The economic benefits of water

June 5, 2017

Water, wastewater, and stormwater infrastructure in the United States is at a critical juncture. As the infrastructure has aged, capital needs have risen dramatically, as have the challenges facing these systems. 

Every year, water mains in the US experience an estimated 240,000 breaks[i], while overflows of combined sewer systems cause the release of 900-billion gallons of untreated wastewater and stormwater to water bodies.[ii] To address these issues and achieve a good state of repair, a 2016 report by the American Society of Civil Engineer[iii] said the nationwide investment in water infrastructure needs to triple, from approximately $40 billion per year to approximately $120 billion per year. 

Hatch’s sustainable economics team recently assessed the benefits the US economy would realize from funding the national water infrastructure gap in its report, The Economic Benefits of Investing in Water Infrastructure. The report was released on World Water Day at a congressional briefing convened by the US Water Alliance and the Value of Water Campaign in Washington, D.C. The report builds on the team’s previous study, which analyzed the economic impacts generated by the capital and operating budgets of twenty-five of the nation’s largest water and wastewater utilities. 

Our findings demonstrate that funding the water infrastructure gap creates high-quality jobs and strong local economies. By closing the water infrastructure gap, the US economy would stand to gain $220 billion in annual economic activity, including direct, indirect, and induced spending.[iv] The additional capital investments in water and wastewater infrastructure would generate and sustain 1.3 million high-quality jobs with wages 20 percent above the national average. 

What’s more, water infrastructure itself is a major driver of productivity. From semiconductor manufacturing to hotels and restaurants, virtually all sectors of the economy rely on water infrastructure. Centralized delivery and treatment frees businesses of the burden of building and sizing infrastructure themselves. By ensuring that businesses continue to benefit from these efficiencies, meeting the water infrastructure gap is estimated to preserve roughly $90 billion per year in business sales and roughly 500,000 jobs over the next ten years. 

The consequences of even temporary disruptions in water and wastewater service can be devastating. Without reliable water and wastewater service, many industries would be forced to shut down production. We find that an eight-day disruption in water and wastewater service would result in a one-percent loss in annual GDP, putting the economy at risk of a recession. 

The report stresses that addressing the nation’s water infrastructure needs and maximizing the economic, social, and environmental benefits of water infrastructure requires collaboration across all levels of government and the private sector. 

Hatch is on the forefront of helping the water sector tackle today’s infrastructure challenges and realize the potential for widespread benefits highlighted in the report. For example, our triple bottom line framework provides a tool for decision-makers to evaluate water infrastructure investments based on economic, social, and environmental goals. In this way, infrastructure investments can be optimized without compromising the core purpose of the infrastructure asset. 

[i] ASCE (American Society of Civil Engineers). 2013. 2013 Report Card for America’s Infrastructure. 

[ii] Galavotti, H. 2015. EPA’s Stormwater Program and Improving Resiliency with Green Infrastructure. U.S. Environmental Protection Agency 

[iii] ASCE (American Society of Civil Engineers). 2016. Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future. 

[iv] Direct effects refer to impacts on businesses involved in the design and construction of water infrastructure. Also considered are the impacts on suppliers to these businesses (indirect effects), as well as the economic activity stimulated by employee spending (induced effects).