14-i CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS 14.1 INTRODUCTION ......................................................................................................... 14-1 14.2 METHODOLOGY ........................................................................................................ 14-1 14.3 RESULTS ...................................................................................................................... 14-2 14.3.2 Net National Employment Impact Summary ............................................... 14-5

LIST OF TABLES

Table 14.3.1 Polyphase Small Electric Motors: Ne t National Change in Employment ......... 14-7 Table 14.3.2 Capacitor-Start Small Electric Motors: Net National Change in Employment ....................................................................................................... 14-7

LIST OF FIGURES

Figure 14.3.1 Polyphase Small Electric Motors: Employment Impact of Increased Equipment Costs ................................................................................................ 14-3 Figure 14.3.2 Capacitor-Start Small Electric Motors: Employment Impact of Increased Equipment Costs ................................................................................................ 14-3 Figure 14.3.3 Polyphase Small Electric Motors: Employment Impact of Energy Savings ..... 14-4 Figure 14.3.4 Capacitor-Start Small Electric Moto rs: Employment Impact of Energy Savings ............................................................................................................... 14-5 Figure 14.3.5 Polyphase Small Electric Motors: Ne t National Change in Employment ......... 14-6 Figure 14.3.6 Capacitor-Start Small Electric Motors: Net National Change in Employment ....................................................................................................... 14-614-1 CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION

DOE’s employment impact anal ysis is designed to estimate indirect national job creation or elimination resulting from possible standa rds, due to reallocation of the associated expenditures for purchasing and operating small electric motors.

DOE expects small electric motor standa rds 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 general purpose small electric motors, including the retail price plus sales tax. Using an input/output econometric model of the U.S. economy, this analysis estimated the yearto-year effect of these expe nditure impacts on net economic output and employment.

DOE intends this analysis to quantify the indirect employment impacts of these expenditure changes. It evaluate d direct employment impacts at manufacturers of small electric motors in the manufacturer im pact analysis (see chapter 12).

14.2 METHODOLOGY

The Department based its analysis on an input/output model of the U.S. economy that estimates the effects of standards on major sector s of the economy related to buildings and the net impact of standards on jobs. The Pacifi c Northwest National Laboratory developed the model, ImSET 1 (Impact of Sector Energy Techno logies) as a successor to ImBuild 2 , a specialpurpose version of the IMPLAN 3 national input/output model. Im SET estimates the employment and income effects of building energy technol ogies. In comparison with simple economic multiplier approaches, ImSET allows for more co mplete 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 econom y 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 188-sector model of the nationa l economy to predict the economic effects of residential and commercial buildings technologies. ImSET collects estimates of initial investments, energy savings, and economic activ ity associated with spending the savings resulting from standards (e.g., changes in fi nal 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 calcula tes impacts on national employment and wage income.14-2 Energy-efficiency technology primarily a ffects the U.S. economy along three spending pathways. First, general investment funds are dive rted to sectors that manufacture, install, and maintain energy-efficient appliances. The incr eased cost of appliances leads to higher employment in the appliance manufacturing sect ors 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 lead s to reductions in utili ty sector investment and employment.

14.3 RESULTS

The results in this section refer to impacts of small electric motor standards relative to the base case for each appliance. DOE disaggregated th e impact of small electric motor standards on employment into two component effects: incr eased capital investment costs and decreased energy costs. DOE does not project that repair or maintenanc e costs will vary with motor efficiency. Therefore, these costs are uncha nged by the proposed standard, and have no employment impacts. These component effects and a summary impact are presented for polyphase and capacitor-start motors at each trial standard level.

In calculating employment impacts of cap acitor-start TSLs, DOE used its CSCR/CSIR market share model with a ten-year market shar e shift time which models a market transition from current CSIR market shar e in 2015 to the final modeled market share in 2025, and with a zero-year market share shift tim e (market share shift complete by 2015). The figures presented in this section correspond only to th e ten-year market share shift time, but Table 14.3.2 shows the ranges of these employment impact estimates derived from the two market share models. The employment impacts predicted by the two m odels differ most during the 2015 to 2025 time period and for TSLs with large market share changes, as expected.

