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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 high-intensity discharge lamps. The U.S. Department 

of Energy (DOE) will conduct this analysis as part of the notice of proposed rulemaking 

(NOPR). 

DOE will estimate the effects of standards on employment for equipment manufacturers, 

relevant service industries, energy suppliers, and the economy in general. Both indirect and direct 

employment impacts are estimated. Direct employment effects 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 13 of the interim technical support document (TSD)). Indirect 

employment impacts affect the national economy in areas other than the regulated manufacturing 

sector. Indirect impacts may result from both 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 energy conservation standards to increase the total installed cost of 

equipment (which includes manufacturer sales price, sales taxes, distribution channel markups, 

and installation costs). DOE also 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 lamps and related equipment, including the retail price plus sales 

tax, and increase installation costs.

Using an input-output (I-O) model of the U.S. economy, this analysis will seek to 

estimate the effects on different sectors and the net effect on jobs. DOE will estimate national 

employment effects on 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 will base its analysis on an I-O 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 3.1.11 (Impact 

of Sector Energy Technologies), to estimate the employment and income effects of building 

energy technologies. Compared with simple economic multiplier approaches, ImSET allows for 
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more complete and automated analysis of the economic impacts of energy efficiency investments 

in buildings.

In an I-O model, the level of employment in an economy is determined by the 

relationships of different sectors of the economy and the spending flows among them. Because 

different sectors have different levels of labor intensity, 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. 

The ImSET model includes structure 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 aggregated to 187 sectors. The time scale of the model is 50 years. 

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 I-O 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.

The following is an example of how the employment impact analysis might track effects 

resulting from a standard for high-intensity discharge lamps. Depending on the design options 

considered, one possible outcome is that the standards for these lamps 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. Scott, M. J., J. M. Roop, O. V. Livingston, R. W. Schultz, and P. J. Balducci. ImSET 3.1: 

Impact of Sector Energy Technologies. 2009. Pacific Northwest National Laboratory: 

Richland, WA. PNNL-18412. <www.pnl.gov/main/publications/external/ 

technical_reports/PNNL-18412.pdf>

2. Lawson, A. M., K. S. Bersandi, 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.