Let's Stop Arguing About Energy Jobs
Both Donald Trump and Hillary Clinton have made the creation of so-called “energy jobs” a regular topic on the campaign trail. At a stop in Michigan, Clinton asserted that America could become a “clean energy superpower … and create millions of jobs.” Trump, at a Pennsylvania rally in coal and shale country, proposed “an energy revolution, and that means a lot of jobs, especially for this area.”
Whoever holds the reigns of power next January should focus on job creation. But the fact is, energy jobs should not be where we look to revitalize U.S. employment.
Here’s why: The singular achievement of modern society has been the near magical increase in the production of everything, including and especially energy supply, using less labor -– in a word, “productivity.” Nobel Prize-winning economist Paul Krugman put it well: “Productivity isn’t everything, but in the long run it is almost everything.” It’s actually a good thing “energy jobs” comprise barely 3 percent of America’s workforce unlike days of yore when huge swaths of the population were so occupied.
The fact is the energy sector is following agriculture’s tech-driven productivity trends. There was a time when most people were employed in agriculture. Now America grows enough food to feed everyone here and much of the world with just 1.5 percent of our labor force so employed. No one in their right mind would encourage ‘full’ employment by reversing gains in agriculture productivity.
So when it comes to energy policies, we should focus first on productivity because it “is almost everything.” It follows that the overall economy is better off when stimulating jobs that yield the most energy per employee. Here the data on energy productivity are illuminating.
As has been widely publicized, solar and wind output have grown over the past half dozen years. The data show that each new solar job produced the equivalent of almost 300 barrels of oil (BOE). Over the same period, wind was far more productive: each new wind job yielded 4,000 BOE. (And while ethanol output didn’t rise, its productivity is about 1,000 BOE per ethanol job.) And shale? Each new shale job produced 14,000 BOE.
This astonishing productivity in shale explains the American oil and gas boom. In all, over the past half-decade shale has yielded 2,000 percent more American energy than solar and wind combined—and without special subsidies. Along the way, shale did become the nation’s largest job creator during the recovery from the Great Recession. But that says more about the sluggishness of the overall recovery in which the shale boom was the only bright corner in the economy.
More relevant to the economy, the U.S.-created oil and gas glut collapsed global energy prices. As University of Michigan economist Mark Perry pointed out, Americans now spend a smaller share of their income on energy than at any time since such tracking began in 1929. This is the power of productivity.
And since trade issues matter in the political and economic calculus, consider that two-thirds of the solar panels installed in America are manufactured overseas, as are more than half of wind turbines. Meanwhile, the shale supply chain is, like ethanol, nearly entirely home grown.
This is key: If we want more jobs we should be looking mainly at the non-energy activities where 97 percent of Americans find employment. And since overall job growth follows rising productivity, it’s a bad idea to pursue less productive technologies in any sector, including energy. Policies should focus on stimulating productivity everywhere. Perhaps “productivity” seems too arcane in this sound-bite season. Consider then that according to the Department of Labor most jobs come from small businesses. But for the first time in decades, the U.S. crossed a ‘sad’ milestone in 2008 when more businesses failed annually than were being created. Worse yet: Millennials are starting new businesses at half the rate that Boomers did.
While all jobs matter, more important than energy jobs are policies that ensure America keeps fuel costs down because low-priced energy is an accelerant for growth. The central policy imperative today must be on restoring America’s business formation engine.