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The Pitfalls in Job Counting ("Green" jobs versus economic jobs)

It’s understandable that this happens during a recession, but nonetheless a very bad trend in policy analysis is the narrowminded focus on jobs per se.  Thus the ~$800 billion spending package is evaluated according to how many jobs it will create or save, rather than according to its promotion of efficient resource allocation.

This focus on employment for its own sake is most evident in the “green jobs” rhetoric.  There are two major problems with the typical claims in this area.  First, advocates will offer statistics showing that a tax on fossil fuels coupled with, say, subsidies to wind power will create jobs on net, because it takes more people to produce a given amount of electricity through wind than through coal.

But far from being an advantage, this is prima facie evidence against the use of wind power.  (The correct criterion, of course, is total cost, including capital and labor.)  We want to get as many kilowatt-hours as possible from a given amount of resources.  The goal of the electricity sector isn’t to employ workers, it’s to power homes and businesses.  If Martians showed up and offered to beam unlimited amounts of electricity to every building on the planet as a token of goodwill, that would be fantastic.  But I suspect some energy “experts” would warn that this would throw the world into a catastrophic depression because of all the unemployed workers.

Besides its misguided elevation of workers over consumers, the typical rhetoric on green jobs often uses very expansive definitions to generate optimistic projections.  For example, Roger Pielke links to a Christian Science Monitor analysis of such chicanery:

Earlier this week, Fortune’s eco-blog, Green Wombat, ran a story under the headline, “Wind jobs outstrip the coal industry.

Blogger Todd Woody cites [a] new report from the American Wind Energy Association that about 85,000 people are now employed by the wind power industry, up from 50,000 a year ago. Mr. Woody then says that “the coal industry employs about 81,000 workers,” citing a 2007 report from the Department of Energy.

…But it’s a bogus comparison. According to the wind energy report, those 85,000 jobs in wind power are as “varied as turbine component manufacturing, construction and installation of wind turbines, wind turbine operations and maintenance, legal and marketing services, and more.”  The 81,000 coal jobs counted by the Department of Energy are only miners. Their figure excludes those who haul the coal around the country, as well as those who work in coal power plants.

To be fair,  Woody…does say that “[t]he wind industry now employs more people than coal mining in the United States.” But his story then immediately abandons this distinction, and then goes on to characterize those 81,000 jobs as comprising the total employment of the coal industry.

These are just two of the problems with the “green jobs” rhetoric.  Another flaw is that such analyses often assume that unemployed workers will stay idle indefinitely, if not for government spending programs.  For a full critique of the most popular green jobs studies, see my paper with Robert Michaels.

3 comments

1 Environmental Capital - WSJ.com : Green Jobs: The 'Fiscally Conservative' Stimulus Spending { 02.23.09 at 11:52 am }

[...] nature of many clean-energy projects, from retrofitting buildings to installing solar panels. Detractors see a fatal flaw precisely in the labor-intensive nature of green jobs, since that amounts to lower [...]

2 Wall Street Journal » Blog Archive » Green Jobs: The ‘Fiscally Conservative’ Stimulus Spending { 02.23.09 at 4:50 pm }

[...] nature of many clean-energy projects, from retrofitting buildings to installing solar panels. Detractors see a fatal flaw precisely in the labor-intensive nature of green jobs, since that amounts to lower [...]

3 Tomas J. Nally { 02.24.09 at 2:34 am }

The stimulus plan, as a whole, is not a jobs creator. It will be a jobs destroyer compared to alternate uses of $800 billion. The reason is so simple that…well…I dare say even an elected politician could understand it.

Basically, the reason that public sector spending destroys jobs is because it takes the federal government $1.25 to procure the same amount of goods and services that can be procurred in the private sector for $1.00. This phenomenon could go by the simple name of “inefficiency”, but I prefer to call it “the degraded purchasing power of the federal dollar”.

When $0.25 of purchasing power is lost billions and billions of times over, that represents hundreds of thousands of jobs that will never come into existence because the federal government is spending those dollars instead of the private sector entities from whom those dollars were extracted.

Why can private sector entities make more happen with a dollar than the federal government? This is equally easy to understand. Private entities have a duty to the “bottom line”. Elected officials have a duty to their reelection.

But those politicians who are genuinely concerned for the American people will want dollars to remain where their purchasing power — and job creation power — is maximized. In the hands of the people and companies who created those dollars in the first place.

—Tom Nally, New Orleans

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