CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION ......................................................................................................... 16-1

16.2 ASSUMPTIONS............................................................................................................ 16-1

16.3 METHODOLOGY ........................................................................................................ 16-1

16.4 SHORT-TERM RESULTS............................................................................................ 16-2

16.5 LONG-TERM RESULTS.............................................................................................. 16-3

REFERENCES .......................................................................................................................... 16-5

LIST OF TABLES

Table 16.4.1 CUAC Net National Short-term Change in Employment (Number of Jobs) .... 16-3

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CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

16.1 INTRODUCTION

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

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

expenditures for purchasing and operating CUAC. Job increases or decreases reported in this 

chapter are separate from the direct CUAC production sector employment impacts reported in 

the manufacturer impact analysis (Chapter 12), and reflect the employment impact of efficiency 

standards on all other sectors of the economy. 

16.2 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 products, 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. DOE 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.

16.3 METHODOLOGY

DOE 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 

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

, a special-purpose 

version of the IMPLAN4 national input/output model. ImSET estimates the employment and 

income effects of building energy technologies. In comparison with simple economic multiplier

approaches, ImSET allows for more complete and automated analysis of the economic impacts

of energy-efficiency investments in buildings.

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

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

Sectors vary in their levels of labor intensity and 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 products. The increased cost of products leads to higher employment in 

the product manufacturing sectors and lower employment in other economic sectors. Second, 

commercial spending is 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 notes that the employment impacts estimated with ImSET for the entire economy 

differ from the employment impacts in the CUAC 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. 

16.4 SHORT-TERM RESULTS

The results in this section refer to impacts of CUAC 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 CUAC. 

DOE presents the summary impact.

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

sectors, the CUAC 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 

level). By raising energy efficiency, the rule generally increases the purchase price of CUAC;

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, freeing up 

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this money to be spend in other sectors. The reduction in electricity demand causes a reduction in 

employment in that sector. Finally, based on the net impact of increased expenditures on CUAC

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 16.4.1 present the modeled net employment impact from the rule in 2019 by trial 

standard level, rounded to the nearest hundred jobs. Approximately 95% of CUAC are 

domestically produced and 5% are imported. The net employment impact estimate is sensitive to 

assumptions regarding the return to the U.S. economy of money spent on imported CUAC. The 

two scenarios bounding the ranges presented in Table 13.4.1 represent situations in which none 

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

on imported CUAC returns to the U.S. economy. The U.S. trade deficit in recent years suggests 

that between 50% and 75% of the money spent on imported CUAC is likely to return, with 

employment impacts falling within the ranges presented below.

Table 16.4.1 CUAC Net National Short-term Change in Employment (Number of Jobs)

Trial Standard Level 2019 2024

TSL 1 100 600

TSL 2 200 1,300

TSL 3 300 1,700

TSL 4 300 to 400 2,400 to 2,500

For context, the Office of Management of Budget currently assumes that the 

unemployment rate may decline to 6.9% in 2014 and drop further to 5.3% in 2017.5 The 

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 longer-term employment.

16.5 LONG-TERM RESULTS

Over the long term DOE expects the energy savings to consumers to increasingly 

dominate the increase in product 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 

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, to 

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

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

Table 13.4.1 for most product classes and TSLs. The ImSET model projections, assuming no 

price or wage effects until 2024, 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>

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