CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS 

TABLE OF CONTENTS
 

14.1 INTRODUCTION ............................................................................................................ 14-1 

14.2 ASSUMPTIONS............................................................................................................... 14-1 

14.3 METHODOLOGY ........................................................................................................... 14-1 

REFERENCES .......................................................................................................................... 14-3 

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CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS 

14.1 INTRODUCTION 

The Department of Energy (DOE) intends the employment impact analysis to estimate 

national job creation or job elimination resulting from possible new standards, due to reallocation 

of the associated expenditures for purchasing and operating equipment. DOE will conduct this 

analysis as one of the analyses for the notice of proposed rulemaking (NOPR). DOE will 

estimate national impacts on major sectors of the U.S. economy, using publicly available data 

and incorporating different energy price scenarios that it will carry out as part of the analysis for 

the NOPR. DOE will make all methods and documentation available for review. 

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the plants that produce the 

covered equipment, along with the affiliated distribution and service companies, resulting from 

the imposition of standards. DOE will evaluate direct employment impacts in its manufacturer 

impact analysis, as described in chapter 12. Indirect employment impacts may result from 

expenditures shifting between goods (the substitution effect) and changes in income and overall 

expenditure levels (the income effect) that occur due to the imposition of standards.. 

14.2 ASSUMPTIONS 

DOE expects new equipment standards to decrease energy consumption, and therefore to 

reduce expenditures for energy. The savings in energy expenditures may be spent on new 

investment and other items. The standards may increase the purchase price of equipment, 

including the retail price plus sales tax, and increase installation costs. 

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

year-to-year effect of these expenditure impacts on net economic output and employment. A 

simple model might involve reduced expenditures for energy and reallocation of that money 

toward other sectors in the economy. DOE intends the employment impact analysis to quantify 

the indirect employment impacts of these expenditure changes. It will evaluate direct 

employment impacts in the manufacturer impact analysis step of the process. 

14.3 METHODOLOGY 

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

U.S. economy that focuses on sectors most relevant to industrial, commercial, and residential 

building energy use.1 ImSET is a special-purpose version of the U.S. Benchmark National I-O 

model designed to estimate the national employment and income effects of energy-saving 

technologies deployed by the DOE Office of Energy Efficiency and Renewable Energy. 

Compared with previous versions of the model used in earlier energy conservation 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. 

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The ImSET model includes structural coefficients to characterize economic flows among 

the multiple sectors. ImSET’s national economic I-O structure is based on the 2002 Benchmark 

U.S. table,2

 which is specially aggregated to 187 sectors. The time step of the model is annual 

and the time scale of the model is 100 years (2001-2099). 

The ImSET model allows a great deal of flexibility for analyzing types of energy 

efficiency effects. For example, certain economic effects of energy efficiency improvements 

require an assessment of inter-industry purchases, which is handled in the model. Some energy 

efficiency investments will not only reduce the costs of energy in the economy but also the costs 

of labor and other goods and services, which is accommodated through a recalculation of the I-O 

structure in the model. Output from ImSET 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 CACs. Depending on the design options considered, one possible outcome is 

that the standards for these CACs would reduce energy expenditures and increase equipment 

prices in the residential and commercial sectors. These expenditure changes may reduce energy 

sector employment and either reduce or increase employment in selected commercial sectors. At 

the same time, the standard may increase investment in the residential and commercial sector and 

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

annual net national employment impact of these types of expenditure flows. 

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REFERENCES 

1. Scott M.J., O.V. Livingston, J.M. Roop, R.W. Schultz, and P.J. Balducci. 2009. Impact of 

Sector Energy Technologies Model Description and User’s Guide. Pacific Northwest 

National Laboratory, Richland, WA. PNNL-18412, 

2. Stewart, RL, JB Stone, and ML Streitwieser. 2007. U.S. Benchmark Input-Output Accounts, 

2002. Survey of Current Business October 2007. Accessed March 11, 2009 at 

http://www.bea.gov/industry/index.htm#benchmark_io. 

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