CHAPTER 15. NET NATIONAL EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

15.1 ASSUMPTIONS............................................................................................................... 15-3 15.2 METHODOLOGY ........................................................................................................... 15-3 15.3 RESULTS ........................................................................................................................ . 15-4 REFERENCES ..................................................................................................................... ..... 15-6

LIST OF TABLES

Table 15.3.1 Net National Change in Jobs for Class A BVMs by TSL ................................. 15-5 Table 15.3.2 Net National Change in Jobs for Class B BVMs by TSL .................................. 15-5

15-i15-iiCHAPTER 15. NET NATIONAL EMPL OYMENT IMPACT ANALYSIS

Employment impact is one of the factors that the U.S. Department of Energy (DOE) considers in selecting a standard for refrig erated beverage vending machines (BVMs). Employment impacts include direct and indirect impacts. Direct employ ment impacts are any changes in the number of employees for BVM manufacturers, their suppliers, and related service firms. Indirect impacts are those changes of empl oyment in the larger eco nomy that occur due to the shift in expenditures and capit al investment that is caused by the purchase and operation of more efficient BVM equipment. The manufacturer impact analysis in this rulemaking addresses only the employment impacts on manufacturers of BVMs ( i.e. , the direct employment impacts; see chapter 13, Manufacturer Impact Analysis, of the technical support document [TSD]); this chapter describes other, primarily indirect, employment impacts.

15.1 ASSUMPTIONS

If promulgated, DOE expects BVMs’ am ended energy conservation standards to decrease the national energy consumption and therefore reduce energy expenditure s. The savings in energy expenditures may be used on new investment or not at all ( i.e. , they may remain “saved”). The amended energy conservation standards may increase the purchase price ( i.e. , equipment price plus sales tax) and installation costs of BVMs.

Using an econometric model of the U.S. ec onomy, this analysis estimated the year-toyear effect of these expenditure impacts on net economic output and employment. DOE intended this analysis to quantify the in direct employment impacts of re duced expenditures for energy and reallocation of that money toward other sectors of the economy.

15.2 METHODOLOGY

DOE defines the net national em ployment impacts resulting from proposed amended energy conservation standards for BVMs as the ne t national change in jobs in the general economy. The key factors affecting the outcome of ne t change in jobs are: (1) increased spending on the purchase and installation of BVM equipment meeting the amended standards, (2) reduced customer spending on electricity, (3) reduced sp ending on new investment or capacity by energy companies, and (4) the associated indirect effects of the above.

DOE based its analysis on the Impact of Sector Energy Technologies (ImSET) model developed by Pacific Northwest National Laborat ory for DOE’s Office of Energy Efficiency and Renewable Energy. 1 ImSET is a personal computer-based, economic analysis model that estimates the effects of standards on major sector s of the U.S. economy related to buildings and the net impact of standards on jobs. ImSET’ s input/output structure is based on the 1997 Benchmark U.S. table aggregated to 188 sectors to estimate the employment and income effects of building energy technologies. 2 Compared with simple economic multiplier approaches, ImSET allows for more complete and automate d analysis of the economic impacts of energyefficiency investments in buildings.

15-315-4 In an input/output model, the level of employment in an economy is determined by the relationship of different sectors of the econom y and the spending flows among them. Different sectors have different levels of labor inte nsity and changes in the level of spending ( e.g. , due to the effects of an amended energy conservation standard) in one sector of the economy will affect spending in other sectors, which in turn w ill affect the overall level of employment.

ImSET collects estimates of initial investments, energy savings, and economic activity associated with spending the savings resulting from amended standards ( e.g. , changes in final demand in personal consumption, business invest ment and spending, and government spending). It provides overall estimates of the change in national output for each input-output sector. Then, the model applies estimates of employment and wage income per dollar of economic output for each sector and calculates impacts on na tional employment and wage income.

ImSET calculates the total effect of standa rds on employment, incl uding job creation or deletion, in the manufacturing se ctor. As described above, DOE an alyzed the direct employment impacts ( i.e. , those that would occur at the manufactur ing plants of BVM equipment) in the manufacturer impact an alysis (chapter 13).

Energy-efficiency technology primarily a ffects the U.S. economy along three spending pathways. First, general investment funds are dive rted to sectors that manufacture, install, and maintain energy efficient technologies. The in creased cost of technology leads to higher employment in the air-conditioner manufact uring sector, including BVMs and lower employment in other economic sectors. Second, co mmercial firm spending is redirected from utilities toward firms that supply commercial production inputs. Third, electric utility sector investment funds are released for use in other sectors of the economy. When customers use less energy, electric utilities e xperience relative reductions in de mand, which leads to reductions in utility sector investment and employment.

15.3 RESULTS

The results show the tota l effects of amended energy conservation standards on employment for the selected years.

Table 15.3.1 shows the estimated net national empl oyment i mpacts of the seven different trial standard levels (TSLs) for the Class A BV M equipment. A detailed discussion of the TSLs can be found in chapter 9, Trial Standard Levels, of the TSD). The figure shows that for a given year over the period of analysis (2012–2042), the change in the number of jobs in the economy relative to the number of jobs if there were no change in st andards and hence no resulting change in spending and cash flow patterns throughout the economy.Table 15.3.1 Net National Change in Jobs for Class A BVMs by TSL
Net National Change in Jobs (number of jobs) Trial Standard

Level (TSL) 2012 2022 2032 2042 TSL 1 0 10 13 14 TSL 2 3 50 57 64 TSL 3 5 113 132 146 TSL 4 9 173 203 226 TSL 5 9 204 239 265 TSL 6 9 223 262 292 TSL 7 -61 220 267 304

Similarly, Table 15.3.2 shows the net national employmen t im pacts of the amended BVM energy conservation standards by trial standard le vel and specified years for the entire and BVM markets.

Table 15.3.2 Net National Change in Jobs for Class B BVMs by TSL
Net National Change in Jobs (number of jobs) Trial Standard

Level (TSL) 2012 2022 2032 2042 TSL 1 0 3 4 4 TSL 2 0 5 5 6 TSL 3 0 24 29 33 TSL 4 0 28 34 38 TSL 5 -19 66 80 90 TSL 6 -78 39 56 68

As shown in Table 15.3.1 and Table 15.3.2 , the proposed BVM standards have virtually no initial impact on jobs and have a s mall, pos itive impact on jobs in later years. This is explained by the fact that the required initial investment in the standard-compliant equipment costs a few jobs because the investment is capi tal-intensive relative to other spending in the economy that would be displaced to pay for th e investment. However, in the long term, the benefit to the economy of the energy savings from the installed equipment more than makes up for the initial investment, and the net effect on employment is positive. The long-term positive and increasing impact occurs because the energy savings in future years are obtained from both current and previous efficiency investments reflected in the installed stock of efficient equipment, while investment costs for the equipment occur only once.

In conclusion, DOE estimates that net indi rect employment impacts from a proposed BVM standard are positive but very small.

15-515-6 REFERENCES

1. Scott, M.J. et al. ImSET: Impact of Sector Energy Technologies. 2005. Pacific Northwest National Laboratory, Richland, WA. Prepared for the U.S. Department of Energy under Contract DE-AC05-76RLO1830.

2. Lawson, A. M., K. S. Bersani, M. Fahi m-Nader, and J. Guo. Benchmark Input-Output Accounts of the U. S. Economy, 1997. Survey of Current Business . 2002. December: pp. 19-117.