The Infrastructure Predicament

A healthy infrastructure--city streets, interstate highways, bridges, waterworks and sewer systems--is vital to business. But the United States is facing major infrastructure problems in the next decade and beyond that will make “business as usual” increasingly difficult.

Many of the problems will be aggravated by demographic trends that also will affect business. Help from Washington is unlikely to be as forthcoming as it was, forcing state and local governments to turn to local taxpayers and businesses for funds.

“From a demographic perspective, infrastructure needs (and our ability to pay for them) are influenced by changes in where people live and work, migration patterns, consumption and lifestyle patterns, the age of the population and income levels,” according to “America in the 21st Century: Infrastructure Needs,” a report by the Washington-based Population Reference Bureau.

Trends that will affect infrastructure include the movement of large numbers of Americans from Northeastern cities to the South and Southwest (leaving behind aging facilities and lower tax bases and bringing with them a demand for new roads and increased sewage-system capacity). Another trend is the rising economic expectations of many middle-class Americans, which in the past has meant more cars on the highways and greater business and housing-related infrastructure demands.

What lies ahead? The Population Reference Bureau warns that deteriorating streets and highways, gridlock traffic conditions, bridges in dire need of repair, leaky water storage and distribution systems and inadequate sewage treatment capacity could become common in the 1990s and the early 21st Century. Businesses will feel the effect of infrastructure deterioration in everything from increased delivery time due to traffic congestion to laws limiting new offices and store construction because of strained water and sewage-system capacities.

Also exacerbating the situation will be worker-related trends that include a declining supply of civil engineers to address infrastructure problems. Enrollment in schools of civil engineering has dropped, while the number of engineers reaching retirement age has grown. Business may have competition from government in attracting tomorrow’s civil engineers.

“Competition for scarce labor is likely to force wages up,” notes William O’Hare, the Population Reference Bureau’s director of policy studies. “If municipalities cannot find a sufficient number of civil engineers or construction workers in the United States, they may turn to labor markets abroad. These potential labor shortages will spur debate on revising U.S. immigration policies to fit the nation’s perceived labor needs.”

While there is agreement that the United States needs to put more money into infrastructure preservation, the question of who pays remains to be answered. The Population Reference Bureau concludes that, given a large budget deficit and a strong anti-tax climate, a big increase in federal funds for infrastructure repair is unlikely. This means that states with large populations and large infrastructure needs, such as California, may be shouldering rapidly increasing infrastructure expenses.