15.i

CHAPTER 15. NET NATIONAL EMPLOYMENT

TABLE OF CONTENTS

TABLE

Table 15.1 Net National Change in Jobs ...................................... 15.2

FIGURES

Figure 15.1 Net National Employment Impacts ................................. 15.1

Figure 15.2 Employment Impacts of Consumer Savings .......................... 15.4

Figure 15.3 Employment Impacts of Equipment Price ............................ 15.5

Figure 15.4 Employment Impacts of Installation Cost ............................ 15.6

Figure 15.5 Employment Impacts of Utility Impacts ............................. 15.7

Figure 15.6 Net National Employment Impacts, AEO2000 High Growth . . . . . . . . . . . . . 15.8

Figure 15.7 Net National Employment Impacts, AEO2000 Low Growth . . . . . . . . . . . . . . 15.9
15.1

CHAPTER 15. NET NATIONAL EMPLOYMENT

Net national employment impacts from water heater efficiency standards are defined as net

jobs created or eliminated in the general economy as a consequence of: (1) reduced spending by end

users on energy (electricity, gas, oil, and LPG); (2) reduced spending on new investment or capacity

by energy companies; (3) increased spending on the purchase of new water heaters; (4) increased

spending on the installation of new water heaters; and (5) the associated indirect effects of those four

factors throughout the national economy. 

 Figure 15.1 shows the estimated net national employment impacts of four different trial

standard levels. These trial standard levels are discussed in greater detail in the analyses of

Shipments (Chapter 11) and National Energy Impacts (Chapter 12). Figure 15.1 shows, for any

given year, the change in the number of jobs in the economy relative to the number of jobs if there

were no change in standards (and thus no resulting change in spending and cash flow patterns

throughout the economy). Table 15.1 shows the net national employment impact in specific years.

-30

-20

-10

0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.1 Net National Employment Impacts
15.2

Table 15.1 Net National Change in Jobs

Trial Standard Level 2010

(thousands)

2020

(thousands)

2030

(thousands)

1 3.8 7.7 8.9

2 3.5 9.2 11.2

3 6.4 15.8 21.4

4 -4.1 1.9 -5.2

These results are based 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 model, ImBuild, was developed for DOE’s Office of Building Technology,

State and Community Programs.1 ImBuild (which stands for Impact of Building Energy Efficiency

Programs) was created by the Pacific Northwest National Laboratory as a special-purpose version

of the IMPLAN national input-output model. It was developed to estimate the employment and

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

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

energy-efficiency investments in buildings.

Energy-efficiency technology affects the U.S. economy primarily through three mechanisms.

First, if the incremental costs of the new technology per installed unit are different from those of the

conventional technology, changes in purchases will occur in the sectors involved in manufacturing,

distribution, and installation for both technologies, which will change the overall mix of economic

activity. Second, depending on how the efficiency investment is financed, it may “crowd out” other

domestic savings, investments, and consumer spending, somewhat reducing overall economic

activity. Third, energy expenditures will be reduced. On one hand, this reduction lowers final

demand in the electric and gas utility sectors (and the fuel oil production and distribution sector) as

well as in the trade and services sectors that provide maintenance, parts, and services for the utility

and fuel sectors. On the other hand, it increases net disposable household income and increases

general consumer spending in all sectors (including some increases in expenditures for electric and

gas utility services and retail trade and services).

ImBuild is written in Visual Basic and Excel. It uses a 35-sector model of the national

economy to predict the economic effects of residential and commercial buildings technologies. It

has a user-friendly, menu-driven front end to facilitate input. ImBuild collects user-supplied

estimates of initial investments, energy savings, and economic activity associated with spending of

the savings resulting from standards (changes in final demand in personal consumption, business

investment, and government spending) and provides overall estimates of the change in national

output for each input-output sector. Then, 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.
15.3

ImBuild calculates the total effect of standards on employment, including job creation or

deletion in the manufacturing sector. Direct employment impacts, i.e., those that would occur at

water heater manufacturing plants, are discussed in the Manufacturer Impact Analysis (Chapter 13).

Figure 15.1 shows the cumulative net increase or decrease in jobs resulting from water heater

efficiency standards for each year to the year 2030. The greatest number of jobs is created for Trial

Standard Level 3 with 21,000 more jobs in 2030 when compared to the no-standards base. 

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 so changes in the level of spending (e.g., such as

the effects of an efficiency standard) in one sector of the economy will effect flows in others, which

effects the overall level of employment. 

Jobs are created when the net change in spending flows into more job-intensive sectors

relative to the base case; jobs are lost when the net change in spending flows into less job-intensive

sectors relative to the base case. An energy-efficiency standard for water heaters will create such

changes in the spending flows of the economy. Standards will reduce water heater operating costs,

which will in turn increase the amount of disposable income to consumers. There are two basic

reasons why energy cost savings (driving job creation) increase after a standard is implemented: (1)

households buy higher-efficiency water heaters compared to the base-case scenario and (2) the total

number of water heaters in the country increases over time, generating a greater potential for energy

savings. These water heaters are bought by consumers who would have bought a lower-efficiency

water heater if a higher-efficiency standard were not implemented. 

