13 July 2011

Job Creation Isn’t Inherently Good

Here’s some balderdash from climatologists:

In a recent report (PDF) published by RenewableUK and Energy & Utility Skills, the authors suggest that the wind and marine energy industries have the potential to contribute heavily to job creation given that a correct policy and legislative framework is implemented. Although this is an encouraging message, we ought to study the lessons to be learned from Denmark, the once so promising first mover in renewable energy.
Three market development scenarios, measured by the extent of deployment of wind and marine energy, are set out in the report. By 2021, the low growth scenario envisages the support of 44,000 jobs, medium growth is anticipated to result in the creation of 67,200 jobs, and high growth may well create 115,000 jobs, most of which require a particularly skilled workforce. These numbers account for full-time employees whose jobs are directly or indirectly (i.e. in the supply chain) created by the growth of these industries. For this growth to be possible, however, the authors call for substantial investments in the workforce in order to facilitate the provision of much needed skills.

One of the more hilarious aspects of “green” energy proposals is the promise of more jobs, with the implicit assumption that more jobs equal a lower unemployment rate.  From a practical standpoint, this sort of argument is specious because energy contractors rarely hire unemployed people who have never worked in the energy sector.  As such, the pool of potential candidates is usually relegated to those who aren’t part of the current unemployment metric (because they are either currently employed or being “educated”).

Another implicit claim of jobs in “green” energy is that having more jobs will lead to more wealth.  This may or not be true; although the necessity of subsidies for green energy would suggest that it destroys wealth.  Anyway, a simple thought experiment should suffice to demonstrate how more jobs doesn’t always equal more wealth:  Imagine two countries, each having a population of 500 that are equally productive at producing everything except energy.  Country A requires the labor of two people in order to produce 100 megawatts of electricity in one hour; Country B requires the labor of one person in order to produce 100 megawatts of electricity in one hour.  Assuming that both countries have identical natural resources, capital, and governmental infrastructure, etc., which one is wealthier?

To ask the question is to answer it:  the country that can produce more electricity with less labor is wealthier, because it can divert more human capital to producing things other than electricity.  This thus shows that having more energy jobs may not be a good thing because it does not indicate whether the increase in jobs will produce more energy more efficiently, which is actually the relevant metric.  Employing people simply for the sake of employing people is not economic growth, it is charity, and should be viewed as such.

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