Duke Institute Seeks to Upgrade Job Prediction Models

Such critical elements as job definition, the economy's overall unemployment rate, or economic differentiation typically are not taken into account in most job measurement estimates.

With U.S. unemployment rates hovering near 10 percent, proposals for new energy and environmental policies are scrutinized more for their ability to create jobs. Yet, job-creation estimates vary widely, are often conflicting, and can confuse policymaking efforts, according to a policy brief released by Duke University’s Nicholas Institute for Environmental Policy Solutions.

“Different models are used to generate these estimates, and there are no widely accepted standard practices for how to conduct these studies, or to transparently report key underlying assumptions and results," said Brian Murray, director for economic analysis at the institute and a co-author of the paper. "The effect has been confusion on the part of policymakers and the public at a time when greater clarity is needed in assessing the trade-offs such legislation presents.”

The policy brief outlines critical elements of job measurement not taken into account in most estimates, including job definition, the economy’s overall unemployment rate, or the differentiation across sectors of the economy and over time. Authors Murray, research associate Joshua Schneck, and Etan Gumerman, co-director of the Duke Climate Change Policy Partnership, argue the resulting information can mischaracterize job estimates and the broader economic impacts resulting from these policies.

“I think there has been some reluctance in the modeling community to focus on job impacts when the primary purpose of these policies is not to create jobs, but rather to achieve an environmental goal,” said Schneck. “That said, with U.S. unemployment at such a high-level, demand for jobs analyses are not going away, and therefore the focus for modelers should be on filling that demand with studies exhibiting as much analytical rigor and transparency as possible — a goal we hope to further with this paper.”

To more accurately portray the effect energy and environmental policy may have on jobs, the authors recommend developing standardized modeling and reporting practices, which can better take into account all underlying factors and report the outcome more consistently. Specifically, this approach would more precisely highlight uncertainties, capture short- and mid-term job dynamics, and state whether results are in net or gross job impacts.

“While we by no means view this paper as a ‘how to’ guide to perform and report these important studies,” Murray said, “We do hope it can provide guidance for future efforts aimed at consistency of application and transparency of reporting.”

The paper was developed out of a workshop hosted by the institute, which brought together close to 60 economists, policy advisers, and government officials. Suzanne Tegen, a senior energy analyst at the National Renewable Energy Laboratory, co-authored the report.

To read the full policy brief, visit the Nicholas Institute’s website: nicholasinstitute.duke.edu/economics/climatechangepolicy/estimating-employment-impacts.

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