14-i 

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
14-1 

CHAPTER 14. EMPLOYMENT IMPACT ANALYSIS

14.1 INTRODUCTION

The U.S. Department of Energy (DOE) intends the employment impact analysis to 

estimate national job creation or job elimination resulting from possible new standards, due to 

reallocation of the associated expenditures for purchasing and operating equipment. DOE will 

conduct this analysis as one of the analyses for the notice of proposed rulemaking (NOPR). DOE 

will estimate national impacts on major sectors of the U.S. economy, using publicly available 

data and incorporating different energy price scenarios that it will carry out as part of the analysis 

for the NOPR. DOE will make all methods and documentation available for review. 

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the plants that produce the 

covered equipment, along with the affiliated distribution and service companies, resulting from 

the imposition of standards. DOE will evaluate direct employment impacts in its manufacturer 

impact analysis, as described in chapter 12 of the preliminary technical support document (TSD). 

Indirect employment impacts may result from expenditures shifting between goods (the 

substitution effect) and changes in income and overall expenditure levels (the income effect) that 

occur due to the imposition of standards. 

14.2 ASSUMPTIONS

DOE expects new equipment standards to decrease energy consumption, and therefore to 

reduce expenditures for energy. The savings in energy expenditures may be spent on new 

investment and other items. The standards may increase the purchase price of 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 seeks to estimate 

the year-to-year effect of these expenditure impacts on net economic output and employment. A 

simple model might involve reduced expenditures for energy and reallocation of that money 

toward other sectors in the economy. DOE intends the employment impact analysis to quantify 

the indirect employment impacts of these expenditure changes. It will evaluate direct 

employment impacts in the manufacturer impact analysis step of the process.

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, 

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. 
14-2 

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 2002 Benchmark 

U.S. table,2

 which is specially aggregated to 187 sectors. The time step of the model is annual 

and the time scale of the model is 100 years (2001–2099). 

The ImSET model allows a great deal of flexibility for analyzing 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 commercial refrigeration equipment. Depending on the design options 

considered, one possible outcome is that the standards for this commercial refrigeration 

equipment would reduce energy expenditures and increase equipment prices in the commercial

and industrial sectors. These expenditure changes may reduce energy sector employment and 

either reduce or increase employment in selected commercial sectors. At the same time, the 

standard may increase investment in the commercial and industrial sectors 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.
14-3 

REFERENCES

1. Scott M.J., O.V. Livingston, J.M. Roop, R.W. Schultz, and P.J. Balducci. Impact of Sector 

Energy Technologies Model Description and User’s Guide. 2009. Pacific Northwest National 

Laboratory: Richland, WA. Report No. PNNL-18412. 

2. Stewart, R.L., J.B. Stone, and M.L. Streitwieser. U.S. Benchmark Input-Output Accounts, 

2002. Survey of Current Business October 2007. 2007. (Last accessed March 11, 2009.) 

<http://www.bea.gov/industry/index.htm#benchmark_io>