A Free-Market Energy Blog

Are ‘Green’ Programs Good for the Poor?

By Robert Murphy -- August 11, 2009

The Political Economy Research Institute (PERI) recently put out a study called “Green Prosperity”  with the subtitle:  “How Clean-Energy Policies Can Fight Poverty and Raise Living Standards in the United States.” I have posted a full critique for the Institute for Energy Reserach, which I summarize here.

Helping Business By Crippling It?

The PERI study makes this bold claim:

The building of a clean-energy economy in the United States can also serve another purpose: to create new ‘pathways out of poverty’ for the 78 million people in this country (roughly 25 percent of the population) who are presently poor or near-poor, and raise living standards more generally for low-income people in the United States. (p. 2)

This is nonsense. You don’t make a country richer by taking away options from businesses.

You don’t spur businesses to hire more workers, and pay them higher wages, by reducing the productivity of the average worker, by slapping on more regulations.

If some of the more dire computer simulations are accurate, then it could be true that the major economies need to quickly reduce emissions, in order to avoid future environmental damages. Yet even if that were true, the (rational) cutbacks would be very costly. The question is: Are the benefits (of mitigated emissions) worth these high costs?

Again, if we take the most alarming climate models at face value, then efforts to contain climate change will have a disproportionate benefit to the world’s poorest people. They would be the ones to suffer the brunt of rising sea levels and so forth.

But by the same token, it is the world’s poorest people who will suffer the most from cutbacks in generic goods and services, cutbacks that will be necessary if various governments impose strict emission cuts.

The Lower the Wage, the More Jobs You Can “Create”

The PERI study repeats a popular stat from the green literature:

[O]ur findings show that clean-energy investments create more job opportunities than spending on fossil fuels, across all levels of skill and education. The largest benefits will accrue to workers with relatively low educational credentials. (p.2, emphasis added)

In a relatively free market economy, where for the most part lawmakers and unelected bureaucrats don’t control economic decision-making, labor and capital moves towards those sectors where they are the most productive. Some businesses, such as hair salons, are relatively labor-intensive, whereas other businesses, such as airlines or oil rigs, would be more capital-intensive. Loosely speaking, the economy’s overall output would be maximized, because every worker and machine would be deployed in the sector where they could produce the most value (and earn the most money).

Now enter the policymakers and bureaucrats who start rearranging resources. They look at businesses that generate electricity by harnessing wind and solar power, and then they look at businesses that produce electricity by harnessing coal power. Since it takes more workers to produce electricity from windmills and solar panels, they decide to cripple the coal burners and give subsidies to the wind harvesters to try to create a “green recovery.”

But if it really helped workers for them to move from efficient energy industries into “green” energy sectors, why would the government have to force them to do it? Part of the answer is that the new jobs will actually not be very high paying, as the PERI study unwittingly admits when it says, “Out of the 1.7 million net increase in job creation, roughly 870,000 of the newly available jobs would be accessible to workers with high school degrees or less.”

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