The Unemployment Problem

Business leaders will meet on Thursday with White House officials in order to “ponder ways to boost employment.”

After mistakenly promising unemployment below 8% if the stimulus bill were to pass, this administration has finally determined that maybe those who’ve been creating jobs and wealth might actually know something about . . . creating jobs and wealth.

One would hope that serious consideration would be given to the suggestions made by those whose business is to produce, employ, grow, and make a profit; but this administration’s policies have been consistently unfriendly to small businesses – those that actually create the majority of jobs in this country.

CEOs and business owners, according to the Wall Street Journal, are interested in having a discussion about tax incentives for new hires and eliminating whatever uncertainty can possibly be eliminated in the current climate.  

Bills currently under consideration in Congress, including the health care bill and cap-and-trade-type legislation, could potentially increase the costs of doing business so astronomically as to completely shut down the growth of some companies.  Until there is a reliable way to project costs, new employees are simply too much of a risk for many businesses in this depressed economy.

The Obama administration is apparently interested in discussing job growth in the clean-tech sector, failing to realize that without the infrastructure to support the industry, few new jobs will be created quickly and the work will go to foreign workers in other countries.

Of the $1.05 billion already given out in clean-energy grants from stimulus cash, 84% has gone to foreign wind companies.  While those companies may have subsidiaries in the United States, the numbers of Americans employed as a result of those grants is negligible.  Iberdrola Renewables, a subsidiary of a Spanish utility company, has received $545 million alone and was able to announce a $247.4 million profit during the first 9 months of this year.  The company employs just 800 individuals throughout the United States.

The bulk of the money made through wind projects is made in the manufacturing of turbines.  Nearly 3/4 of the jobs created in this industry is in manufacturing, as opposed to just over 1/4 for the operation, maintenance, and installation of the turbines.  It should also be noted that, according to the Renewable Energy Policy Project, for every 1,000 megawatts of wind energy developed, there are 4,300 jobs created.

Of the grants given from stimulus funds, 1,763 megawatts of capacity were developed; of those, 1,566 were installed by foreign companies.  What this means is that approximately 4,500 jobs were likely created overseas with our tax dollars, at a time when unemployment in our own country has exceeded 10%, and our president claims lowering unemployment (ostensibly with stimulus funds) is a major priority.

Is it too much of a stretch to take our recent experience in renewable energy cost dynamics and draw on it when examining the German experience, nearly 20 years in the making?  A final report, issued in October of this year regarding the economic impacts of the promotion of renewable energies in that country, does little to convince that the future holds any greater economic achievements for us down the road than those achieved in Germany.

While job growth projections look appealing, they apparently fail to take into account offsetting job losses which result, including the opportunity cost of investment being diverted from other, possibly more beneficial investment.”

Additionally, because more workers are needed to produce a given amount of energy than is necessary with traditional energy production, the output potential of the overall economy is diminished.  This then leads to lower net job creation.  According to the German study, “Significant research shows that initial employment benefits from renewable policies soon turn negative as additional costs are incurred.”

The existence of renewable-energy jobs in Germany has also been found to be completely dependent on government support, and subsidization is as high as US $240,000 per worker.  This, after nearly 20 years of development.  Our current administration may have to make a decision as to which is more of a priority at this time: clean-energy production or job creation.

There have been laid out for us two conflicting goals, where the evidence points to the fact that pursuit of one will fully undermine the achievement of the other.  Failure to acknowledge the existence of a such a conflict does nothing to avoid the problems inherent in it and simply relegates us to repeating mistakes laid bare by the history and experience of others.  Let’s learn from history and move forward rather than deny reality and undermine our future.

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