The Economic Impacts of I-73 Construction:
A Focus on Job Creation
January 2009
Dr. Donald L. Schunk
Research Economist
BB&T Center for Economic and Community Development
Coastal Carolina University
[email protected]
The Economic Impacts of I-73 Construction:
A Focus on Job Creation
January 2009
Dr. Donald L. Schunk, Research Economist
BB&T Center for Economic and Community Development, Coastal Carolina University
Interstate 73 in South Carolina has the potential to ultimately play a critical role in
economic development for the Myrtle Beach area, the Pee Dee Region, and for the entire
state. Upon completion, I-73 will play a key role in attracting additional tourists to the
Grand Strand and attracting additional industry throughout the I-73 corridor. The
investment in I-73 will be returned in the form of lower business costs, greater
productivity, reduced congestion and shortened travel times. These direct benefits of I-73
will work to benefit existing businesses throughout the region, make the region more
attractive to new industry, enable the region to attract new visitors to the area, and
increase the size of the region’s labor and product markets.
Once in place, I-73 will benefit the region and state by supporting additional jobs and
household income. The completed I-73 will not solve all of the region’s economic
challenges by itself; rather, I-73 will be one important piece of the economic
development puzzle.
However, in the near term, the actual construction of I-73 will certainly provide a much
needed boost to the regional and state economies. Specifically, I-73 construction will
generate a substantial number of jobs at a time when the region and state are experiencing
sharp job losses and rapidly rising unemployment.
The primary purpose of this report is to identify the immediate stimulative effects of I-73
construction. Yet, it is important to recognize throughout this study that the short-term
stimulus effects are only the first wave of benefits that can accrue to the region. The
return to investment in I-73 will continue to grow as the competed I-73 plays an
important role in enhancing economic development and tourism in South Carolina.
In terms of providing an immediate economic stimulus, the construction of I-73 in South
Carolina can be expected to generate the following economic benefits for the Myrtle
Beach area, the Pee Dee Region, and for South Carolina:
• The direct support of a total of 23,400 positions in the construction sector.
These positions are spread across the entire length of the construction phase. If
we assume a five-year construction schedule, then at any single point in time, I-
73 construction will be supporting 4,680 new construction sector jobs.
• The direct construction spending will generate $170.7 million in new household
income annually for workers in the construction sector.
• Beyond the 4,680 new construction jobs, an additional 3,040 jobs will be
generated throughout the regional economy due to economic ripple effects.
• Taken together, a total of 7,720 jobs will be created and will last throughout the
I-73 construction phase.
• For context, during November 2008, the South Carolina I-73 corridor counties of
Dillon, Marion, Marlboro and Horry had a combined unemployment rate of 10.6
percent, with 17,915 residents currently unemployed and many additional
residents either underemployed or out of the labor force. The construction of I-
73 would boost employment for the region, lower the area’s unemployment rate,
reduce the strain on the state’s unemployment insurance fund, and generate
additional tax revenues for state and local governments.
Understanding Economic Impacts
The construction phase of the South Carolina portion of Interstate 73 will entail
substantial economic benefits for the regional and state economy. During the
construction phase, in addition to the increased activity within the construction sector
itself, additional economic benefits will ripple throughout the regional economy due to
economic linkages and multiplier effects. In this case, firms in the construction sector
will purchase goods and services as inputs from other local businesses. Additionally,
workers in the construction sector will see a boost to incomes that can then be spent at
area businesses, setting off additional ripple effects.
In standard economic impact analyses, three types of economic impacts can be identified:
direct, indirect and induced effects. The direct effect of an activity represents the initial
change in economic activity. In this case, the direct effects are the initial changes in the
final demand for the output of the construction sector.
The indirect effects refer to all of the additional economic impacts that arise from inter-
industry linkages between local firms. For example, as the construction sector purchases
inputs from other local businesses – and these suppliers in turn purchase inputs from
additional businesses – the input-output relationships between different firms and
industries generates indirect effects on businesses in virtually every sector of the local
economy.
