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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 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 equipment. The U.S. Department of Energy (DOE)

will conduct this analysis as part of the notice of proposed rulemaking (NOPR).

DOE will estimate 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 (preliminary technical support document (TSD) chapter 12). Indirect 

employment impacts affect the national economy in areas other 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 adjustment 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 equipment and reduced spending on 

energy.

14.2 ASSUMPTIONS

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

manufacturer sales price, sales taxes, distribution channel markups, and installation costs). 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. 

Conversely, amended energy conservation standards may raise the sales price (i.e., equipment

price times markups and sales tax) of metal halide lamp fixtures 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 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 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, 
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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 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-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 metal halide lamp fixtures. Depending on the design options considered, one 

possible outcome is that the standards for these fixtures 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 annual net national employment impact of these 

types of expenditure flows.
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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, 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.