Saturday, June 11, 2011

William Grindley's Brief Notes #5: The Empty Economy Promises of High-Speed Rail

Think about it.  The California High-Speed Rail Authority predicts hundreds of thousands of new jobs will be created by virtue of the existence of the high-speed train running between Los Angeles and San Francisco.  Furthermore, it has been established by the rail authority that most of those riding this train will have given up flying or driving.  What does that mean?

Think about taking a flight from SF to LA.  Where does  your money go?  The air ticket itself is only the tip of the business iceberg for the airport, its many commercial services, and the air carrier and all those jobs.  Each person not flying lowers the demand for the air ticket and the ancillary services.  In short, when we all stop flying from SF to LA, lots of jobs will be lost.  

Ditto for driving.  When you drive, there is an invisible cost-meter attached to your car which is ticking not only for the purchase of gasoline, but lots of other related expenses, car wear, maintenance and depreciation, as well as the consumption of other services en route.  When you no longer drive (and take the train instead) more jobs are lost.  The train industry gains at the expense of the air and vehicle industries.

People, especially Democrats, will say that's a good thing.  Is it?  Will all those job losses be a good thing?

The point is that there will actually be few if any job gains with HSR.  It's a zero-sum game, and jobs will be lost as well as gained. It could also be that more jobs will be lost than gained. T

Then how about the benefits to the economy?  The benefits come from the government-paid construction process if rail workers stay at motels, drive their trucks, eat at restaurants and buy clothes near the construction site. Of course, there doubtless are economic benefits for all the consultants, contractors and developers. That's all artificial government stimulated economic growth like it is for Defense Department contractors. But for the DD contractors, those are fairly permanent jobs.  With HSR construction, not so much. 

You get the larger picture.  That economic burst stops when the government funds dry up or the construction is complete.  It's temporary, not a permanent additional job increase in the economy.(Unless, of course, you are talking about janitorial jobs or flipping hamburgers at train stations.)

To continue with this theme and the rail authority's perpetual promises of more jobs and a more vibrant economy, will train travel increase business?  Not if there is an overall decline in business travel, and as many companies and corporations reduce their head-count and cut their travel expenses, that means a concomitant loss of travel related business and economic activity.  We already know that there is such a business travel decline since it's become so costly. And on-line, virtual meetings and conferences are more and more common (and less costly than travelling).  

Businesses are learning to cut their overhead, and their labor costs are a major part of that.  They would rather increase their capital investment in technologies since it has become possible to quantify the productivity gains of a reduced labor force relying much more on such technological (info-tech) support.  Hence, less travel; not more. 

You could argue that HSR is too little, too late.  It's window in the US was fifty years ago when inter-city train travel was still a dominant mode of transit.  But, that's no longer true.  Making the declining inter-city train travel go faster won't save it.  I would say to all those train boosters, we've moved on.  We can't go back, even if the trains are faster. 

Unless HSR becomes a for-profit business, it will remain yet another government bureaucracy employer. That's no way to boost the economy or reduce unemployment permanently.  


Brief Note #5 – June 6th 2011

From the authors of The Financial Risks Of California’s Proposed High-Speed Rail Project and six Briefing Papers. Available at
Finding: New and permanent jobs are important but not assured by the train
Background: RIMS II Multipliers are a nationally accepted method used to calculate permanent jobs for such a transportation mega-project. They capture the full range of jobs, not just those created by the high-speed rail system’s operator.1 

The multipliers developed for California by the US Department of Commerce are an accurate reflection of the system’s resultant permanent employment potential within California. CHSRA’s 2025 estimated operating expenses for the Phase One train from LA/Anaheim to San Francisco were given as $1.63Billion.2 Using this figure and the RIMS II Multipliers, independent economist Claire Starry, 3 concluded that a range of 16,000 to 40,000 annual permanent jobs would be created by the Phase One, five years into its operation. 4

In 2008, California’s High-Speed Rail Authority (CHSRA) said “Experts calculate . . more than 320,000 permanent jobs will result by 2030.” 5 A year later the CHSRA’s 2009 Plan claimed the LA-SF project would create 450,000 permanent jobs – 40% greater than 2008.6 Why such different conclusions than RIMS-based calculations and within a year? 7

Whatever the explanation, the CHSRA’s permanent job forecasts contain a deep-seated flaw. The 2009 ridership forecast is based on the high-speed rail system capturing passengers from California’s air and auto passenger marketplaces. That will create unemployment in those marketplaces. At best the rail-based jobs would only displace the airline and auto market workers, but if the rail’s administration is more efficient than those marketplaces, it is possible the train will create a net loss of jobs in California.

Conclusions: CHSRA’s two permanent job creation forecasts contradict one another, and while a 2010 CHSRA brochure projects about 4,500 jobs inside the operator, it’s unclear where the outside-the-operator jobs will come from and when. CHSRA’s forecasts also may either create no new jobs or a possible net loss in jobs in California. The CHSRA must address their methods for calculating permanent jobs and the cannibalization or net loss of jobs in California caused by the project.


1. The RIMS II multipliers are widely used in economic impact studies. Other studies might use IMPLAN or REMI from private companies, but these too are based on Department of Commerce input output tables. Department of Commerce, Bureau of Economic Analysis. Regional Multipliers: A Users Handbook for the Regional Input-Output Modeling System (RIMS II), 3rd Edition; March 1997. At,

2. Op. Cit. HSRA Report To The Legislature; December 2009; pg. 82, Table J. This is in Year Of Expenditure (YOE) dollars. 

3. Claire Starry, PhD, is the President of TDS Economics, focused on transportation economics. Credited with more than 25 publications, Dr. Starry was a co-author of ridership forecasts for Spain’s high-speed rail system while at Stanford Research Institute. Her calculations were based on files from the Industry Benchmark Division (IBD), Bureau of Economic Analysis, U.S. Department of Commerce – see: This range would be approximately one Full Time Equivalent (FTE) job for every $50,000 to $70,000 of the high-speed rail operator’s budget.

4. The higher estimate is based on RMS II multipliers for interurban rail and highway transportation services multipliers. The lower RMS II-based estimate uses only railroads and related services multipliers. Other estimates, such as those used by Public Interest Research Group (PIRG), use transit multipliers. But RMS multipliers are preferred because transit systems require far more drivers and on-board personnel than a 400-800 seat high-speed train.

5. California High-Speed Rail Authority CHSRA; California High-Speed Train Business Plan; November 2008; pg.12. 6 HSRA Report To The Legislature; December 2009; pg. 110. 7 A possible explanation is the CHSRA’s 2008 experts estimated 320,000 ‘permanent’ jobs only for the eleven years (2020-2030) used in the 2008 Plan; while in 2009 they estimated 450,000 ‘permanent’ jobs for only the sixteen years (2020-2035) used in operations’ calculations. Dividing each estimated number of jobs by each assumed years (11 and 16) yields 29,000 and 28,000 ‘permanent’ jobs. This would put the CHSRA estimates in the mid-range of the RIMS II-based estimate of 16,000-40,000 jobs. However, there is no reference to this calculation in either CHSRA Business Plan, and the numbers given in both could be misconstrued to represent a vastly greater estimate than the CHSRA wished to convey.

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