Microeconomics of green jobs - Research Paper Example

The Micro Economics of Green Jobs The Micro Economics of Green Jobs According to Tom Konrad, green job is a type of activity which involves the minimal resources and positively impacts on the environment as it seeks to create more jobs to the working populations in a country. Although it is gaining significance, it is shrouded in lots of controversies and confusions. This is because it has been appreciated and criticized in equal measures. By saying this, it means that a green job should be a utilitarian activity which has lots of benefits to the society.

In other words, green job projects should be geared towards job creation, not destruction. Moreover, it should be help in conserving the environment and promoting the health and well-being of everyone.In order to impact on the economic activity, green job policy should be carefully thought. No political or unnecessary rhetoric should be used to hinder the implementation of viable green job policies. Hence, as the article illustrates, a job should be considered as green in case it can contribute to job creation and economic activity by either substituting labor for capital or substituting capital for labor (Furchtgott-Roth, 2012).

By doing this, it will be much easier to introduce an activity which benefits the country. For instance, the use of hybrid vehicle system can be of many benefits because it can help in creating more jobs to the drivers and fleet monitors.Therefore, for a green job to be in a position of improving economic efficiency, the policy makers should be quite thoughtful in their decisions. Meaning, they should ensure that more work is produced through focusing on how the policy can be able to breakdown all the barriers to energy efficiency that can be relied upon to stimulate economic prosperity by making a good use of money which would otherwise be wasted.

Based on the above discussion, I would like to begin by concurring that green job is a wise initiative. It has lots of benefits to the society. In this regard, I recommend that the policy makers should not bring politics into the formulation of such policies. Instead, they should come up with policies that encourage the use of new technologies and can help in conserving the environment. Such policies should greatly impact on job creation; cater for the health and well-being of all the citizens and create room for future growth (Furchtgott-Roth, 2012).

In addition, I would like to recommend that the policy makers should give priority to long-term projects which can benefit the society for a long time. This implies that the green job project chosen should be able to provide the people for a longer duration. This is the best way through which everyone can enjoy them. Besides, the enforcement of such policies should not be purely based on politics, but focused on the advantages that people can get from them. If this happens, the environment will be sustainably utilized as more jobs are created for the people in order to economically empower them.

ReferencesFurchtgott-Roth, D. (2012). Regulating to Disaster: How Green Jobs Policies Are Damaging Americas Economy. New York: Encounter Books. ArticleThe Microeconomics of Green JobsMuch fuss has been made about green jobs. Do they exist, and are more “brown” jobs displaced for every green one? Given all the political rhetoric, it’s not surprising that there is also considerable confusion about green jobs.There should not be. While pinpointing the actual number of jobs created or destroyed by any particular policy will always be fraught, the underlying microeconomics are rather simple, and understanding those microeconomics can make it clear if a given policy will be a net creator or destroyer of jobs.

While there are many considerations that should be taken into account when forming policy, such as encouraging new technology which may allow future growth, and improving the health and well-being of citizens, I am going to restrict myself to the goal of promoting job creation and economic activity in this article in order to keep the discussion relatively simple.Re-framing the QuestionIn order to avoid the rather pointless debate about the definition of a “green job” I will re-frame the question to one that I believe both sides would agree is more important (at least if they were able to put aside partisan bickering):Does a particular green policy create more jobs than it destroys?

If a policy is both green (which I define as lowering our use of resources and/or environmental impact) and is a net creator of jobs, all parties should agree that it is a good policy. Green policies which destroy jobs, on the other hand will require further analysis as to whether the environmental and health benefits outweigh the economic losses, a question which requires putting relative value on various benefits, and cannot be resolved purely by economic reasoning.Which Policies are Net Job Creators?

I’m aware of two mechanisms by which a policy can increase or decrease economic activity and hence number of jobs.1. Jobs can be created or destroyed by substituting labor for capital, energy, and/or other resources in production.2. If a policy increases economic efficiency, it will increase economic activity and create jobs. If it decreases economic efficiency, it will reduce economic activity and destroy jobs.Substituting Labor for Energy or CapitalA basic tenet of microeconomics says that there is a tradeoff between capital, labor and natural resources such as energy in the production function.

In particular, you can substitute capital for labor (by mechanization) or labor for capital (by using shovels and picks instead of bulldozers.) Now add energy into the mix, and you can substitute fossil energy for either capital or labor to attain the same production.For example, a hybrid vehicle substitutes capital and resources (in the form of an electric motor and batteries) for energy (less fuel consumed to do the same work.) A bus substitutes labor (the bus driver) for capital, resources and energy (lots of cars and fuel consumed.) A green building substitutes labor (better architecture/construction) and some resources (extra insulation) for energy.

