Green Jobs Demonstrate The Perils Of Government-Directed Economic Growth

Green Jobs Demonstrate The Perils Of Government-Directed Economic Growth

Part of President Biden’s Build Back Better initiative promises to “create good-paying union jobs and train Americans for jobs of the future.” The unspoken theory behind this initiative is that green jobs will offer a pay premium to workers compared to jobs in the fossil fuel industry. It also reflects the Administration’s view that sustainable and robust economic growth is driven by the federal government. Both of these premises are ill-founded.

Starting with the pay premium of green jobs, a study commissioned by North America’s Building Trades Unions (NABTU) reports that tradespeople “consider projects in oil and natural gas to have better perceived wages, benefits, and opportunities than renewables projects. They also report that the oil and natural gas industries offer projects with longer durations than those in renewables industries”.

Data from the Bureau of Labor Statistics (BLS) confirm their perspectives. Based on the Occupational Employment and Wage Statistics, the average annual wage for a solar photovoltaic installer is $46,470, which is less than the average annual wage for many jobs in the oil and gas industry such as a derrick operator ($47,920 annually) or an underground mining machine operator ($52,400).

An October 21, 2020 NPR editorial arguing in favor of green jobs even had to admit that petroleum jobs pay “40% over the median [salary] according to the U.S. Energy and Employment Report – and extraction jobs on drilling sites pay nearly double the national median, according to the Bureau of Labor Statistics.”

Just as important, according to the Department of Energy, “the domestic oil and natural gas extraction industry supports 896,000 jobs (as of the end of 2019), including both direct [people directly employed in the industry] and indirect jobs [people employed in the industry’s supplier firms]. This consists of 158,000 direct jobs and an estimated 738,000 indirect jobs, such as service and supply jobs”.

Citing a study by the Economic Policy Institute, the Department of Energy further notes that the industry has one of “the highest indirect job employment multipliers, where one direct job leads to an additional 5.43 indirect jobs.” Put differently, for every job generated by the profitable production of oil and natural gas, there will be more than 5 jobs created in related industries. A 2015 study from the German government assessed that the similar economic multiplier from “green energy jobs” is around 2, or less than half the multiplier for the oil and gas industry.

These data indicate that, based on the economic models used by the Administration, President Biden’s policy of discouraging jobs in oil and natural gas is counterproductive if the goal is to accelerate recovery from the Covid-19 recession. Instead of promoting economic growth, the Administration is actively discouraging the growth of good-paying union jobs that have broad-based economic benefits.

While it is difficult to justify the investment in green jobs based on its economic impact, perhaps the Administration is really judging the efficacy of these policies based on the combined environmental and economic impact. Even if this is the case, the justification is still inconsistent with the data.

Based on the COemission data from the Energy Information Administration (EIA), total emissions in the U.S. peaked in 2007 and by 2018 had declined 11.5%. While it may seem logical that the share of power that a state generates from renewable energy sources would be associated with a larger decline in overall state CO2 emissions, this relationship is not evident in the data. In fact, it is the states that generate the largest share of energy from nuclear power that tended to have the largest reduction in overall CO2 emissions.

Take California as an example. California generates a larger share of its energy from renewable sources than the average state, and a much smaller share from nuclear power. Total emissions also declined 8.6% between 2007 and 2018, which is significantly smaller than the national average decline of 11.5%. Therefore, unless the green jobs initiative is supporting a resurgence of the nuclear power industry, it is unlikely that the net environmental and economic benefits justify these expenditures.

The fact that the actual data on green jobs and green investments differ from the political expectations demonstrates the folly of directing economic growth out of Washington D.C. Although the Biden Administration likens government expenditures to investments, this classification is a misnomer.

Investments are productive because there is a risk of failure, which ensures that scarce investment dollars fund projects that efficiently serve consumers’ needs and desires. In contrast, the Build Back Better program will spend hundreds of billions of dollars on green projects with little to no discipline. This inability to learn from failure is a crucial difference between the Administration’s proposed expenditures and actual productive investments.

A robust recovery from the current recession is an essential public policy goal, so is encouraging a market-based approach toward lowering the economy’s carbon intensity. However, President Biden’s Build Back Better platform is ill-equipped to meet them. The likely result will be a less efficient economy that will diminish our prosperity and make it more difficult to address important societal problems such as global climate change.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.