Figures 14.4.1 and 14.4.2 summarize the empl oyment impacts of the increased investment and spending on higher- efficiency equipment. Equipment manufacturing is relatively capital-intensive compared to ot her sectors of the economy, but the increased costs of efficiency add to the income of distribut ors and retail businesses, which are (on average) more laborintensive than other sectors. Th erefore, the department projects that the capital expenditures on more expensive motors will result in a net increase of jobs.0 1 2 3 4 5 6

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Figure 14.3.1 Polyphase Small Electric Motors : Employment Impact of Increased Equipment Costs

0 2 4 6 8 10 12 14

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8

Figure 14.3.2 Capacitor-Start Small Electric Mo tors: Employment Impact of Increased Equipment Costs

14-3Figures 14.4.3 and 14.4.4 show the employment impact of redirected spending made possible by equipment energy savings. For all products, the employment impact is strongly positive.

0 0.5

1 1.5

2 2.5

3

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Figure 14.3.3 Polyphase Small Electric Motors : Employment Impact of Energy Savings

14-40 2 4 6 8 10 12 14 16

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8

Figure 14.3.4 Capacitor-Start Small Electric Mo tors: Employment Impact of Energy Savings

14.3.2 Net National Employment Impact Summary

Figures 14.3.5 and 14.3.6 show the estimated net national employment impacts of the polyphase and capacitor-start small electric moto r trial standard levels. Figure 14.3.6 corresponds to the case in which the CSIR/CSCR market sh ares adjust over the period from 2015 to 2025. For any given year, these figures show the net ch ange in the number of jobs in the economy relative to if there were no change in standard s (and thus no resulting change in spending and cash flow patterns throughout the economy). Tables 14.3.1 and 14.3.2 show the net national employment impact in specific years. Table 14.3. 2 shows this impact as a range between the employment impacts of a standard if the CSIR/C SCR market share takes te n years to adjust to the standard and the impact if the market adjusts by 2015, the start of the analysis period.

14-50 1 2 3 4 5 6 7 8 9

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7

Figure 14.3.5 Polyphase Small Electric Motors: Net National Change in Employment

0.00 5.00 10.00 15.00 20.00 25.00

2015 2020 2025 2030 2035 2040 2045 YearNet Jobs (1000s) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8

Figure 14.3.6 Capacitor-Start Small Electric Mo tors: Net National Change in Employment
14-614-7 Table 14.3.1 Polyphase Small Electric Motors: Ne t National Change in Employment Trial Standard Level 2015 (thousands) 2025 (thousands) 2035 (thousands) 2045 (thousands) 1 0.06 0.20 0.24 0.29 2 0.10 0.44 0.54 0.64 3 0.18 0.85 1.03 1.22 4 0.22 0.98 1.19 1.41 5 0.65 1.95 2.33 2.74 6 0.89 2.35 2.78 3.26 7 3.87 6.09 6.95 7.98

Table 14.3.2 Capacitor-Start Small Electric Motors: Net National Change in Employment Trial Standard Level 2015 (thousands) 2025 (thousands) 2035 (thousands) 2045 (thousands) 1 0.99 3.49 5.13 – 5.21 6.63 – 6.74 2 1.00 3.54 5.20 – 5.29 6.73 – 6.85 3 1.41 – 1.42 4.51 – 4.53 6.59 – 6.68 8.50 – 8.64 4 2.24 – 2.27 5.88 – 5.94 8.41 – 8.55 10.8 – 10.97 5 2.18 – 2.25 5.83 – 5.89 8.37 – 8.50 10.75 – 10.92 6 10.02 – 10.05 15.25 – 15.38 19.2 – 19.64 23.87 – 24.42 7 1.66 – 8.41 6.48 – 9.48 9.52 – 9.78 12.36 – 12.69 8 3.27 – 8.66 9.16 – 10.92 12.98 – 13.28 16.74 – 17.0714-8 REFERENCES

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

. Pacific Northwest National Laboratory. July 2005.

2 Scott, M. J., D. J. Hostick, and D. B. Belzer, ImBuild: Impact of Building Energy Efficiency Programs , April, 1998. Pacific Northwest Nationa l Laboratory. Richland, WA. Report No. PNNL-11884. Prepared for the U.S. Departme nt of Energy under Contract DE-AC06-76RLO 1830.

3 Minnesota IMPLAN Group, Inc., IMPLAN Professional: User’s Gu ide, Analysis Guide, Data Guide , 1997. Stillwater, MN.