Green jobs: supply and demand

In a year of anti-incumbent sentiment, the Democrat candidates for governor and senate here are planning on emphasizing their environmental policy and green jobs. The lead story in Friday’s Mercury was about the gubernatorial candidate;

Brown puts focus on green

was the five column headline above the fold. (The online headline was more boring.) The point of the story was that Jerry Brown wants Bay Area voters to know that unlike his GOP opponent, he supports California’s controversial anti-global warming policy:

Brown said the new law would create hundreds of thousands of clean-energy jobs, reclaiming from China leadership of the cleantech economy.

Also on Friday, the local ABC TV station ran a story about the party’s senate candidate touting green jobs:

Sen. Barbara Boxer, D-Calif., is talking up the benefits of stimulus spending. Friday, she was in San Jose at a job training center talking about green tech jobs, saying California is the hub of the clean energy economy for the entire country.

At the Center for Employment Training in San Jose, Boxer watched as students practiced mounting solar panels and solar power irrigation devices.

She told the students they are training for the jobs of the future.

"If we keep focused and we make sure that we don't go backwards we will see these workers here working all over the state putting those roofs on schools on office buildings and on homes," Boxer said.

The CET received $3 million from a stimulus grant. Students are confident their training will pay off.

The story was surprisingly intelligent and balanced for local television, perhaps because reporter Mark Matthews had 2:30 to make his point. The story quoted both blue collar workers hoping to get green jobs, those that have despaired, and Boxer’s GOP opponent as disagreeing with job training subsidies.

The argument for such training is straightforward. It would be nice to rely on the market to identify training needs and supply that that need, but perhaps there would be a lag in responding to that demand — or perhaps in times of tight budgets, firms and non-profits are underinvesting in worker training.

Still, by training workers for a specific industry, the federal government is either reducing the costs for companies in that industry, or shifting demand to the trained workers from whoever the firms were planning on hiring instead. (It’s also possible that by reducing the cost of acquiring new workers, that the government is slightly increasing the demand for such workers.)

However, as one of the TV interviews suggests, some of the workers may be trained for jobs that don’t exist. For example, last year California community colleges were training workers for solar installer jobs just as other installers were laying off workers. This is both a problem with the government picking job training based on environmental policy rather than proven demand, and — more generally — a problem of producing a supply of specialized workers in advance of demand. (In California in the 1960s and 1970s, there were some really bad times to start a 4-year degree in aerospace engineering.)

The linkage of Brown’s policy lever to local jobs was more tenuous than for the direct training model. Opponents of AB 32 say that the measure increases costs (and thus reduces money for workers), particularly with small firms.

The original argument for AB32 was that California needs to take the lead among Americans in reducing carbon emissions to do our part to reduce global warming. However, since the recession, AB32 proponents (like Brown) now say requiring more CO2-efficient technologies will lead to California jobs in creating and delivering such green technologies.

The problem is that the most aggressive and admired demand-side RE stimulation — the model for the global industry — has been Germany. Now, the general consensus is that manufacturing of solar panels is fleeing to China — just like everything else — and that both German buyers and sellers of panels will shift to panels made in China.

That’s the inherent problem with buyer subsidies: they cause people to buy things, but not necessarily things made locally. (Under WTO rules, subsidies for locally-made products are verboten.) So buyer subsidies — or mandates — will shift demand but not necessarily stimulate local employment.

This is not an argument to do nothing, but it is a reminder that the effects of government stimulus (or mandates) may be less than predicted and thus less cost-effective than proponents originally claimed.