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Unformatted text preview: ndous: from 750 direct short‐term positions per US$1billion spent on coal‐fired generation projects to 100,000 short‐term positions for water supply and sanitation network expansion. In addition, the results are highly sensitive to assumptions about wages and the division between skilled and unskilled workers. The direct employment generation potential of a public works project is thus highly sensitive to: the sectoral allocation of the proposed program; the technology to be employed in each project, and the local labor market traits of the country in question. Indirect job estimates are also highly sensitive to the division between locally produced versus imported inputs. 144 With those sensitivities in mind, a “prototypical mix” of infrastructure investment implemented in LAC would generate about 40,000 direct and indirect short‐term positions per US$1billion spent. Even with an assumed multiplier of 2.0 for further induced employment and no crowding out or substitution effect, this would mean employment generation of about 2 million jobs for the incremental US$25 billion so far proposed as stimulus in 2009 in the LAC region. This would represent about 7 percent of LAC’s estimated unemployed in 2009. The estimates correspond to capital investment projects in various countries across the region. [See Annex 2 for details.] There is a sub‐set of infrastructure interventions, which, however limited in scope, may provide the opportunity for even greater direct employment benefits: rural road maintenance. Such programs 145
typically invest up to 90 percent of the total project costs in labor activities. Regional data suggest that between 200 and 500 annualized positions are generated for every million dollar spent on these initiatives by employing unskilled workers in rural areas paid at the minimum wage. The jobs generated from labor intensive maintenance projects would, in turn, generate very few indirect jobs because of the lack of material and equipment inputs. Nevertheless, labor intensive projects coupled with well‐
targeted social programs may be considered a highly progressive intervention for reducing the impact of the crisis on poor communities. Again, the primary employment generation numbers assume no substitution effect. In advising governments on the design of stimulus plans, it becomes clear that the employment story is complex and the investment decision should be made in the context of the explicit objectives of the government in the medium to long term. Beyond the varying labor results, fast and significant expansion of infrastructure investments presents important practical challenges to the efficiency and the efficacy of the stimulus program. A shortlist of these challenges might include: sorting and planning contradictions, delayed disbursement and impact, the affordability of these packages, and corruption risks. 144 Based on country experience with infrastructure investment we assumed a composition of these stimulus as: 50% in Transport (25% in highways, 2...
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