The induced effects represent all of the additional economic benefits that are driven by
the local spending of household income. The increased activity in the construction sector
will boost incomes for construction workers. Some of this income will be spent locally
on, for example, retail trade, health care, entertainment, housing, and so on. As firms in
these industries see a boost to their sales, the employees of these firms will also see
additional income that can be spent locally.
The successive rounds of indirect and induced impacts do not go on forever. For
example, a portion of an increase in household income will be saved, used to pay taxes,
or spent outside the local economy. Money that leaks out of the local area in this way
cannot be used to support additional local activity. Therefore, the indirect and induced
impacts become smaller and smaller over time until eventually the additional activity in
each round goes to zero. Because of these leakages, it is useful to consider the notion of
an economic multiplier.
An economic multiplier can be used to determine what the total impact (direct plus
indirect plus induced) will be given a certain value for the direct impact. For example, if
$100 of direct spending within a particular sector ultimately results in a total spending
impact of $150, it can be said that the output multiplier is 1.5 – the $100 in direct
spending times the multiplier of 1.5 equals $150 in total spending or total output. The
value of this multiplier varies from sector to sector, and is determined largely by the size
of the local supplier network.
The above discussion implies that economic impact analysis essentially involves: 1)
determining the appropriate levels of direct business activity, and 2) determining and
applying the correct values for economic multipliers to estimate the total impact on
output, employment, and labor income.
The direct effects of the construction phase of I-73 include total expenditures of $2.4
billion. To estimate the employment and income associated with this direct construction
spending, as well as the indirect and induced effects, a detailed structural model of the
South Carolina and regional economies was utilized. This model is known as an input-
output model. An input-output model contains specific information on economic
linkages between different industries. Therefore, the input-output model for the four-
county region that includes Dillon, Horry, Marion and Marlboro Counties is equipped to
quantify, for example, the pattern of local input purchases by the local construction
sector. This model can be used to estimate the full range of indirect and induced impacts
described previously. This report utilizes the input-output modeling software IMPLAN.
This model can be used in conjunction with the direct construction spending data to
estimate the economic impacts in terms of three distinct measures: economic output,
employment and labor income. Economic output can be thought of as an aggregate
measure of total spending resulting from the initial direct expenditure. It includes all
spending by consumers and businesses on both goods and services. It is therefore a
broad, all-inclusive measure of the impact on total economic activity. Employment
measures the impact on jobs in terms of the total number of positions. Labor income
represents total employee compensation, including wages, salaries and benefits.
Current Labor Market Conditions Along the I-73 Corridor
The I-73 corridor in South Carolina consists of four counties: Dillon, Marion, Marlboro
and Horry. Despite their geographical proximity to each other, these counties differ
greatly in terms of economic structure and overall economic conditions. Horry County is
home to Myrtle Beach, and sees its economy largely dominated by tourism related
industry and various service sector activities. Meanwhile, the more rural counties of
Dillon, Marlboro, and Marion continue to be largely dominated by manufacturing even
after years of job losses. These differing economic structures are accompanied by sharp
differences in terms of average wages, per capita income, tax bases, and more.
However, for the purpose of this report and its focus on short-term job creation, these
four counties are similar in that they are each sharply experiencing the effects of the
current recession. The current cyclical downturn has caused the four-county region’s
unemployment rate to rise rapidly since the middle of 2008, as shown in Figure 1.
However, it is also important to note that the region’s unemployment rate is consistently
higher than the national average, even during times of economic expansion. In this sense,
this region suffers not only from rising unemployment due to the current recession, but
also from larger and longer lasting problems with structural unemployment.
Figure 1. Unemployment Rates, Jan. 1990 - Nov. 2008
12
11
10
9
8
percent
7
6
5
4
3
90 92 94 96 98 00 02 04 06 08
S.C. I-73 Corridor Counties
U.S.
Table 1 provides a snapshot of recent labor market conditions in the four S.C. I-73
counties. Included in this table are the unemployment rates for the four counties, South
Carolina, and the United States as of November 2008. At the time, unemployment rates
across the region ranged from 9.5 percent in Horry County to a high of 17.1 percent in
Marion County. In total, there were 17,915 unemployed residents in the four counties.
