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 IMPACTS.............................................................................................. 16-3

LIST OF TABLES

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

16-i
CHAPTER 16. EMPLOYMENT IMPACT ANALYSIS

16.1 INTRODUCTION

The U.S. Department of Energy’s (DOE’s) employment impact analysis is designed to 

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

reallocation of the associated expenditures for purchasing and operating PTACs and PTHPs. Job 

increases or decreases reported in this chapter are separate from the direct manufacturing sector 

employment impacts reported in 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 appliances, 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. It 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. As input/output models do not allow prices to bring markets into 

equilibrium, they are best used for short-run analyses. DOE, therefore, includes 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

The Department 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 a more complete and automated analysis of 

the economic impacts of energy efficiency investments in buildings.

16-1
In an input/output model, the level of employment in an economy is determined by the 

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

sectors have different 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 affect the overall level of employment.

ImSET uses a 187-sector model of the national economy to predict the economic effects 

of residential and commercial building 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 appliances. The increased cost of appliances leads to higher 

employment in the appliance manufacturing sectors 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 leads to reductions in utility sector investment 

and employment.

DOE also notes that the employment impacts estimated with ImSET for the entire 

economy differ from the employment impacts in the PTAC and PTHP 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 PTAC and PTHP 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 presents the summary impact.

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

sectors: the PTAC and PTHP production sector, the energy generation sector, and the general 

consumer good sector (as mentioned previously, ImSET’s calculations are made at a much more 

disaggregate level). By raising energy efficiency, the rule increases the purchase price of PTACs

and PTHPs; 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. 

The reduction in electricity demand causes a reduction in employment in that sector. Finally, 

based on the net impact of increased expenditures on PTACs and PTHPs and reduced 

16-2
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, generating more 

employment; the converse is true for workers who are laid off.)

Table 16.4.1 presents the modeled net employment impact from the rule in 2019, rounded 

to the nearest ten jobs. Approximately 40% of PTACs and PTHPs are domestically produced 

and 60% are imported or assembled from imported components. The net employment impact 

estimate is sensitive to assumptions regarding the return to the U.S. economy of money spent on 

imported PTACs and PTHPs. The two scenarios bounding the ranges presented in Table 16.4.1 

represent situations in which none of the money spent on imported PTACs and PTHPs returns to 

the U.S. economy and all of the money spent on imported PTACs and PTHPs 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 PTACs and PTHPs is likely to return, with employment impacts 

falling within the ranges presented below.

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

Trial Standard Level 2019 2024

1 -10 to 0 -10 to 10

2 -60 to -10 -40 to 30

3 -130 to -20 -80 to 50

4 -220 to -30 -140 to 70

5 -260 to -30 -140 to 80

For context, the Office of Management and Budget (OMB) currently projects that the 

official unemployment rate may decline to 6.9% in 2014 and drop further to 5.4% in 2019.

5 The 

unemployment rate in 2019 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 IMPACTS

Due to the short payback period of energy efficiency improvements mandated by this 

rule, over the long term DOE expects the energy savings to consumers to increasingly dominate 

the increase in appliance 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. As 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 a long-run equilibrium, there is no net effect 

on total employment, because wages adjust to bring the labor market into equilibrium.

Nonetheless, even to the extent that markets are slow to adjust, DOE anticipates that net labor 

16-3
market impacts will be negligible over time due to the small magnitude of the short-term effects 

presented in Table 16.4.1. The ImSET model projections, assuming no price or wage effects 

until 2024, are included in the second column of Table 16.4.1.

16-4
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. 

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 2013 Mid-Session Review: Budget of the 

U.S. Government, 

<http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/13msr.pdf>

16-5