CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION ......................................................................................................... 16-1

16.2 ASSUMPTIONS ............................................................................................................ 16-1

16.3 METHODOLOGY ........................................................................................................ 16-1

16.4 SHORT-TERM RESULTS ............................................................................................ 16-2

16.5 LONG-TERM IMPACTS .............................................................................................. 16-3

LIST OF TABLES

Table 16.4.1 Net National Short-term Change in Employment (Number of jobs) ................. 16-3

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CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

16.1 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 SPVUs. 

16.2 ASSUMPTIONS

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

estimated 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 evaluated direct employment impacts at manufacturers’ facilities in the 

manufacturer impact analysis (see chapter 12).

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

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 overestimate the magnitude of actual job impacts over the 

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

equilibrium, they are best used for a short-run analysis. We therefore include 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. 

16.3 METHODOLOGY

DOE based 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.

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 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 so 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 affects the overall level of employment.

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

of residential and commercial buildings technologies. ImSET collects estimates of initial 

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 spending is 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 lead to reductions in utility sector investment and employment.

DOE also notes that the employment impacts estimated with ImSET for the entire 

economy differ from the employment impacts in the SPVU manufacturing sector estimated in 

chapter 12 using the Government Regulatory Impact Model (GRIM). The methodologies used 

and the sectors analyzed in the ImSET and GRIM models are different. 

16.4 SHORT-TERM RESULTS

The results in this section refer to impacts of SPVU standards relative to the base case. 

DOE disaggregated the impact of standards on employment into three component effects: 

increased capital investment costs, decreased energy and water costs, and changes in operations 

and maintenance costs. DOE anticipates no change in operations and maintenance costs for 

SPVUs. DOE presents the summary impact. 

 Conceptually, one can consider the impact of the rule in its first year on three aggregate 

sectors: the SPVU production sector, the energy generation sector, and the general consumer 

goods sector. (As mentioned previously, ImSET’s calculations are made at a much more 

disaggregated level.) By raising energy efficiency, the rule increases the purchase price of 

SPVUs; this increase in expenditures causes an increase in employment in this sector. At the 

same time, the improvements in energy efficiency reduce consumer expenditures on electricity. 

For the case of SPVU, the energy savings due to decreased electricity use are projected to be 

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slightly offset by a small increase in natural gas use. The reduction in electricity demand causes a 

reduction in employment in that sector. Finally, based on the net impact of increased 

expenditures on SPVUs and reduced expenditures on electricity, consumer expenditures on 

everything else are either positively or negatively affected, increasing or reducing jobs in those 

sectors accordingly. The model also captures any indirect jobs created or lost by changes in 

consumption due to changes in employment. (As more workers are hired, they consume more 

goods, generating more employment; the converse is true for workers who are laid off.) 

Table 16.4.1 presents the modeled net employment impact from the rule in 2019, rounded 

to the nearest hundred jobs. Approximately 85% of SPVUs are produced domestically and 15% 

are imported. The net employment impact estimate is sensitive to assumptions regarding the 

return to the U.S. economy of money spent on imported SPVUs. The two scenarios bounding 

the ranges presented in Table 16.4.1 represent situations in which none of the money spent on 

imported SPVUs returns to the U.S. economy and all of the money spent on imported SPVUs 

returns to the U.S. economy. The U.S. trade deficit in recent years suggests that between 50% 

and 75% of the money spent on imported SPVUs is likely to return, with employment impacts 

falling within the ranges presented below. Short-term changes in employment are minimal as 

evidenced by Table 16.4.1. 

Table 16.4.1 Net National Short-term Change in Employment (Number of jobs)

Trial Standard Level 2019 2024 

1 0 0

2 0 0 to 100

3 -100 to 0 0 to 200

4 -200 to 0 0 to 200

For context, OMB currently assumes that the unemployment rate may decline to 6.9% in 

2014 and drop further to 5.4% in 2019.5 The unemployment rate in 2019 is projected to be close 

to “full employment.” When an economy is at full employment any effects on net employment 

are likely to be transitory as workers change jobs, rather than enter or exit longer-term 

employment.

16.5 LONG-TERM IMPACTS

 Due to the short payback period of energy efficiency improvements mandated by this 

rule, over the long term we expect the energy savings to consumers to increasingly dominate the 

increase in appliance costs, resulting in increased aggregate savings to consumers. As a result, 

we expect demand for electricity to decline over time and demand for other goods to increase. 

Since the electricity generation sector is relatively capital intensive compared to the consumer 

goods sector, the net effect will be an increase in labor demand. In equilibrium, this should lead 

to upward pressure on wages and a shift in employment away from electricity generation towards 

consumer goods. Note that, in a long-run equilibrium, there is no net effect on total employment, 

because wages adjust to bring the labor market into equilibrium. Nonetheless, even to the extent 

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that markets are slow to adjust, we anticipate that net labor market impacts will be negligible 

over time due to the small magnitude of the short-term effects presented in Table 16.4.1. The 

ImSET model projections, assuming no price or wage effects until 2024, are also included in 

Table 16.4.1. 

 

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REFERENCES

1. Scott, M., JM Roop, RW Schultz, DM Anderson, KA Cort, The Impact of DOE Building 

Technology Energy Efficiency Programs on U.S. Employment, Income, and Investment.

Energy Economics, 2008. 30(5): pp. 2283-2301 

2. Roop, J. M., M. J. Scott, and R. W. Schultz, ImSET: Impact of Sector Energy 

Technologies, 2005. Pacific Northwest National Laboratory. Richland, WA. Report No. 

PNNL- 15273. 

3. Scott, M. J., D. J. Hostick, and D. B. Belzer, ImBuild: Impact of Building Energy 

Efficiency Programs, April, 1998. Pacific Northwest National Laboratory. Richland, WA. 

Report No. PNNL-11884. Prepared for the U.S. Department of Energy under Contract 

DE-AC06-76RLO 1830. 

4. Minnesota IMPLAN Group Inc., IMPLAN Professional: User's Guide, Analysis Guide, 

Data Guide, 1997. Stillwater, MN. 

5. Office of Management and Budget, Fiscal Year 2013 Mid-Session Review: Budget of the 

U.S. Government, 

<http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/13msr.pdf>

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