CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION

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14.2 ASSUMPTIONS

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14.3 METHODOLOGY

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REFERENCES

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14-iCHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION

The employment impact analysis is intended to estimate national job creation or job elimination resulting from proposed standards due to reallocation of associated commercial expenditures for purchasing and operating equipm ent. The U.S. Department of Energy (DOE) will conduct this analysis as part of th e notice of proposed 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 energy conservation 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 (chapter 12 of the preliminary t echnical support document). Indirect employment impacts affect the national economy in areas othe r than in the regulated manufacturing sector. Indirect impacts may result both from expenditures shifting among goods (substitution effect) and changes in income that lead to an adjustme nt in overall expenditure levels (income effect). DOE defines indirect employment impacts from energy conservation standards as net jobs eliminated or created in the general economy as a result of increased spending driven by the increased prices for regulated equipm ent and reduced spending on energy.

14.2 ASSUMPTIONS

DOE expects new standards to increase the tota l installed cost of equipment (including manufacturer sales price, sales taxes, distribution channel mar kups, and installation cost). DOE also expects the new standards to decrease en ergy 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. Conversely, amended energy conservation standards may raise the sales price ( i.e. , equipment price plus sales tax) of fluorescent lamp ballasts and increase installation costs.

Using an input-output (I-O) 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 th e 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 model of the

U.S. economy that focuses on sectors most releva nt to industrial, comme rcial, 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

14-1energy efficiency investments in buildings, industry, transportation, and the electric power

sectors.

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 1997 Benchmark

U.S. table, 2 which is specially aggregated to 188 sectors. The time scale of the model is 50 years.

The I-O model is static, which allows a great deal of flexibility for types of energy efficiency effects. For example, certain economic effects of energy efficiency improvements require an assessment of inter-indus try 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 se rvices, 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 ove rall 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 fluorescent lamp ballasts. De pending on the design options considered, one possible outcome is that the standards for thes e ballasts 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 empl oyment in other sectors. DOE designed the employment impact analysis to estimate the annual net national employment impact of these types of expenditure flows.

14-2REFERENCES

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

2005. Pacific Northwest National Laborator y: Richland, WA. Report No. PNNL-15273.

2. Lawson, A. M., K. S. Bersani, M. Fahim-Nader, and J. Guo. Benchmark Input-Output Accounts of the United States, 1997. Survey of Current Business . 2002. 82 (December): pp.

19–109.

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