SB 1407 and Job Creation

Where did this estimate come from?

The estimate was derived from the following source: "The Contribution of Office, Industrial, and Retail Development and Construction on California’s Economy," a 2007 report prepared for the National Association of Industrial and Office Properties Research Foundation.  The California report, developed with 2005 construction data from McGraw-Hill Construction, is part of a larger national report prepared by Stephen S. Fuller, PhD, Professor of Public Policy and Regional Development and Director of the Center for Regional Analysis of George Mason University. The NAIOP report was chosen because it has been used by other public entities, including the California Department of General Services, as the basis for job-creation estimates on capital projects.

The 2007 California report estimated that:

• $14.671 billion in construction-related spending would create 308,938 jobs, which means that 
• $1 billion in construction spending would support 21,057 jobs; and
• $47,488 in construction spending would support one job.

These calculations were applied to the estimated total cost of each SB 1407 project. Total job creation for the program was rounded and allocated to each project based on its proportional share of program dollars at the time all project budgets were first authorized. Some project budgets have changed in minor ways since the estimation, but the jobs figures are considered rough orders-of-magnitude estimates of economic impact, so they have not been modified since the original projection.

Frequently Asked Questions

What types of jobs does the estimate include?

The estimate includes direct jobs, such as those of construction workers, and indirect jobs, such as those of suppliers of construction-related materials and services. It also includes the ripple effect in the economy attributable to the spending those workers will do as well as the spending associated with those who work in the buildings once completed, also known as induced jobs.

According to this estimate method, how is one job counted?

This estimate method is based on full-time employment of one worker for a single year.

Economic conditions have changed dramatically since 2007.  Have these estimates been revised to reflect that change?

No. NAIOP frequently updates this report, so its estimates can change annually. The 2012 NAIOP report indicated that each billion dollars in California construction spending would result in 15,472 jobs, while the same dollar amount would generate more than 21,500 jobs in a nationwide average. Because all of the SB 1407 projects began years ago and are already generating some economic benefit, and because other sources, such as the Associated General Contractors of America, estimate much higher jobs-generation impact from construction spending, we believe the original figures are still valid as estimates of a type of economic benefit that would be difficult to quantify precisely.