CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION ............................................................................................................ 14­1

14.2 ASSUMPTIONS............................................................................................................... 14­1

14.3 METHODOLOGY ........................................................................................................... 14­1

REFERENCES .......................................................................................................................... 14­3

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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 possible new 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 Public Rulemaking (NOPR).

DOE estimates 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 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 (MIA)

(Chapter 12). Indirect employment impacts are impacts on the national economy other than in

the manufacturing sector being regulated. Indirect impacts may result both from expenditures

shifting among goods (substitution effect) and changes in income which lead to a change in

overall expenditure levels (income effect). DOE defines indirect employment impacts from

standards as net jobs eliminated or created in the general economy as a result of increased

spending driven by the increased equipment prices and reduced spending on energy.

14.2 ASSUMPTIONS

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

MSP, sales taxes, distribution channel mark­ups, and installation cost). 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. On the other hand,

energy conservation standards may raise the purchase price (including the retail price and sales

tax) of general service fluorescent lamps (GSFL) and incandescent reflector lamps (IRL) , and

increase installation costs.

Using an input/output 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 spreadsheet model of

the U.S. economy that focuses on 188 sectors most relevant to industrial, commercial, and

1

residential building energy use. ImSET is a special­purpose version of the U.S. Benchmark

National Input­Output (I­O) model, which has been designed to estimate the national

employment and income effects of energy­saving technologies that are deployed by the DOE

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Office of Energy Efficiency and Renewable Energy. In comparison with previous versions of

the model used in earlier rulemakings, 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 software includes a personal computer­based I­O model with structural

coefficients to characterize economic flows among the 188 sectors. ImSET’s national economic

2 I­O structure is based on the 1997 Benchmark U.S. table, specially aggregated to 188 sectors.

The time scale of the model is 50 years.

The model is a static I­O model, which allows a great deal of flexibility concerning the

types of energy efficiency effects that can be accommodated. For example, certain economic

effects of energy efficiency improvements require an assessment of inter­industry purchases,

which is handled in the model. Some energy efficiency investments will not only reduce the

costs of energy in the economy but the costs of labor and other goods and services as well, which

is accommodated through a recalculation of the I­O structure in the model. Output from the

ImSET model 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 IRL. Depending on the design options considered, one possible outcome is

that the standards for IRL 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

year­to­year 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, Ann M., Kurt S. Bersani, Mahnaz Fahim­Nader, and Jiemin Guo. Benchmark InputOutput Accounts of the U. S. Economy, 1997. Survey of Current Business. 2002. December.

pp. 19­117.

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