High Speed Rail Economic Study Makes Exaggerated Claims

High Speed Rail in Taiwan (Image: jiadoldol)

Last week in Vancouver BC, Washington Governor Jay Inslee talked up how "the convenience of a one-hour trip between Vancouver and Seattle would create countless opportunities for people in both B.C. and Washington". He cited an economic analysis that a high-speed rail link between the two cities could create up to 200,000 jobs and $300 billion in increased economic output annually. Inslee has characterized this as a 20:1 return. How seriously should we take these claims?

The economic analysis, funded by Microsoft and the Washington Building Trades, was prepared as an addendum to a study by WSDOT of HSR costs and ridership. It was released in January, a month after the main report. The analysis estimates 38,000 jobs will be created, directly and indirectly, during construction. More speculatively, the authors claim up to another 160,000 jobs will be created through agglomeration effects, effectively growing the Seattle and Vancouver urban area economies by reducing travel times from outlying cities. While agglomeration effects are a real phenomenon, the size of the claimed effects is preposterous. The reader is asked to believe that about sixty jobs can be created for every daily rider on the train.

Construction and Operations Impacts.

Some jobs are created through construction and operations. The model estimates 38,000 jobs from construction for 10 years. Operations and maintenance adds 3,000 permanent jobs. These numbers include indirect employment as the workers spend their income creating more employment. The model used in the study is unable to separate the direct and indirect effects.

This is a simplistic view of how infrastructure spending works. Economists will point out that multipliers exist only in economies with unemployed resources. If construction workers are already employed, then workers for high speed rail lines can only be hired by taking workers away from other infrastructure and housing construction. Net added employment is much lower.

This strategy of buying infrastructure to create construction jobs can be used to justify paying for anything and doesn't favor building high speed rail over any other make-work task. It makes more sense to think of construction wages as a cost of building the system. The benefits of rail are the transportation services provided, not the outlays to build the line.

Agglomeration Impacts.

The more remarkable claim of the study is a large agglomeration effect yielding up to 160,000 jobs in Metro Vancouver and Seattle. Agglomeration effects happen as cities grow larger. The expanded labor market creates economies of scale and greater specialization. Better transportation can create agglomeration effects by integrating otherwise distant communities. In this instance, the size of the claimed effect is far out of scale with the forecast ridership on HSR.

The WSDOT study found fully half of HSR ridership between Portland and Vancouver would be Portland-Seattle only. One fourth is Seattle-Vancouver, and the remainder is between intermediate destinations. That profile is consistent with Cascades ridership today. That comes out to roughly 1,000,000 annual riders between Seattle and Vancouver, or about 3,000 riders per day in 2035. The authors of the economic study accept these ridership numbers, and then extrapolate to a claimed economic benefit of 160,000 extra jobs in Seattle and Vancouver.

The model estimates "travel buffers", the distances commuters may travel of 40 minutes (also 51 minutes for a range of estimates). For example, the station at Bellingham is 14 minutes from Vancouver by HSR maglev service. The calculation adds every town within a 26"minute drive of Bellingham to the Vancouver base population to calculate the population within a 40-minute buffer.

Even if one wishes away the delays of an international border crossing, it's a stretch to see cities almost a half hour south of Bellingham as economically part of Vancouver. Bellingham doesn't become the West End because there's a fast train. Yet, that's the calculus of the study. As the authors write: "In 2016, the population of metropolitan Seattle stood at about 3.8 million residents and metropolitan Vancouver stood at about 2.5 million. Greater integration would effectively more than double the Vancouver labor market or increase the Seattle market by 66 percent."

Real urban growth and economic integration requires more than a handful of long-distance commuters. So far leaders on both sides of the border are recognizing this and remain skeptical of Cascadia high-speed rail. Washington and British Columbia together are paying much less than half the suggested cost of a deeper study, and legislators show no interest in funding the $24-$42 billion commitment to build the system.