Industrial Green

Green industries grow jobs and labor income faster than environmentally high-impact industries. Perhaps we already knew that, but I just discovered an economic model that demonstrates how shifting Washington’s industrial output to green collar jobs will benefit workers’ pocketbooks.

For example, the model can compare educational services to petroleum products. And it shows that increasing sales in education, rather than the petroleum, will create 12 times as many jobs and 20 times more labor income.

These numbers don’t come from a crystal ball. They’re based on an Input-Output Impact Model, which is used by government agencies and private consultants to estimate the economic impacts of a project or a budget. The model tries to tabulate how industries stimulate one another by tracking how much they sell to consumers as compared to other local industries. It can be used to see the overall economic ramifications of boosting one industry versus another. In the example above, it tells us that educational services create a lot more local economic activity than petroleum products.

I took advantage of the Washington State Input Output Model on the Office of Finance and Management’s website. OFM generously provides a worksheet in which anyone can play Mao and redistribute industrial growth or boost output in certain industries by plugging in numbers on a spreadsheet.

For example, let’s say we model a decrease of $5 million in output from a few high-impact industries such as: “Animal Production,” “Logging,” “Mining,” and “Petroleum Products” and move that $5 million into “Food Services and Drinking Places,” “Arts, Recreation and Accommodation,” “Health Services,” and “Educational Services.” The worksheet tells us that total economic output will increase by $3 million; 435 new jobs will be created; and labor income will increase by $6.3 million. Not too shabby!

Of course the service industry cannot fuel our entire economy. So let’s try some green shifting within the sectors that produce physical things.

This time let’s take $7 million each from “Chemical Manufacturing,” “Food Manufacturing,” and “Fabricated Metals” and let’s move it to “Computer and Electronic Products,” “Crops,” and “Textiles and Apparel.” With this shift we actually lost total output on the order of $2.8 million. But we gained elsewhere: 141 new jobs and around $1 million in labor income, a net for Washington workers and the environment.

Try it for yourself (xls). You can grow and shrink various economic sectors (table 1 column B) and see the results for gross output, the number of jobs, and labor income (table 5 Columns B, C, D on row 265).

Here’s a look at the best and worst industries for overall job creation if they received an independent $5 million output boost.

The best:

The worst:

OFM’s model is useful for only small-scale change and it makes some assumptions and extrapolations that stretch certainty. Still, it appears that shifting the economy toward greener jobs will also move us toward a healthier economy—one with fatter paychecks and more job opportunities. Because this model does not account for production limitations, such as the depletion of natural resources—a limitation that plagues too many economic models—the real economy would likely favor green industries even m
ore.

One more note of caution, however: if we don’t change our consumption habits, a green shift in our local economic output will simply send the environmentally high-impact industries elsewhere. So to be meaningful, a shift to green collar jobs shift must go hand-in-hand with a shift to greener buying habits.