This represented a 58 percent increase in the number unemployed over the last twelve
months.
Table 1. Labor Market Indicators: S.C. I-73 Corridor
Dillon Horry Marion Marlboro S.C. U.S.
Unemployment Rate, Nov. 2008 12.0% 9.5% 17.1% 14.2% 8.4% 7.2%
Labor Force Participation Rate, 2007 57.3% 64.9% 49.0% 52.4% 63.4% 66.0%
However, even these unemployment statistics do not reveal the full depth of the labor
market problems across the region. Table 1 also provides 2007 labor force participation
rates for these areas. These figures represent the fraction of the population aged 16 years
and older that is either working or actively looking for work. Horry County maintains a
relatively high labor force participation rate. However, the remaining I-73 corridor
counties have considerably lower rates of labor force attachment. In Marion County, for
example, only 49 percent of the population aged 16 and older is working or actively
looking for work. And of course, of those that are in the labor force, more than 17
percent are currently unemployed.
These labor market indicators for the South Carolina I-73 corridor counties speak
dramatically to the need for job creation throughout the region, both in the short-term to
counteract the cyclical rise in joblessness, but also for the longer-term to reverse years of
persistently high rates of structural unemployment.
Estimated Impacts of I-73 Construction
For the purpose of this study, the total estimated cost of construction for South Carolina’s
section of the proposed I-73 is $2.4 billion. Of course, with a project of this magnitude,
this construction cost will be spread over a period of several years. In order to provide
context for the economic impacts of this construction, it is useful to consider the average
annual impacts over the course of the construction phase. For this purpose, we will
assume that I-73 will take a total of five years to construct, and that the total cost will be
spread evenly over those five years.
In this case, spending on I-73 construction is assumed to total $480 million annually over
five years. This expenditure represents a direct boost to the output of the regional
construction industry and will support jobs and income for workers in the construction
sector. As shown in Table 2, the annual construction expenditure can be expected to
support a total of 4,680 jobs each year during the five-year construction phase. The labor
income associated with these jobs is estimated to be $170.7 million annually.
Table 2. Annual Direct Impacts of I-73 Construction
Economic Output $480 million
Employment 4,683 jobs
Income $170.7 million
The $480 million annually in direct spending will lead to additional ripple effects
throughout the regional and state economies. Again, these ripple effects occur as the
construction sector purchases inputs from other local industries (indirect effects) and as
the construction workers themselves spend their newly generated income at local
businesses (induced effects). To estimate the additional jobs created via these ripple
effects, we first need to estimate the magnitude in dollars of the indirect and induced
expenditure flows. Given estimates of the indirect and induced spending, we can
estimate the number of jobs that this spending would support.
Table 3 provides estimates of the direct, indirect and induced spending associated with I-
73 construction. These represent the estimated impacts on regional economic output.
The $480 million annually in direct construction activity will generate an additional
$195.9 million in indirect activity and $143.0 million in induced activity. It is important
to recognize that these ripple effects spread far beyond the construction sector. For
example, the effects include the increased activity for manufacturing, retail trade,
financial services, a wide variety of service sector businesses, and others as construction
sector firms and workers spend their increased income on input purchases and household
expenditures.
Table 3. Annual I-73 Construction Impacts on
Economic Output
Direct $480.0 million
Indirect $195.9 million
Induced $143.0 million
Total $818.9 million
In the context of a deepening recession in early 2009 with widespread job losses and
rising unemployment, the employment impacts of I-73 construction are critical. These
estimated employment effects are summarized in Table 4. Specifically, I-73 construction
is expected to directly generate 4,683 jobs that will last throughout the construction phase
of the project. The indirect economic activity is expected to generate another 1,569 jobs,
while the induced employment effect is estimated at 1,466. In total, the construction of I-
73 can be expected to generate 7,718 jobs that will be spread across the region and will
also be spread across all sectors of the local economy.
