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CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

13.1 INTRODUCTION ......................................................................................................... 13-1

13.2 ASSUMPTIONS............................................................................................................ 13-1

13.3 METHODOLOGY ........................................................................................................ 13-1

13.4 SHORT-TERM RESULTS............................................................................................ 13-2

13.5 LONG-TERM RESULTS.............................................................................................. 13-3

LIST OF TABLES

Table 13.4.1 Net National Short-term Change in Employment (number of jobs)*................ 13-3
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CHAPTER 13. EMPLOYMENT IMPACT ANALYSIS

13.1 INTRODUCTION

DOE’s employment impact analysis is designed to estimate indirect national job creation 

or elimination resulting from possible standards, due to reallocation of the associated 

expenditures for purchasing and operating microwave ovens. Job increases or decreases reported 

in this chapter are separate from the direct microwave sector employment impacts reported in 

Chapter 12, and reflect the employment impact of efficiency standards on all other sectors of the 

economy. DOE examined the combined employment impacts for Microwave-only Ovens and 

Countertop Combination Ovens (Product Class 1) and Over-the-range Combination Ovens 

(Product Class 2).

13.2 ASSUMPTIONS

DOE expects energy conservation standards to decrease energy consumption, and 

therefore to reduce energy expenditures. The savings in energy expenditures may be spent on 

new investment or not at all (i.e., they may remain “saved”). The standards may increase the 

purchase price of appliances, including the retail price plus sales tax, and increase installation 

costs. 

Using an input/output econometric model of the U.S. economy, this analysis estimated 

the short-term effect of these expenditure impacts on net economic output and employment. 

DOE intends this analysis to quantify the indirect employment impacts of these expenditure 

changes. It evaluated direct employment impacts at manufacturers’ facilities in the manufacturer 

impact analysis (see chapter 12).

DOE notes that ImSET is not a general equilibrium forecasting model, and understands 

the uncertainties involved in projecting employment impacts, especially changes in the later 

years of the analysis.1 Because ImSET does not incorporate price changes, the employment 

effects predicted by ImSET would over-estimate the magnitude of actual job impacts over the 

long run for this rule. Since input/output models do not allow prices to bring markets into 

equilibrium, they are best used for short-run analysis. DOE therefore include a qualitative 

discussion of how labor markets are likely to respond in the longer term. In future rulemakings, 

DOE may consider the use of other modeling approaches for examining long run employment 

impacts.

13.3 METHODOLOGY

The Department based its analysis on an input/output model of the U.S. economy that 

estimates the effects of standards on major sectors of the economy related to buildings and the

net impact of standards on jobs. The Pacific Northwest National Laboratory developed the 

model, ImSET 3.1.1

2

(Impact of Sector Energy Technologies) as a successor to ImBuild3, a 

special-purpose version of the IMPLAN4national input/output model. ImSET estimates the 

employment and income effects of building energy technologies. In comparison with simple 
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economic multiplier approaches, ImSET allows for more complete and automated analysis of the 

economic impacts of energy-efficiency investments in buildings.

In an input/output model, the level of employment in an economy is determined by the 

relationship of different sectors of the economy and the spending flows among them. Different 

sectors have different levels of labor intensity and so changes in the level of spending (e.g., due 

to the effects of an efficiency standard) in one sector of the economy will affect flows in other 

sectors, which affects the overall level of employment.

ImSET uses a 187-sector model of the national economy to predict the economic effects 

of residential and commercial buildings technologies. ImSET collects estimates of initial 

investments, energy savings, and economic activity associated with spending the savings 

resulting from standards (e.g., changes in final demand in personal consumption, business 

investment and spending, and government spending). It provides overall estimates of the change 

in national output for each input-output sector. The model applies estimates of employment and 

wage income per dollar of economic output for each sector and calculates impacts on national 

employment and wage income.

Energy-efficiency technology primarily affects the U.S. economy along three spending 

pathways. First, general investment funds are diverted to sectors that manufacture, install, and 

maintain energy-efficient appliances. The increased cost of appliances leads to higher 

employment in the appliance manufacturing sectors and lower employment in other economic 

sectors. Second, commercial firm and residential spending are redirected from utilities toward 

firms that supply production inputs. Third, electric utility sector investment funds are released 

for use in other sectors of the economy. When consumers use less energy, electric utilities 

experience relative reductions in demand which leads to reductions in utility sector investment 

and employment.

DOE also notes that the employment impacts estimated with ImSET for the entire 

economy differ from the employment impacts in the microwave manufacturing sector estimated 

in Chapter 12 using the Government Regulatory Impact Model (GRIM). The methodologies 

used and the sectors analyzed in the ImSET and GRIM models are different. 

