Across the United States, transit agencies at all levels of government—local, state, and federal—make annual purchases of new vehicles for their public transportation systems. Current investments in new railway vehicles and buses average about $5.6 billion (2012 dollars) annually. Concerns over pollution, traffic, and climate change may push the nation to reach for a more expansive goal: to double ridership in 20 years. This would require an estimated $12.8 billion worth of annual rolling stock purchases.
The Federal Transportation Administration (FTA) uses a “Buy America” requirement to raise the job-creation potential of such public investments that uses its funds. Specifically, the Buy America provision requires that all final assembly of the railway vehicles and buses purchased with FTA grant dollars must occur within the U.S., and all components and sub-components must have more than 60 percent domestic content. The goal of this Buy America requirement is to insure that U.S. taxpayers’ dollars create jobs in the U.S., rather than overseas by promoting greater domestic content in these vehicles.
How many jobs does the U.S. economy gain when manufacturers raise the domestic content of their products? This research brief presents estimates which show that, on average, when manufacturers fully source the components and sub-components of their vehicles domestically they create at least 26 percent more jobs than manufacturers that only meet the 60 percent Buy America requirement. Clearly on a case-by-case basis, stronger requirements would significantly raise the number of U.S. jobs created from these public investments.