Table 4. I-73 Construction Impacts on
Employment
Direct 4,683 jobs
Indirect 1,569 jobs
Induced 1,466 jobs
Total 7,718 jobs
The jobs supported by the construction of I-73 will also generate a substantial amount of
household income for the region. On an annual basis, the direct construction effects will
generate $170.7 million in new household income. Another $62.7 million in income is
expected via indirect effects and $44.4 million due to the induced effects. In total, the
annual boost to regional household income is projected to be $277.8 million. These
income effects are summarized in Table 5.
Table 5. Annual I-73 Construction Impacts on
Household Income
Direct $170.7 million
Indirect $62.7 million
Induced $44.4 million
Total $277.8 million
Over the entire construction phase, the $2.4 billion I-73 project is expected to have a total
economic impact of $4.1 billion on the regional economy. A total of 38,590 positions
will be supported with total household income of $1.4 billion.1
I-73 Construction Job Creation Impacts in Context
The construction of I-73 in South Carolina is expected to create 7,718 jobs directly in the
construction sectors and also indirectly throughout all sectors of the regional economy.
While it is impossible to accurately predict where these workers would come from, it is
likely that the majority of these positions could be filled with local workers. As of
November 2008, there were nearly 18,000 unemployed individuals in the four-county
area. In addition to these, there are a substantial number of underemployed workers as
well as qualified workers currently not in the labor force.
The creation of 7,718 new jobs would amount to a 4.6 percent increase in total regional
employment.2 Given the current economic downturn and the large number of available
workers already in the region, there is the potential for a significant portion of these
positions to be filled by local residents. If all of the new jobs were filled from the ranks
of those currently unemployed, this would mark a 43 percent decrease in the number of
unemployed individuals in the four-county region. If this were the case, the region’s
unemployment rate would fall from 10.6 percent to 6.1 percent based on the November
2008 labor force estimates.
1
Here, the concept of a position can be thought of as a year’s worth of employment. If the entire I-73 was
constructed in one single year, the total employment impact would be 38,590 jobs. However, because it
will be constructed over a period of five years, several of these 38,590 year-long ‘positions’ could be held
by the same individual. In this sense, the 38,590 positions over the course of five years amount to 7,718
unique jobs that will last throughout the entire construction phase.
2
This is based on the November 2008 regional employment estimate of 168,301 from the U.S. Bureau of
Labor Statistics.
The jobs that could potentially be created by the construction of I-73 would provide a
strong boost to the local and state economies and would help offset the effects of the
national recession, a recession that is taking a particularly sharp toll on the consumer-
driven areas near Myrtle Beach as well as the manufacturing-intensive regions along the
rural portions of the South Carolina I-73 corridor.
The Long-Term Benefits of Interstate 73
The construction of I-73 will generate a significant number of new jobs for the region.
These jobs tied to the construction phase are especially valuable against the backdrop of
the current recession. It is this near-term stimulus that underscores the urgency to begin
I-73 construction. However, infrastructure spending should not be undertaken for the
sole purpose of generating jobs in the short-term. Indeed, the most important benefits of
infrastructure investments are the long-term payoffs that accrue once the project is
complete.
In the case of I-73 in South Carolina, the 7,718 jobs that stand to be created during the
construction phase will serve as a bridge for the region’s economy until the finished
project itself begins to generate the long-lasting benefits that are the basis for its
construction. That is, I-73 has the potential to generate significant and long-lasting
benefits for the Grand Strand, the Pee Dee region, and South Carolina. It is this longer-
term payoff of I-73 that has the potential to transform the region’s economy.
While the primary focus of this research has been on the short-term stimulative effects of
I-73 construction, the remainder of this report will provide a general overview of the
potential long-term benefits of I-73 in South Carolina.3
In general, I-73 will provide important benefits directly to its end-users, including both
households and businesses. For example, the completed I-73 will provide increased
safety, reduced congestion, travel times, and costs, as well as greater transportation
accessibility. These direct benefits for the users of I-73 will in turn support a variety of
identifiable broad economic benefits. These broad, longer-term economic benefits
include positive impacts on business costs and productivity, business location, tourism,
labor markets, and state and local tax revenues. Figure 2 illustrates the general
relationship between investment in I-73, the direct end-user benefits, and these broader
economic benefits.