13.4 SHORT-TERM RESULTS

The results in this section refer to impacts of microwave oven standards relative to the 

base case. DOE disaggregated the impact of standards on employment into three component 

effects: increased capital investment costs, decreased energy costs, and changes in operations and 

maintenance costs. DOE anticipates no change in operations and maintenance costs for 

microwave ovens. DOE presents the summary impact.

Conceptually, one can consider the impact of the rule in its first year on three aggregate 

sectors, the microwave production sector, the energy generation sector, and the general consumer 

good sector (as mentioned above ImSET’s calculations are made at a much more disaggregate 
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level). By raising energy efficiency, the rule increases the purchase price of microwaves, this

increase in expenditures causes an increase in employment in this sector. At the same time, the 

improvements in energy efficiency reduce consumer expenditures on electricity. The reduction in 

electricity demand causes a reduction in employment in that sector. Finally, based on the net 

impact of increased expenditures on microwaves and reduced expenditures on electricity, 

consumer expenditures on everything else are either positively or negatively affected, increasing 

or reducing jobs in that sector accordingly. The model also captures any indirect jobs created or 

lost by changes in consumption due to changes in employment (as more workers are hired they 

consume more goods, which generates more employment, the converse is true for workers laid 

off).

Table 13.4.1 presents the modeled net employment impact from the rule in 2015. As 

mentioned in Chapter 12, 4% of microwaves are produced domestically and 96% are imported. 

The net employment impact estimate is sensitive to assumptions regarding the return to the U.S. 

economy of money spent on imported microwaves. The two scenarios bounding the ranges 

presented in Table 13.4.1 represent situations in which none of the money spent on imported 

microwaves returns to the U.S. economy and all of the money spent on imported microwaves 

returns to the U.S. economy (low and high bounds, respectively). The U.S. trade deficit in recent 

years suggests that between 50% and 75% of the money spent on imported microwaves is likely 

to return, with employment impacts falling within the ranges presented below.

Table 13.4.1 Net National Short-term Change in Employment (number of jobs)*

Trial Standard Level 2015 2020

1 53 to 78 544 to 566

2 15 to 101 731 to 807

3 -140 to 109 847 to 1067

4 -917 to -4 710 to 1517

* Compliance date of standard levels is 2014.

For context, OMB currently assumes that the office unemployment rate may decline to 

6.9% in 2014 and drop further to 5.3% in 2017.5The unemployment rate in 2017 is projected to 

be close to “full employment.” When an economy is at full employment any effects on net 

employment are likely to be transitory as workers change jobs, rather than enter or exit longerterm employment.

13.5 LONG-TERM RESULTS

Due to the short payback period of energy efficiency improvements mandated by this 

rule, over the long term DOE expects the energy savings to consumers to increasingly dominate 

the increase in appliance costs, resulting in increased aggregate savings to consumers. As a 

result, DOE expects demand for electricity to decline over time and demand for other goods to 

increase. Since the electricity generation sector is relatively capital intensive compared to the 
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consumer goods sector, the net effect will be an increase in labor demand. In equilibrium, this 

should lead to upward pressure on wages and a shift in employment away from electricity 

generation towards consumer goods. Note that in long-run equilibrium there is no net effect on 

total employment since wages adjust to bring the labor market into equilibrium. Nonetheless, 

even to the extent that markets are slow to adjust, DOE anticipates that net labor market impacts 

will be negligible over time due to the small magnitude of the short-term effects presented in 

Table 13.4.1. The ImSET model projections, assuming no price or wage effects until 2020, are 

included in the second column of Table 13.4.1.
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REFERENCES

1. Scott, M., JM Roop, RW Schultz, DM Anderson, KA Cort, The Impact of DOE Building 

Technology Energy Efficiency Programs on U.S. Employment, Income, and Investment.

Energy Economics, 2008. 30(5): pp. 2283-2301 

2. 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. 

3. Scott, M. J., D. J. Hostick, and D. B. Belzer, ImBuild: Impact of Building Energy 

Efficiency Programs, April, 1998. Pacific Northwest National Laboratory. Richland, WA. 

Report No. PNNL-11884. Prepared for the U.S. Department of Energy under Contract 

DE-AC06-76RLO 1830. 

4. Minnesota IMPLAN Group Inc., IMPLAN Professional: User's Guide, Analysis Guide, 

Data Guide, 1997. Stillwater, MN. 

5. Office of Management and Budget, Fiscal Year 2012 Mid-Session Review: Budget of the 

U.S. Government, Washington, DC. 

<http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/12msr.pdf>