Tuesday, May 26, 2009

Understanding local multipliers 

A city in Rhode Island -- state unemployment rate: 11.1% -- is finding out stimulus dollars don't really stick in their town.
Paula Daigneau makes $18.60 an hour directing traffic for the repaving of Main Road in Tiverton, a town of 15,000 in eastern Rhode Island. She says that�s twice what she would have earned doing chores on a friend�s farm.

�The jobs were getting pretty limited,� said Daigneau, 51, a flagger who signals drivers with a sign she pivots from �Stop� to �Slow.�

Daigneau and 31 full-time co-workers are beneficiaries of President Barack Obama�s $787 billion spending program aimed at reviving the U.S. economy. To Michael D�Ambra, president of the construction company that landed the $2.4 million contract, the Main Road project shows the effort is succeeding.

�It appears that the stimulus is doing its job,� D�Ambra said. �It�s putting people to work.�

To critics, the Tiverton project, which is scheduled to end in September, illustrates the stimulus program�s weaknesses: They say it may be creating too few jobs, too slowly, for too short a time.

Once the stimulus money is spent, �that�s the end of it,� said Harry Staley, chairman of the Rhode Island Statewide Coalition, a group that advocates responsible government spending. He said he�s concerned that the money is going to �projects that are not in fact critical� and won�t provide a long-lasting boost to the economy.
How much of the $2.4 million stays in Tiverton? �A lot of this depends on how much add-on spending goes into the project. �A road gets torn up, so local businesses lose work in the short run. �
National Grid Plc, which distributes electricity and natural gas, is doing gas line maintenance as Main Road is resurfaced, but that work would have been done anyhow and hasn�t required any new hiring, said company spokesman David Graves. National Grid�s U.S. headquarters is in Westborough, Massachusetts.

The road workers, from Rhode Island and nearby Massachusetts, aren�t spending much money in Tiverton because most pack their lunches for their 30-minute lunch break, said D�Ambra, the construction company�s head.

Aside from renting an office and buying fuel, �I don�t think we really bring a lot of dollars and cents into that town,� said D�Ambra, whose company is based in Warwick, Rhode Island, about 35 miles from Tiverton.

�What the project�s going to mean to me is short-term, we may lose business,� said Doreen Rapoza, co-owner of the Hair Reflections salon. �But after, it may do well because more people will be walking with sidewalks.�
Many people driving I-94 this month have begun to experience road delays as well (one trip to Plymouth from St. Cloud at midday was 45 minutes longer due to construction near Rogers), a cost which is not factored into the multiplier calculation. �Neither is the lost business of Ms. Rapoza. �The federal government isn't as worried about where the job creation happens (Massachusetts and Rhode Island voters both vote for president) but the impact on towns is very uneven. �

Cf. Cogan, Cwik, Taylor and Wieland [Feb. 2009].

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