3
Quantifying these long-term benefits is beyond the scope of the current study. Future research into the
specific long-term impacts of I-73 is expected to produce estimates of potential job and income creation, as
well as the possible impacts on other factors such as business formation, consumer spending, and tax
revenues.
Figure 2. Long-Term Impacts of I-73
I-73 Investment
Direct User Benefits:
•Increased Safety
•Reduced Congestion and Travel Time
•Increased Choice and Accessibility
Broad Economic Benefits, Impacts on:
•Business Costs and Productivity
•Business Location
•Tourism Impacts
•Labor Markets
•Tax Revenues
The reduced congestion and travel time accompanying I-73 will work to lower the costs
of business in the region and boost business productivity. This will have the effect of
benefiting existing business in the region as well as making the region more attractive to
new industry. Long-term business growth in a region is affected by many factors,
including the size of the region’s product and labor markets, the relative cost of doing
business in the region, and the region’s proximity or access to raw materials and other
inputs. Investing in I-73 can have a positive impact on all of these factors. In addition,
the presence of Interstate 73 may expand opportunities for multi-modal connections,
including road/rail/sea/air connections for either passenger travel or freight shipments
that can further complement economic development.
Though difficult to quantify, it is generally agreed that providing adequate transportation
infrastructure is among the most critical aspects of an economic development strategy.
Given the persistent problems across the region in terms of long-term structural
unemployment, this potential boost to regional economic development would be critical
to reversing decades of sub-par economic performance.
I-73 will be an asset to industrial location throughout the region. In the more rural areas
along the I-73 corridor, these economic development effects will be critical in that they
will bring jobs to areas that suffer from persistently high unemployment as well as very
low rates of labor force participation. Meanwhile, closer to Myrtle Beach, these
economic development effects will have the primary benefit of diversifying the Grand
Strand’s economy. That is, while the immediate Myrtle Beach area does not experience
the same structural unemployment and labor force problems as the rural areas along the I-
73 corridor, the Myrtle Beach area would benefit from a more diverse economy. Greater
economic diversity around Myrtle Beach would help insulate the economy from future
economic downturns, and would also have the potential to contribute to higher average
wages and increased per capita income.
The reduction in congestion and travel times will also have a positive impact on tourism
in the Myrtle Beach area. Reduced travel times will help Myrtle Beach draw more
visitors from its existing origination markets, and will also help the area reach further into
additional and previously untapped markets for new visitors. I-73 will help meet the
needs of both current and future tourism levels along the Grand Strand. Tourism is the
largest industry in South Carolina, and the Myrtle Beach area is the heart of the state’s
tourism sector. The industry is a critical piece of the state’s economy in terms of
generating jobs and income as well as state and local tax revenues.
In general, transportation investments allow individuals to benefit from increased
employment options as their range of feasible commuting is expanded. Meanwhile, the
supply of labor to area employers increases as more potential employees fall within their
commuting range. As a result, I-73 will help expand the size of the regional labor market
in northeastern South Carolina. There already exists a pattern of commuting between the
Grand Strand and Pee Dee regions. I-73 will help make this commuting more efficient
benefiting both workers and businesses.
Finally, the full range of economic development, tourism, and labor market
enhancements arising from the completed I-73 will work to boost state and local tax
collections. I-73 will provide a boost to state and local tax bases via gains in
employment, income, spending, as well as positive impacts on property values along the
interstate corridor.
Summary
The construction of I-73 in South Carolina will provide a substantial boost to the
economies of the Grand Strand and Pee Dee regions, and for all of South Carolina. There
are important immediate benefits associated with the construction of I-73. Specifically,
during the construction phase, it is expected that a total of 7,718 jobs will be created
across the four-county I-73 South Carolina corridor. These jobs will boost the region’s
economy at a time of rapidly rising unemployment and job losses.
While this immediate stimulative impact has been the focus of this report, it is important
to recognize that in a sense, these short-term effects are but a critical byproduct of the
project. Indeed, it is the potential longer-term effects on economic development and
tourism that underscore the importance of I-73 for South Carolina.