A standard may also increase purchase price (reducing disposable income to consumers) and

increase the demand for capital in the water heater manufacturing industry. The water heater

manufacturing industry is more capital-intensive than average, so an increase in spending flows to

it will initially tend to reduce the employment level in the overall economy.

Figure 15.1 can be divided into three general sections:

a. During the first few years of a new standard, the increased costs of buying more efficient

water heaters are greater than the dollar savings in energy. In Figure 15.1, this is

reflected as a net decrease in jobs between 2004 and 2006 for trial standard levels 1

through 3. This effect extends to 2012 under trial standard level 4.

b. Once the initial costs are recovered through energy savings, the dollars saved in

expenditures on energy are available to buy other goods in the economy, thereby

increasing jobs. The net national employment curve is steepest for the first dozen years

(the lifetime of a water heater), during which time there is both a growth in the total stock

of water heaters as well as an increase in the saturation of water heaters of higher

efficiency.
15.4

c. After 2015, even though the total stock of water heaters continues to increase, the growth

in net employment stabilizes because at that point all of the water heaters being replaced

in the standards case are water heaters that are already high-efficiency (instead of

replacing baseline water heaters with high-efficiency ones). Under trial standard level 4,

the shift to electric water heaters in new construction means energy savings are not

sufficient to offset the increased equipment costs and net employment starts to decline

again.

The impact on jobs has been disaggregated into the component effects. Figure 15.2 shows

the impact on jobs of consumer energy savings. When more consumers save money by using

efficient water heaters, they have more money to spend in other more labor-intensive sectors of the

economy; this results in a net increase in jobs throughout the economy.

-30

-20

-10

0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.2 Employment Impacts of Consumer Savings

The employment impacts of consumer energy savings are largest for Trial Standard Level

3, with a cumulative increase of 29,000 jobs in 2030.
15.5

Figure 15.3 shows the employment impacts of the increased first cost of more efficient water

heaters. This higher first cost is reflected in the decrease in jobs shown in the figure. Because

manufacturing is capital-intensive, less investment capital is available for other purposes. Trial

Standard Levels 1 shows a loss of less than 3,000 jobs in 2030 because of the increase in equipment

price. Trial Standard Levels 2 and 3 show a loss of about 6,000 jobs in 2030. Trial Standard Level

4 shows a loss of more than 30,000 jobs in 2030.

-30

-20

-10

0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.3 Employment Impacts of Equipment Price

There is a significant increase in installation costs from energy-efficiency standards.

However, the impact on jobs is surprisingly small. Cumulative job increase because of increased

installation costs in 2030 is projected to be about 1,000 jobs for Trial Standard Level 4. This is

shown in Figure 15.4. The scale in this figure is the same as in the other employment impact charts

to show the relative size of this impact.
15.6

-30

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0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.4 Employment Impacts of Installation Cost

Figure 15.5 shows the decrease in employment resulting from energy savings. When

consumers use less energy, the electric and gas utilities (and fuel oil production and delivery

companies) experience relative reductions in demand. Reduced demand results in less investment

in new capacity and hence lower employment in these sectors. The effect on jobs because of the

impact on utilities is also small. The impact on utilities causes a net loss of 1800 jobs for Trial

Standard Level 3.
15.7

-30

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-10

0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.5 Employment Impacts of Utility Impacts

The energy savings for each of the fuel sources are shown in the National Energy Impacts

results (Chapter 12).

Figures 15.1 through 15.5 are all based on future energy prices as projected in the Annual

Energy Outlook 2000 (AEO2000).2 In addition to its reference scenario, which was used above, the

AEO2000 includes a “high growth” and “low growth” scenario for future energy prices. We also

estimated the net national employment impacts for the four different standard levels using these two

alternative scenarios for future energy prices. Figures 15.6 and 15.7 show the net employment

impacts for the high and low growth scenarios, respectively. 
15.8

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.6 Net National Employment Impacts, AEO2000 High Growth
15.9

-30

-20

-10

0

10

20

30

2000200520102015202020252030

Year

Jobs (Thousands)

Trial Standard 1

Trial Standard 2

Trial Standard 3

Trial Standard 4

Figure 15.7 Net National Employment Impacts, AEO2000 Low Growth
15.10

REFERENCE

1. 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. Prepared for

the U.S. Department of Energy under Contract DE-AC06-76RLO 1830. Report No. PNNL11884. 

2. U.S. Department of Energy - Energy Information Administration, Annual Energy Outlook

2000: With Projections Through 2020, December, 1999. Washington, DC. Report No.

DOE/EIA-0383(2000). <http://www.eia.doe.gov/oiaf/aeo/>