Where the Jobs Aren’t
By David Brooks, The New York Times, September 5th 2011
With the economy stagnating and unemployment high, where are the jobs of the future going to come from? A few years ago, it seemed as though the Green Economy could be a big part of the answer.
New clean-energy sources could address environmental, economic and national security problems all at once. In his 2008 convention speech, Barack Obama promised to create five million green economy jobs. The U.S. Conference of Mayors estimated in April 2009 that green jobs could account for 10 percent of new job growth over the next 30 years.
Alas, it was not to be. The gigantic public investments in green energy may be stimulating innovation and helping the environment. But they are not evidence that the government knows how to create private-sector jobs.
Recently, Aaron Glantz reported in The Times on some of the disappointments. California was awarded $186 million in federal stimulus money to weatherize homes. So far, the program has created the equivalent of only 538 full-time jobs. A $59 million effort to train people for green jobs in California produced only 719 job placements.
SolFocus designs solar panels in the United States, but the bulk of its employment is in China where the panels are actually made. As the company spokesman told Glantz, “Taxes and labor rates” are cheaper there.
There’s a wealth of other evidence to suggest that the green economy will not be a short-term jobs machine. According to Investor’s Business Daily, executives at Johnson Controls turned $300 million in green technology grants into 150 jobs — that’s $2 million per job.
Sunil Sharan, a former director of The Smart Grid Initiative at General Electric, wrote in The Washington Post that the Smart Grid, while efficient and environmentally beneficial, will be a net job destroyer. For example, 28,000 meter-reading jobs will be replaced by the Smart Grid’s automatic transmitters.
A study by McKinsey suggests that clean energy may produce jobs for highly skilled engineers, but it will not produce many jobs for U.S. manufacturing workers. Gordon Hughes, formerly of the World Bank and now an economist at the University of Edinburgh, surveyed the landscape and concluded: “There are no sound economic arguments to support an assertion that green energy policies will increase the total level of employment in the medium or longer term when we hold macroeconomic conditions constant.”
Many of the most celebrated green tech companies are foundering despite lavish public support. Evergreen Solar, the recipient of tens of millions of dollars in state support, moved its manufacturing facility to China before filing for bankruptcy protection.
The U.S. Department of Energy poured $535 million in loans into Solyndra, a solar panel maker backed by George Kaiser, a major Democratic donor.
The Government Accountability Office discovered that Solyndra had been permitted to bypass required steps in the government loan guarantee process. The Energy Department’s inspector general criticized the department for not maintaining e-mails that discussed how the loan guarantee winners were chosen.
Late last month, Solyndra announced that it was ceasing operations, laying off its 1,100 employees. The Department of Energy placed the wrong bet, potentially losing the taxpayers half-a-billion dollars.
All of this is not to say that the government shouldn’t be doing what it can to promote clean energy. It is to say that the government isn’t very good when it tries to directly create private-sector jobs.
In 2009, Josh Lerner of Harvard Business School published a useful book called “Boulevard of Broken Dreams.” He found that for each instance in which the government has successfully promoted entrepreneurial activity, there is a pile of instances in which it failed.
Lerner details case after case where public investments produced little or nothing. But he also makes an important distinction between government efforts to set the table for entrepreneurial activity and government efforts to create jobs directly. Setting the table means building an underlying context for innovation: funding academic research, establishing clear laws, improving immigration policies, building infrastructure and keeping capital gains tax rates low. Lerner notes that one of the most important government initiatives to encourage innovation was the Bayh-Dole Act of 1980, which gave universities automatic title to research paid by the federal government.
These table-setting efforts work. The problem is the results are indirect, the jobs take a long time to emerge and the market may end up favoring old-energy sources instead of shiny new ones. So politicians invariably go for the instant rush. They try to use taxpayer money to create private jobs now. But they end up wasting billions.
We should pursue green innovation. We just shouldn’t imagine these efforts will create the jobs we need.