Jobs, Jobs and Energy Jobs

It's two million, and counting. But how high can it go? 

by Steve Mitnick, Aug 11, 2015

Job creation is paramount. Job creation in the energy sector is even more instrumental, for those who ply their trade there as we do. How often have we heard, for instance, that the solar industry  its residential rooftop segment especially — is creating jobs at remarkable rates of year-over-year growth? Much was made recently that solar has left the coal industry in the dust (pun intended) in terms of employment.

Job creation estimates advanced by advocates for this or that program, policy or proposal have been notorious for obscuring assumptions and the inherent difficulties in making fair apples-to-apples comparisons. This wouldn't matter much but for the considerable impact that job estimates can have on the debates.

Making murkier the discussions about jobs is the widespread misunderstanding of electricity sector employment. The problem starts with the incautious use of the US Bureau of Labor Statistics data on employment.

The Bureau's Current Employment Statistics, based on a broad monthly survey, is the authoritative source on the number of jobs by industry. Its Establishment Data estimates the number of jobs for everything from logging to snack food manufacturing to toy stores to sports teams, adding up to the total of some 162 million Americans on non-farm private and government payrolls.

Too often one cites the number of jobs in category 22, entitled Utilities, specifically category 2211, entitled Power Generation/Supply. This number, currently around 0.4 million, is represented as the industry's total employment. Policymakers, the press and the public can't know that this number may count no more than a fifth or so of the industry's total employment, disregarding four fifths.

The gross underestimation of electricity employment comes from the dis-integration of the electricity value chain. The dis-integration is national, even in the south, Midwest and mountain west where electric utilities are commonly referred to as vertically-integrated.

Electricity is not always generated and supplied by conventional utilities, but by government agencies in many areas. Electricity is almost never generated with fuel produced and delivered by utilities, but by the mining and transportation sectors. Electricity's infrastructure is almost entirely made and erected by the manufacturing and construction sectors. So the jobs at these government agencies, fuel mining and transportation companies, and manufacturing and construction companies are just as much a part of the electricity value chain as the jobs at conventional utilities.

A dozen categories in the Establishment Data aside from Power Generation/Supply are clearly integral proportions of electricity employment. Each of these categories includes tens or hundreds of thousands of jobs in the electricity sector.

In the government part of the national economy, Local Government Utilities includes public power utilities. In the mining part of the economy, Bituminous Coal/Lignite Surface and Bituminous Coal/Lignite Underground include coal produced for power plants. And Oil/Gas Extraction includes natural gas for power plants. In the transportation part of the economy, Rail, Water and Pipeline include coal and natural gas delivered for power plants.

In the construction part of the economy, Power/Communication System and Oil/Gas Pipeline include infrastructure erected for electricity and fuel. In the manufacturing part of the economy, Electric Power/Specialty Transformers, Turbine/Power Transmission Equipment and Mining/Oil/Gas Field Machinery include critical components for that infrastructure.

It wouldn't be appropriate to allocate all the jobs in these dozen categories to the electricity sector. For instance, the oil side of Oil/Gas Extraction and Oil/Gas Pipeline should be subtracted out. However, in aggregate, the dozen categories have nearly 1.4 million Americans on payrolls.

There are good methods to properly allocate a portion of these jobs to the electricity sector. With coal mining and transportation by rail, water and truck, the federal government has data on the percentage of coal and natural gas destined for US power plants, and on the percentage of rail, water and truck traffic delivering coal to these plants. As another example, energy industry associations have data on employment in the entire natural gas value chain, on employment by the natural gas utility departments of combination electric/gas utilities, and on employment by investor-owned, public power and rural co-op electric utilities.

My estimate is that approximately 0.8 million of the 1.4 million jobs in the dozen categories  just over half  are allocable to the electricity sector. That's twice the number of jobs in the narrow category Power Generation/Supply.

And we haven't mentioned as of yet the vast workforces in professional and outsourced services that are clearly integral proportions of electricity employment. Among the largest departments in the country's many firms in the fields of computer/tech, accounting, legal, engineering, consulting, communications, human resources, finance, real estate, architecture, security, call centers, temp agencies, janitorial, etc. are dedicated to the electricity sector.

The Establishment Data estimates these kinds of firms have well over 10 million employees. Professional/technical services firms by themselves have 8.5 million. So dedicated departments of professional and outsourced services firms must have several hundreds of thousands of jobs appropriately allocated to the electricity sector, conservatively in the range of 0.8 million. That's also twice the number of jobs in the narrow category Power Generation/Supply.

Counting the jobs in the Power Generation/Supply category, the jobs in the dozen categories allocable to the electricity sector, and the jobs in departments of professional and outsourced services firms dedicated to the sector, the total can be pegged at 2 million. This would be 1.2% of the nation's non-farm private and government payrolls.

This benchmarks well since the electricity sector is 2.2% of the nation's gross domestic product. Electricity, as we've said, is a mix of many sectors, that when combined are a bit less labor-intensive overall than the economy generally. The combination is roughly comparable to the goods-producing sectors of the economy, but less labor-intensive than the service-providing and government sectors.

The implications for the future of the electricity sector? With some 2 million jobs, and with their well-above-average compensation, benefits and job quality, electricity employment is an important slice of the nation's workforce.

Though, electricity's productivity is continually improved. Efficiencies are every year integrated throughout the value chain. And now we're substituting highly capital-intensive renewable generation for more labor-intensive coal generation. Consequently, we can expect moderate growth in the number of jobs at best.

In 2030, electricity may still employ 2 million. But fewer of the jobs will be in fuel production and delivery and in power plants, and more of them will be in manufacturing, construction, and professional and outsourced services.

Steve Mitnick, author of Lines Down: How We Pay, Use, Value Grid Electricity Amid the Storm, was formerly in the leadership teams of energy consulting practices at McKinsey & Co., Marsh & McLennan, and PHB/Hagler Bailly, was chief energy advisor to the Governor of New York, and was chief executive of a transmission developer. He testified as an expert witness before many regulatory commissions and taught economics and statistics while on the faculty of Georgetown University.

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