From this perspective, any policy that promotes the substitution of labor for energy will create green jobs, since you get more work and less energy consumed. Shifting people out of their cars and onto mass transit will create jobs because there will have to be drivers and people managing the transit system, where before no one was paid to drive. To the extent that the transit system can be paid for out of the reduced fuel costs and car ownership costs of the former drivers turned riders, the number of jobs created will be a pure economic gain.

Multiplier EffectsThat brings us to the other major potential source of jobs from green policies: economic multiplier effects.To the extent that green policies improve economic efficiency by overcoming economic barriers to cost effective green solutions, these policies will result in greater economic activity, and hence more jobs. The strongest critique of “green jobs” initiatives is that they simply shift economic activity from out-of-favor “brown” sectors to more politically correct green ones.

Yet when a policy improves economic efficiency, it does not just shift jobs and capital around in the economy: it creates economic activity and jobs.Not all green policies improve economic efficiency. For example, subsidies for not-yet-economic types of renewable energy such as wave power and solar installations may be justifiable on the grounds that they are helping to promote needed future technologies, but they probably come at a net cost to near-term jobs (even if they may create more jobs in the long term by allowing the creation of new types of businesses.)On the other hand, policies to promote energy efficiency will be strong net creators of jobs, because the cost of energy efficiency is typically only a fraction of the cost of the energy saved.

The very existence of opportunities to save significantly on energy bills at modest cost is proof that the energy market is inefficient. In an efficient market, all such opportunities would have already been taken.After the energy efficiency measure has been installed, the cost savings can be used for useful economic activity, rather than wasted on unneeded fuel. This money will then spur additional activity and stimulate jobs.Using Fossil Resources to Stimulate Growth is Like Stimulating Growth With DebtShort term jobs (green or otherwise) should not be the only consideration when forming policy.

A short term focus on jobs today can end up doing long term economic harm. For instance, if we spend too much borrowed money to create jobs today, the long term drag on the economy caused by paying back the debt will leave everyone worse off.Economic growth fueled by the extraction of non-renewable resources is very similar to economic growth fueled by debt. When we extract these resources and use them, we increase economic activity today, but their non-renewable nature means that we lose the opportunity to extract and use them tomorrow.

Hence, the economic stimulus today comes at the cost of an economic drag tomorrow, and the future economic drag will generally be larger than today’s stimulus, since improving technology should allow us to get more benefit from each unit of resource in the future.Using renewable resources to stimulate growth does not have this problem: Tapping the wind or the sun for energy today does nothing to diminish the wind or sun tomorrow. Hence, to the extent a green job relies on renewable resources and a brown job relies on fossil resources, the green job should be preferred, even before taking the environmental benefits into account.

Policy ImplicationsIf we only consider job creation, the focus on policy should be on creating jobs and economic activity, with a preference for green jobs, since those impose less of a cost on future economic activity than jobs based on extractive industries.Green jobs can be created either by substituting labor for energy and capital, or by reducing energy waste so that the money previously wasted on energy can be put to more productive uses. For policy makers who wish to create green jobs, the implications are clear.

Green job programs should focus on two types of opportunities:1. Industries where labor can usefully be substituted for energy or capital, such as mass transit.2. Breaking down the barriers to energy efficiency which can stimulate economic activity by allowing money that would otherwise have been wasted.The converse is also true: if the goal is to create jobs and stimulate economic activity, subsidies and other policies which encourage the substitution of capital and energy for labor should be ended, especially those subsidies which encourage the extraction of non-renewable resources which only create jobs today at the cost of future jobs.

The most cost effective policies for creating jobs will be those that break down the barriers to the adoption of cost-effective green technologies, especially energy efficiency. Ironically, most energy subsidies have gone into capital intensive sectors such as nuclear and extractive sectors such as oil and gas.A very cost effective way to produce jobs would then simply be to remove subsidies from fossil fuels and nuclear energy and redirect them towards the most cost effective clean technologies.

Increased support for and promotion of public transit could do much more to reduce our dependence on imported oil than support for domestic drilling (which will only make us more dependent on imported oil in the future by using up domestic resources sooner) while also creating jobs.Meanwhile, energy efficiency programs such as cash for caulkers can cost-effectively reduce energy bills and free up money for other sorts of consumption while also creating jobs in the depressed housing sector.