Tuesday, April 14, 2009

Job Creation: Green Investment vs. Defense Spending

Republicans believe government spending does nothing to create jobs, unless we're spending money on defense. Actually, we're better off spending money on green investments according to Robert Pollin, professor of economics.
In fact, the green-investment agenda is a highly effective engine of job creation, much more so, for example, than two favored Republican forms of spending, military outlay and the oil industry.

Thus, for a given billion dollars of spending, the Obama green-investment program will generate about 17,000 jobs. Spending the same amount on the military will produce only 8,500 jobs, 50 percent less than green investments. Spending an additional $1 billion on the oil industry -- the "drill, baby, drill" agenda advanced by the McCain/Palin campaign -- will produce only 4,500, about one-fourth the total created by green investments.
Pollin says three factors are at play to explain why investment spending devoted to the green economy creates more jobs than military or oil spending.
Relative labor intensity. This means more spending on people and less on machines, buildings, supplies, and energy. In weatherizing a home, the machinery and supplies needed are relatively low, while the demand for construction workers is high. Drilling for oil requires huge amounts of sophisticated machinery and relatively few people to operate that equipment. A military base employs lots of people. But it also involves heavy equipment purchases and consumes lots of energy.

Domestic production versus imports and spending abroad. With Obama's green-investment agenda, well over 90 percent of total spending will occur within the U.S. economy. Energy-efficiency measures, such as building retrofits, public transportation, and upgrading the electrical grid, can only occur on-site. Weatherization projects for buildings in North Dakota can only be done in North Dakota. The New York City subway system must be upgraded in New York. By contrast, the U.S. now imports about 50 percent of all the oil it consumes, and about 20 percent of total spending within the oil industry occurs abroad. The proportion of the military budget spent abroad is even higher.

Differences in pay levels. The average annual pay for employees associated with the green investment, including both wages and benefits, is about $52,000. This is roughly 20 percent below the $65,000 average for both the military and oil industries. This means that a given amount of spending for workers in the green-investment areas yields more job creation at lower average wages -- stretching out a given sum of wage and benefit payments.
That last point about lower average wages isn't actually a bad thing according to Pollin, because many more jobs overall are being created and more money is going into more workers' pockets.
All told, the green-investment agenda still creates far more jobs paying over $16 an hour than either the military or the oil industry does -- 75 percent more than the military and three times more than the oil industry.

And in the green economy, even many of the relatively low-paying jobs in construction and manufacturing offer decent job ladders for entry-level workers. There are fewer such prospects for advancement in even lower low-paying service-sector jobs, such as those of janitors, waiters, and health-care assistants.
President Obama's economic stimulus program includes between $50 billion and $140 billion in clean-energy spending. That's a drop in the bucket compared to the $1339 billion the world spent on the military in 2007, of which we're responsible for 45 per cent of that total, distantly followed by the UK, China, France, and Japan each with 4 to 5 per cent of the world share. Instead of increasing defense spending by 8 percent next year, the President should take the $40 billion or so difference and put it toward green investment. It'll create new industries and put more people to work, and we'll still be a superpower.


abi said...

Well said, Kathy. Green investment is a win-win that should come under the category of a no-brainer. But I guess that's the problem with the critics on the right - no brains.

Kathy said...

Thanks, Abi. I would have been on-board with green investment no matter what, but hopefully those job creation figures will win some of the critics over.