Red Light, Green Jobs

Matthew E. Kahn ("Think Again: The Green Economy," May/June 2009) tries to dampen the increasing appetite for green jobs. He argues that addressing climate change will clearly be good for the environment and for the health of future generations, but that it is unlikely to stimulate economic growth.

But in the United States, the progress that has already been made tells a different story. It has been well documented that states with stronger environmental policies consistently outperform those with weaker environmental measures. California’s strong energy-efficiency standards have created more than 1.5 million jobs and have contributed $45 billion to the state’s economy since the early 1970s.

Economists at the University of Massachusetts, Amherst, estimate that the United States can create 2 million jobs over two years by investing $100 billion in a green economic recovery plan. Their "Green Recovery" report demonstrates how this investment would create four times more jobs than spending the same amount of money on the fossil fuel industry would.

A good first step is the recent American Recovery and Reinvestment Act, which includes the biggest down payment on green job creation in U.S. history (about $60 billion). This investment will give the U.S. economy the jump-start it needs, in addition to providing jobs for millions of Americans and a healthier planet for all.

Phaedra Ellis-Lamkins

Chief Executive Officer

Green for All

Oakland, Calif.

Kahn rightly points out some of the problems underlying the current mania for "green jobs" as a cure for our economic and environmental woes. But he only scratches the surface of the problem. In a recent study, my coauthors and I dug into the green jobs literature and found a number of troubling issues.

First, these studies are often based on inappropriate analytical models, which presume no change in technology or relative prices. This is
problematic because a green transformation of the economy would be based on significant changes in both technology and relative prices.

Kahn correctly notes that there is no precise definition of a "green job." But digging deeper shows the situation is even worse. A report prepared for the U.S. Conference of Mayors lists New York and Washington as the cities with the most green jobs at the moment. Why? Because the definition of a green job is so elastic that it includes lawyers and management consultants, as well as a host of clerical and service workers to take care of the lawyers and management consultants.

Green job advocates, moreover, focus on maximizing employment, not maximizing value added. As a result, they are happy to trade high-paying jobs in refineries for solar-panel assembly jobs that pay little. Maximizing low labor productivity jobs isn’t a path to economic growth.

The U.S. economy has many green jobs already. The major energy-using industries, from aluminum to steel to pulp and paper, and many major energy-using consumer goods, such as refrigerators, have become considerably more energy-efficient over the past 50 years without government intervention as the result of market pressure to cut costs. Getting the government out of the way of green entrepreneurs would do more than President Obama’s proposed $150 billion in new spending ever will.

Andrew P. Morriss

H. Ross and Helen Workman
Professor of Law

University of Illinois

Champaign, Ill.

Matthew E. Kahn replies:

I thank both letter writers for their insightful comments. Andrew P. Morriss and I agree on several points. I have mixed feelings about Phaedra Ellis-Lamkins’s argument that strict environmental regulations have caused California to outperform other states. To establish this causal claim, we would need to know what California’s economic performance would have been under Texas-style environmental regulations.

Two years ago, I moved to California in part because I wanted to live in a progressive state with a high quality of life. California’s climate and lifestyle self-select people like the Google guys and Governor Arnold Schwarzenegger. They are the true engine of growth for the state. If California can recruit and retain the skilled, then it will have a bright future. Do stringent environmental regulations help achieve this goal?

In the case of local challenges such as polluted water and smog, the answer is yes. But, now that we are focused on climate change, the jury is still out concerning whether a "green jobs" push offers a win-win of economic growth and sharp reductions in greenhouse gas emissions. My main worry is that if the Obama team emphasizes this policy route, it will distract from the critical goal of directly putting a price on carbon production.