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CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

13.1 INTRODUCTION ......................................................................................................... 13-1

13.2 METHODOLOGY ........................................................................................................ 13-1
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CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

13.1 INTRODUCTION

 The U.S. Department of Energy’s (DOE’s) employment impact analysis is designed to 

estimate indirect national job creation or elimination resulting from possible standards, due to 

reallocation of the associated expenditures for purchasing and operating furnaces. Job increases 

or decreases reported in this chapter are separate from the direct manufacturing sector 

employment impacts reported in chapter 12 and reflect the employment impact of efficiency 

standards on all other sectors of the economy. 

DOE expects energy conservation standards to decrease energy consumption and, 

therefore, to reduce energy expenditures. The savings in energy expenditures may be spent on 

new investment or not at all (i.e., they may remain “saved”). The standards may increase the 

purchase price of appliances, including the retail price plus sales tax, and increase installation 

costs. 

 Using an input/output econometric model of the U.S. economy, this analysis estimates 

the short-term effect of these expenditure impacts on net economic output and employment. 

DOE intends this analysis to quantify the indirect employment impacts of these expenditure 

changes. It evaluates direct employment impacts at manufacturers’ facilities in the manufacturer 

impact analysis (see chapter 12).

 

13.2 METHODOLOGY

The Department bases its analysis on an input/output model of the U.S. economy that 

estimates the effects of standards on major sectors of the economy related to buildings and the 

net impact of standards on jobs. The Pacific Northwest National Laboratory developed the 

model, ImSET 3.1.12

 (Impact of Sector Energy Technologies), as a successor to ImBuild3, a 

special-purpose version of the IMPLAN4 national input/output model. ImSET estimates the 

employment and income effects of building energy technologies. In comparison with simple 

economic multiplier approaches, ImSET allows for a more complete and automated analysis of 

the economic impacts of energy efficiency investments in buildings. 

 In an input/output model, the level of employment in an economy is determined by the 

relationship of different sectors of the economy and the spending flows among them. Different 

sectors have different levels of labor intensity, and changes in the level of spending (e.g., due to 

the effects of an efficiency standard) in one sector of the economy will affect flows in other 

sectors, which affect the overall level of employment.

 ImSET uses a 187-sector model of the national economy to predict the economic effects 

of residential and commercial building technologies. ImSET collects estimates of initial 
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investments, energy savings, and economic activity associated with spending the savings 

resulting from standards (e.g., changes in final demand in personal consumption, business 

investment and spending, and government spending). It provides overall estimates of the change 

in national output for each input-output sector. The model applies estimates of employment and 

wage income per dollar of economic output for each sector and calculates impacts on national 

employment and wage income.

 Energy efficiency technology primarily affects the U.S. economy along three spending 

pathways. First, general investment funds are diverted to sectors that manufacture, install, and 

maintain energy-efficient appliances. The increased cost of appliances leads to higher 

employment in the appliance manufacturing sectors and lower employment in other economic 

sectors. Second, commercial firm and residential spending are redirected from utilities toward 

firms that supply production inputs. Third, electric utility sector investment funds are released 

for use in other sectors of the economy. When consumers use less energy, electric utilities 

experience relative reductions in demand, which leads to reductions in utility sector investment 

and employment. 

 DOE notes that ImSET is not a general equilibrium forecasting model and understands 

the uncertainties involved in projecting employment impacts, especially changes in the later 

years of the analysis.1 Because ImSET does not incorporate price changes, the employment 

effects predicted by ImSET would over-estimate the magnitude of actual job impacts over the 

long run for this rule. As input/output models do not allow prices to bring markets into 

equilibrium, they are best used for a short-run analysis. DOE, therefore, includes a qualitative 

discussion of how labor markets are likely to respond in the longer term. In future rulemakings, 

DOE may consider the use of other modeling approaches for examining long-run employment 

impacts.