ENERGY POLICY:

Accuracy a casualty as job arguments dominate Hill debate

As the Senate rushes toward a vote on oil spill legislation, those seeking changes in the bill are loading their arguments with a potent political word: jobs.

The oil and natural gas industry warns that aggressive regulation of oil drilling could kill industry jobs and those beyond the petroleum sector. Renewable power advocates argue that omitting needed climate policies from the Senate bill threatens existing green jobs and fails to bolster those that could be created.

"People want jobs, and all the more so in a situation like this," with an ongoing recession, said Alan Viard, an economist who is a resident scholar at the American Enterprise Institute. "It naturally has a political resonance."

But Viard and other economists warn that the jobs arguments is flawed. Industries tend to look only at a policy's impact on one sector, ignoring the broader economic impact. And they avoid a tough examination of other factors that should dictate policy decisions, such as whether something is worthwhile and what are all the costs.

"It's easier to make the case" about jobs, Viard said, "than it is to say 'Is wind energy or offshore oil drilling what we should be doing?'"

"The jobs argument is very popular," Viard added. "It is very annoying to economists."

Jobs arguments long have been made to buttress and condemn many proposed policies and became more impassioned with the recession and high unemployment. The 2009 stimulus bill passed on promises it would create jobs. It included grants, loan guarantees and other incentives meant to drive job creation, particularly in the clean energy arena.

President Obama earlier this month promoted his policies as having helped workers. While the White House has not estimated how many clean-energy jobs its policies have spawned or protected, it said that overall the Recovery Act has saved or created 2.5 million to 3.6 million jobs (Greenwire, July 15).

Democrats, renewable energy sectors and environmental groups promote the potential for "green job" creation as one of the reasons passage of climate legislation is crucial. Climate legislation now appears dead for this session, but as the oil spill bill moves forward, the jobs argument thrives.

Denise Bode, CEO of the American Wind Energy Association, on Tuesday decried Senate Majority Leader Harry Reid's plan to omit from the bill a renewable electricity standard, a national mandate requiring utilities to use some green power(Greenwire, July 27).

"We are going to see jobs lost," Bode said. "We are going to see manufacturing facilities not built in the United States. For 85,000 people employed by the wind sector," she said, "this is about survival as an industry."

Clean Energy Works, an alliance of about 60 groups that want climate legislation, on Tuesday sent an e-mail to reporters with the subject line "CEOs: Obstruction of Climate Bill Sends Jobs to China, Dollars to Enemies, Increases Pollution at Home."

The fossil fuel industry also is talking jobs, asserting that over-regulation of the sector could be devastating for workers.

"This would cut domestic production, kill American jobs, slow economic growth and cost billions in federal oil and natural gas revenues," said Jack Gerard, American Petroleum Institute president and CEO, about a proposal to lift limits on petroleum company liability for oil spill damages (Greenwire, July 27).

"Majority Leader Reid suggests his bill will create 150,000 new jobs," Gerard added, "but our analysis indicates that failing to develop in the deepwater of the Gulf of Mexico will cost more than that -- 175,000 jobs, the majority of them in already hard-hit Gulf Coast communities."

Any new jobs?

The reality, economists said, is that although a recession can temporarily shrink the number of jobs, there are roughly the same number of people working at any given time. Government policies can shift where those jobs exist, but for the most part not eliminate or create them, they said.

"Arguments about ... the job-creating or job-destroying effects of climate legislation, those sort of miss the point," said Chad Stone, chief economist at the nonprofit Center on Budget and Policy Priorities. "A transformation to a green economy would change the composition of jobs in the economy, not the aggregate number of jobs."

Wind's trade group argues that an renewable electricity standard would provide long-term stability for the industry and encourage private investment, leading to job growth. But that fails to acknowledge that policy could hurt jobs elsewhere, like in the coal industry, said Adele Morris, policy director for climate and energy economics at the Brookings Institution.

