Infrastructure spending boosts per-person income: report

OTTAWA—Economic activity linked to Ontario’s infrastructure investments supports 167,000 jobs per year and adds about $1,000 per year to the income of every Ontarian, according to a recent report from the Conference Board of Canada.

Funded by Infrastructure Ontario, a crown corporation mandated to fund and deliver infrastructure projects in Ontario, the report calculates economic impacts associated with past and planned public infrastructure spending; it also quantifies the benefits of this investment on the province’s potential output and the income of Ontario residents.

Ontario’s infrastructure spending will total an estimated $96.7 billion, in current dollars, from 2006 to 2014. In real 2002 dollars, the cumulative value of the past and planned investment will be $89.7 billion, with $39.9 billion toward structures and $49.8 billion in machinery and equipment.

For every $100 million (inflation-adjusted) invested in public infrastructure, The study says about $114 million is produced in real GDP and about 1,670 jobs will be created for one year.

“While infrastructure spending supports a significant number of jobs and economic activity, its greater benefit accrues over time. Good public infrastructure will bolster productivity and add to the province’s long-term potential.” said Pedro Antunes, director, National and Provincial Forecast at the Conference Board of Canada.

By including direct, supply chain and other impacts, economic activity in Ontario is boosted by an average of $11.3 billion annually—almost evenly split between goods and business services.

Several sectors benefit:

• Construction output increases by an average of $3-billion per year and 49,000 construction jobs

• Manufacturing adds $2 billion in output, and nearly 23,000 jobs.

• Business services—engineering, architecture, transportation, financial services, wholesale and retail—increase by $5.6 billion per year over 2006 to 2014 with employment up by nearly 88,400 jobs annually.

Federal and provincial governments earn billions in revenue from infrastructure investment. Of the $96.7 billion that Ontario spends on infrastructure over the 2006 to 2014 period, the province recoups roughly $16.7 billion in cumulative personal and corporate income taxes, as well as indirect taxes. A similar amount is added to federal coffers.

In total, higher incomes and profits help to generate nearly $3.7 billion per year in taxes between 2006 and 2014, including $1.6 billion in personal income taxes, and $583 million per year in corporate income taxes. Indirect taxes (largely sales taxes) increase by an average by $1.6 billion annually.

In addition to the economic activity generated by the construction phase, infrastructure projects bolster the stock of Ontario’s physical capital and boost the productive capacity of the economy over the long term. This permanent gain for the economy increased real income per resident in Ontario by $902-per-person in 2012. That gain is expected to increase to $1,044 per resident by 2014.