CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

**14.1 INTRODUCTION** 

**............................................................................................................ 14­1** 

**14.2 ASSUMPTIONS............................................................................................................... 14­1** 

**14.3 METHODOLOGY** 

**........................................................................................................... 14­1** 

**REFERENCES**

**.......................................................................................................................... 14­3** 

**14­i**CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION

**The employment**  **impact analysis**  **is intended**  **to estimate**  **national job**  **creation or**  **job**

**elimination resulting**  **from possible**  **new standards**  **due to**  **reallocation of**  **associated commercial** 

**expenditures for**  **purchasing and**  **operating equipment.**  **The U.S.**  **Department of**  **Energy (DOE)** 

**will conduct**  **this analysis**  **as part**  **of the**  **Notice of**  **Public Rulemaking**  **(NOPR).**

**DOE estimates**  **the impacts**  **of standards**  **on employment**  **for equipment**  **manufacturers,**

**relevant service**  **industries, energy**  **suppliers, and**  **the economy**  **in general.**  **Both indirect**  **and**

**direct employment**  **impacts are**  **covered. Direct**  **employment impacts**  **would result**  **if standards** 

**led to**  **a change**  **in the**  **number of**  **employees at**  **manufacturing plants**  **and related**  **supply and** 

**service firms.**  **Direct impact**  **estimates are**  **addressed in**  **the manufacturer**  **impact analysis**  **(MIA)**

**(Chapter 12).**  **Indirect employment**  **impacts are**  **impacts on**  **the national**  **economy other**  **than in** 

**the manufacturing**  **sector being**  **regulated. Indirect**  **impacts may**  **result both**  **from expenditures** 

**shifting among**  **goods (substitution**  **effect) and**  **changes in**  **income which**  **lead to**  **a change**  **in**

**overall expenditure**  **levels (income**  **effect). DOE**  **defines indirect**  **employment impacts**  **from**

**standards as**  **net jobs**  **eliminated or**  **created in**  **the general**  **economy as**  **a result**  **of increased** 

**spending driven**  **by the**  **increased equipment**  **prices and**  **reduced spending**  **on energy.** 

14.2 ASSUMPTIONS

**DOE expects**  **new standards**  **to increase**  **the total**  **installed cost**  **of equipment**  **(includes**

**MSP, sales**  **taxes, distribution**  **channel mark­ups,**  **and installation**  **cost). DOE**  **also expects**  **the**

**new standards**  **to decrease**  **energy consumption,**  **and, thus,**  **expenditures on**  **energy. Over**  **time,**

**increased total**  **installed cost**  **is paid**  **back through**  **energy savings.**  **The savings**  **in energy** 

**expenditures may**  **be spent**  **on new**  **commercial investment**  **and other**  **items. On**  **the other**  **hand,**

**energy conservation**  **standards may**  **raise the**  **purchase price**  **(including the**  **retail price**  **and sales** 

**tax) of**  **general service**  **fluorescent lamps**  **(GSFL) and**  **incandescent reflector**  **lamps (IRL)** 

**, and** 

**increase installation**  **costs.**

**Using an**  **input/output model**  **of the**  **U.S. economy,**  **this analysis**  **seeks to**  **estimate the** 

**effects on**  **different sectors**  **and the**  **net impact**  **on jobs.**  **DOE will**  **estimate national**  **employment**

**impacts for**  **major sectors**  **of the**  **U.S. economy**  **in the**  **NOPR, using**  **public and**  **commercially**

**available data**  **sources and**  **software. DOE**  **will make**  **all methods**  **and documentation**  **available**

**for review.** 

14.3 METHODOLOGY

**DOE developed**  **Impact of**  **Sector Energy**  **Technologies (ImSET),**  **a spreadsheet**  **model of** 

**the U.S.**  **economy that**  **focuses on**  **188 sectors**  **most relevant**  **to industrial,**  **commercial, and** 

**1 residential**  **building energy**  **use. ImSET is**  **a special­purpose**  **version of**  **the U.S.**  **Benchmark**

**National Input­Output**  **(I­O) model,**  **which has**  **been designed**  **to estimate**  **the national** 

**employment and**  **income effects**  **of energy­saving**  **technologies that**  **are deployed**  **by the**  **DOE**

**14­1 Office**  **of Energy**  **Efficiency and**  **Renewable Energy.**  **In comparison**  **with previous**  **versions of** 

**the model**  **used in**  **earlier rulemakings,**  **the current**  **version allows**  **for more**  **complete and** 

**automated analysis**  **of the**  **essential features**  **of energy**  **efficiency investments**  **in buildings,** 

**industry, transportation,**  **and the**  **electric power**  **sectors.**

**The ImSET**  **software includes**  **a personal**  **computer­based I­O**  **model with**  **structural**

**coefficients to**  **characterize economic**  **flows among**  **the 188**  **sectors. ImSET’s**  **national economic** 

**2 I­O**  **structure is**  **based on**  **the 1997**  **Benchmark U.S.**  **table, specially aggregated**  **to 188**  **sectors.**

**The time**  **scale of**  **the model**  **is 50**  **years.**

**The model**  **is a**  **static I­O**  **model, which**  **allows a**  **great deal**  **of flexibility**  **concerning the** 

**types of**  **energy efficiency**  **effects that**  **can be**  **accommodated. For**  **example, certain**  **economic**

**effects of**  **energy efficiency**  **improvements require**  **an assessment**  **of inter­industry**  **purchases,**

**which is**  **handled in**  **the model.**  **Some energy**  **efficiency investments**  **will not**  **only reduce**  **the**

**costs of**  **energy in**  **the economy**  **but the**  **costs of**  **labor and**  **other goods**  **and services**  **as well,**  **which**

**is accommodated**  **through a**  **recalculation of**  **the I­O**  **structure in**  **the model.**  **Output from**  **the**

**ImSET model**  **can be**  **used to**  **estimate changes**  **in employment,**  **industry output,**  **and wage**  **income**

**in the**  **overall U.S.**  **economy resulting**  **from changes**  **in expenditures**  **in the**  **various sectors**  **of the** 

**economy.**

**The following**  **is an**  **example of**  **how the**  **employment impact**  **analysis might**  **track impacts** 

**from a**  **standard for**  **IRL. Depending**  **on the**  **design options**  **considered, one**  **possible outcome**  **is**

**that the**  **standards for**  **IRL would**  **reduce energy**  **expenditures and**  **increase equipment**  **prices in** 

**the commercial**  **sector. These**  **expenditure changes**  **may reduce**  **commercial and**  **energy sector** 

**employment. At**  **the same**  **time, the**  **standard may**  **increase investment**  **in the**  **commercial sector** 

**and employment**  **in other**  **sectors. DOE**  **designed the**  **employment impact**  **analysis to**  **estimate the** 

**year­to­year net**  **national employment**  **impact of**  **these types**  **of expenditure**  **flows.**

**14­2**REFERENCES

**1 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.**

**2 Lawson,**  **Ann M.,**  **Kurt S.**  **Bersani, Mahnaz**  **Fahim­Nader, and**  **Jiemin Guo.**  **Benchmark Input** 

**Output Accounts**  **of the**  **U. S.**  **Economy, 1997.**  Survey of Current Business

**. 2002.**  **December.**

**pp. 19­117.** 

**14­3**