"The wind people, they want to focus on the gross jobs in their industry, not the net jobs across the economy," Morris said. There may be other reasons to want wind versus coal jobs, she said, but that is a different argument.

The wind group disagreed.

"There are differences from one technology to another, and renewables tend to be more job-intensive energy sources," AWEA said. "A critical portion of the jobs we are talking about here are manufacturing jobs, to make the 8,000 components that go into a modern wind turbine, and to create a U.S. supply chain here in the U.S. for wind and other renewable energy manufacturing.

"If those manufacturing jobs aren't created here, they will go in Europe or China," AWEA added. "Winning the clean energy manufacturing race is the critical opportunity right now with the RES."

For environmental goals to succeed, Morris said, the power made from green sources has to be as inexpensive as possible. That means making the technology in the least expensive place possible. She did not say where that might be.

"Any policy that's designed to drive manufacturing toward more expensive locations is ultimately going to undermine the environmental goal," Morris said.

When government policies eliminate some jobs, over the long run the labor market adjusts, Morris said.

"The people who are employed in that industry eventually migrate to other sectors," Morris said.

Larger effect

Over the short term, however, economists acknowledge adjustments can be painful to some workers and regions. The extent of that impact is open to some debate.

The American Petroleum Institute argues that an extended moratorium on deepwater oil drilling, or changes in tax law that make drilling less profitable, will eliminate jobs in the oil industry and well beyond it.

A report released Tuesday by the industry trade group says that more than 175,000 jobs would be affected annually by those kind of policies. It looked at the period from 2013 through 2035.

API reaches that number in its report by combining workers in three groups. It said that 30,183 oil company jobs would be at risk with a long-term moratorium. The analysis then adds in jobs indirectly connected to the industry, like workers with companies that make a product used in oil drilling or who work for a support company, like operators of contracted drilling rigs. That is another 63,207 positions, API said.

But the API report sees the affected employment pool as even bigger than those groups. The API study also includes all of the jobs that are affected by how oil company and ancillary business workers spend their wages. Those workers eat in a nearby restaurant, for example, and the report counts the job of the cook as also being relevant, said Kyle Isakower, API's vice president of regulatory and economic policy. Those jobs, called the "induced effect," total 82,051.

"Contrary to popular belief, the benefits of oil and gas development and production are not restricted to a narrow sector of the economy," the API report says. "Rather, its impacts are broad-based benefiting manufacturing, construction, real estate, finance and insurance, health and social services among others."

The same could be said of all jobs, some economists said. There is only so much money being spent in society at any one time, Viard said, and how it is spent has effects on different people.

"It's absolutely true if I spend a dollar on offshore drilling instead of spending it on a hamburger, that is going to have a whole series of ripple effects," Viard said. But the induced effect of not spending that dollar on the hamburger "is equally wide," he said.

If an oil company did not spend money on drilling, Viard said, it might choose to return it to shareholders, who might spend it elsewhere or invest it, which could drive down interest rates and benefit home buyers.

"Everything affects everything," Viard said. "There's no way to trace where that money would go, but it would go somewhere, and wherever it went it would create jobs, direct, indirect and induced."

Not all jobs have equal positive impacts on society, Isakower said.

"While there will be an induced effect for any job, some jobs have greater induced effects than others," Isakower said. Oil industry jobs are among those that benefit many others, he said, because "they do tend to be higher-paying jobs than the national average."

A moratorium could cause short-term pain to oil industry jobs and support businesses, Morris said, because those jobs tend to be concentrated in a few geographic areas.

"Workers can't instantly change what industry their skills are suited to," Morris said, and small businesses that service the oil drilling sector cannot quickly relocate.

"There's no question that in the short run there can be economic disruption," Morris said. "That doesn't mean by itself [that a moratorium] is a bad policy. We could be buying time to prevent further economic degradation down the line."

Economists argued that policy decisions should not be made solely or even largely on the basis of whether they will hurt or help jobs.

"Otherwise," Viard said, "we would still have the horse-and-buggy industry because we didn't want to lose horse-and-buggy jobs."

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