The International Energy Agency recently reported that shifting to clean energy will create between 13 and 26 million jobs by 2030. They present this as a benefit, but that’s misleading: jobs are not a benefit, but a cost.
That might sound counterintuitive, but it’s easy to understand. Say you need to do repairs on your home and you can’t or don’t want to do them yourself. That means you have to pay for both materials and labour. But imagine that the materials would magically assemble themselves into the needed repair work all on their own. Then you would only have to pay for materials and you would save the cost of hiring someone.
This is true for any business as well. Suppose the elements of their business could magically assemble themselves into the finished product or service. The business owner could then avoid spending on employees and pass some of that savings on to customers. That’s why automation has replaced so many labourious tasks over time, from agriculture to washing clothes to taking orders at fast-food restaurants.
Can you save the cost of labour by doing your own repair work on your home? No, because your time has value. The time and energy spent doing the home repair can’t be spent on something else, whether that something else is a money-making activity or just leisure. That’s the opportunity cost of your labour, the lost opportunity to do the next most valuable thing with your time, whether for you that’s doing something that makes money or just enjoying some leisure time. Even if you find working on your home pleasurable, there’s still an opportunity cost. If that cost is high, then it’s worth hiring someone else. If it’s low, it may make sense to do the work yourself. But either way, there’s a cost.
But aren’t jobs a benefit to the person who has the job? No. They are no more a benefit than your labour on your own home is a benefit. The income is the benefit and the job is the cost you pay to get the income. That’s easy to see if you imagine getting the same income without having to work for it. Consider why nobody talks about what job they’ll have in heaven. Our standard picture of heaven is that we have all our needs taken care of without doing any work. All our time is leisure time. That vision implicitly recognises that having a job is a cost. It may be a necessary cost here on Earth, but it is nonetheless a cost.
“Imagine how much cheaper the transition to clean energy would be if it required fewer jobs so the public didn’t have to pay for as much labour”
Which brings us back to green jobs. The International Energy Agency suggests that creating millions of jobs in clean energy is a benefit, but now you should see that these jobs are really a cost. You can see this more clearly by thinking about who pays that cost. After all, someone has to pay for all that labour and that someone is the public. Imagine how much cheaper the transition to clean energy would be if it required fewer jobs so the public didn’t have to pay for as much labour. Then the clean energy policies would have even more net value.
And if such a loss of jobs in the energy sector were to occur, it would not mean a net loss of jobs. Instead, those workers would become available for employers in other sectors of the economy to hire. Then for the same amount of labour, we would get both green power and whatever other goods and services those workers would end up providing for us. So if government wanted to craft a truly economically beneficial clean energy policy, it would devise one that requires fewer workers in the energy industry.
Government is not needed to create jobs. The private sector does that on its own and does it best when government stays out of the way. Consider that the US population has tripled in the past century while at the same time automation has eliminated countless jobs. Yet, in the years just before the Covid-19 pandemic, the unemployment rate was historically low. Or consider automated checkout in grocery stores that has reduced the number of cashiers. Naively one would expect a reduction in grocery-store employment. Instead, those workers have shifted to tasks like shopping for customers who then come to the store just long enough to pick up their order. Freeing up labour from one job makes them available for new tasks that nobody could do for us in the past.
Government policies that ‘create’ jobs – green or any other colour – are not adding to the total number of jobs. They are only shifting them away from other economic sectors. And they can only do so by offering higher wages, which are paid for by us members of the public. So once again, those jobs are a cost of the policy, not a benefit.
This isn’t an argument against clean energy. This is an argument that jobs are not a reason to favour clean energy. If we have decided to transition to clean energy for environmental reasons, then we should hope for clean energy that requires fewer jobs. That would be a real benefit.
Originally published by the American Institute for Economic Research and reprinted here with permission.
