CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

**14.1 INTRODUCTION** 

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

**14.3 METHODOLOGY** 

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**REFERENCES**

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

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

14.1 INTRODUCTION

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

**elimination resulting**  **from new**  **standards, due**  **to reallocation**  **of the**  **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**  **will**

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

**and incorporating**  **different energy**  **price scenarios**  **to be**  **conducted as**  **part of**  **the analysis**  **for the** 

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

14.2 ASSUMPTIONS

**DOE expects**  **new commercial**  **refrigeration equipment**  **standards to**  **decrease energy** 

**consumption, and**  **thereby reduce**  **commercial expenditures**  **for energy.**  **The savings**  **in energy** 

**expenditures may**  **then be**  **spent, for**  **example, on**  **new commercial**  **investment. On**  **the other** 

**hand, energy**  **efficiency standards**  **may increase**  **the purchase**  **price of**  **commercial refrigeration** 

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

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

**year­to­year 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**  **this 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**  **a spreadsheet**  **model of**  **the U.S.**  **economy (ImSET)**  **focusing on** 

**1 188**  **sectors most**  **relevant to**  **industrial, commercial,**  **and residential**  **building energy**  **use.**

**ImSET is**  **a special­purpose**  **version of**  **the U.S.**  **Benchmark National**  **Input­Output (I­O)**  **model,**

**which has**  **been designed**  **specifically to**  **estimate the**  **national employment**  **and income**  **effects of** 

**the deployment**  **of Office**  **of Energy**  **Efficiency and**  **Renewable Energy**  **(EERE)**

**– developed** 

**energy­saving technologies.**  **In comparison**  **with the**  **previous versions**  **of the**  **model used**  **in**

**earlier rulemakings,**  **this 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 PC­based**  **I­O model**  **with structural**  **coefficients to** 

**characterize economic**  **flows among**  **the 188**  **sectors. ImSET**  **lends itself**  **to assessing**  **the impacts** 

**of evaluating**  **buildings, power,**  **industrial, and**  **transportation technologies.**  **ImSET’s national** 

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

**188 sectors.**  **The central**  **processing code**  **is written**  **in FORTRAN**  **code.**

**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** 

**14­1 require**  **an assessment**  **of inter­industry**  **purchases. Some**  **energy efficiency**  **investments will**  **not**

**only reduce**  **the costs**  **of energy**  **but the**  **costs of**  **labor and**  **other goods**  **and services**  **as well.**  **In**

**the language**  **of economics,**  **this represents**  **an investment­specific**  **increase in**  **productivity and** 

**value added**  **a and**  **a change**  **to the**  **I­O structure,**  **differing from**  **a case**  **in which**  **a constant**  **I­O**

**structure is**  **applied to**  **a change**  **in investment.**  **DOE may**  **use the**  **ImSET model**  **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.**

**For example,**  **commercial refrigeration**  **equipment standards**  **may reduce**  **energy**

**expenditures and**  **increase equipment**  **prices in**  **the commercial**  **sector. These**  **expenditure**

**changes are**  **likely to**  **reduce commercial**  **and energy**  **sector employment.**  **At the**  **same time,**  **these**

**equipment standards**  **may increase**  **commercial sector**  **investment, and**  **increase employment**  **in**

**other sectors**  **of the**  **economy. DOE**  **designed the**  **employment impact**  **analysis to**  **estimate the** 

**year­to­year net**  **employment effect**  **of these**  **different expenditure**  **flows.**

**a Value­added**  **is the**  **difference between**  **the value**  **of the**  **output of**  **a sector**  **and the**  **costs of**  **the purchased**  **goods and** 

**services that**  **go into**  **the sector.**  **It is**  **mainly composed**  **of labor**  **and proprietor**  **income, retained**  **earnings of** 

**corporations, rents**  **and taxes.** 

**14­2**REFERENCES

**1 Roop,**  **J.M., M.J.**  **Scott, and**  **R.W. Schultze.**  **2005. ImSET:**  **Impact of**  **Sector Energy** 

**Technologies. PNNL­15273.**  **Pacific Northwest**  **National Laboratory,**  **Richland, WA.** 

**2 Lawson,**  **A.M., K.S.**  **Bersani, M.**  **Fahim­Nader, and**  **J. Guo.**  **2002. “Benchmark**  **Input­Output**

**Accounts of**  **the U.S.**  **Economy, 1997,**  **“Survey of**  **Current Business,**  **December, pp.**  **19­117.**

**14­3**