indirect jobs created is:

  17. “...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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. SO... WHAT ARE WE WAITING FOR?

  26. Mahalo !!

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