Briefing Report: The "Green" Jobs Graft

Wednesday, March 2, 2011

"Fallacies do not cease to be fallacies because they become fashions."
- G.K.Chesterton

"While a pro-business agenda may intersect at points with a pro-market one, they are not the same thing. Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and ‘creative destruction’ and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo."
- James Pethokoukis 

Green seeds

In a society as diverse and complex as California, its economic inputs and outputs are likely to reflect an eclectic range of values including an ecologically-correct "green" policy. Its environmental-industrial complex of laws and regulations rule many sectors of the state, from energy to manufacturing to chemicals to waste to even water. Such an eco-conscious economy naturally yields to a discourse on "green" economy, with its politically charged fruit, "green" jobs. Since it is impossible to discern every intention for applying the "green" jobs mantra - a simple marketing ploy or a serious public policy consideration - consumers of the term should be at least familiar with the implications of trading on such a vague idea. This all begs the billion dollar subsidy question: What is a "green" job, exactly?

It is difficult to narrowly define a "green" job because it tries to be all things to all people. The United Nations Environment Program provides the most comprehensive definition. "Green" jobs are those that provide "work in agricultural, manufacturing, research and development (R&D), administrative, and service activities that contribute(s) substantially to preserving or restoring environmental quality. Specifically, but not exclusively, this includes jobs that help to protect ecosystems and biodiversity; reduce energy, materials, and water consumption through high efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generation of all forms of waste and pollution."1 With such a broad definition, it is possible to categorize just about any job as being "green."

There are real problems with a malleable "green" job definition. It is easy to reclassify conventional jobs as "green" jobs when they may be performing essentially the same function under normal circumstances. Nevertheless, an organization will define a "green" job as it suits their purposes. Enterprises operating in the state are aware that the success of their services and products are intricately connected to their ability to not only use resources efficiently, but to effectively market themselves as being "green." Making things more efficient, automating various services or reducing waste - all "green" job functions - leads to a certain amount of creative destruction and necessarily eliminates a variety of jobs. Putting aside a normative discussion on whether rigorous statutory mandates and taxpayer subsidies are right or wrong in their own right, it can be argued that even the best intentioned government "green" jobs schemes increase costs and artificially distort the market. This is not a unique issue to California.

The grass is not always greener

When championing the latest and greatest environmental cause, vigorous activists are quick to quote the latest "green" jobs numbers. Yet, there has to be some perspective on the numbers. A few billion dollars of taxpayer-aided investment over the last couple years is relatively insignificant when compared to California’s $1.9 trillion dollar economy. Taking a broader view, when looking at "green" jobs across the nation, a recent Pew study counted 770,000 unique "jobs that achieve the double bottom line of economic growth and environmental sustainability…a mix of white- and blue-collar positions, from scientists and engineers to electricians, machinists and teachers." That is less than ½ of 1% of all jobs in America.2

Looking abroad, a recent study that reviewed the impact of "green" jobs in Spain, estimated that 2.2 jobs were destroyed for every 1 renewable or "green" job financed by the government. Only 1 in 10 jobs actually created through "green" investment is permanent, and since 2000, Spain has spent $753,778 (US) to create each "green" job, including subsidies of more than $1,319,783 per wind industry job.3 The unemployment rate in Spain hit 20.33% at the end of 2010 and shows little sign of decreasing. Other economic studies in the United Kingdom4 and Germany5 reveal that the high costs of providing mass-scale subsidies to "green" jobs may not be worth it, even in these relatively socialized countries. Further, the Italians and Poles are not convinced that "green" jobs really exist.6

Acknowledging their dense populations and need for increased energy production, in addition to their construction of conventional energy generators, the Chinese and Indian governments have made tremendous investments in wind turbines and photovoltaic cells, seemingly cornering the market for renewable energy products. This kind of policy produces "green" jobs at a high human cost where there is less concern with environmental regulations, the disposal of hazardous waste, union organizing, child-labor laws and the like. These factors also make it very difficult for companies in the United States and California to compete for jobs that manufacture and market "green" products.

There are also negative externalities generally overlooked by those supplying the "green" jobs domestically. If a "green" job produces and installs compact fluorescent lights, LED bulbs, batteries for electric cars and photovoltaic cells, who is going to concentrate on the mercury, arsenic, lead and other heavy metals discharges and wastes associated with these products? Soon enough, California will be forced to deal with the unintended consequences of a coming tide of "green" technology waste. Perhaps we can call them "neon green" jobs for now?

Planting in the rocky soil

Just because we want "green" technology here in California, doesn’t mean that the jobs to make "green" technology stay here. Even if their "green" product were viable in California, the permitting processes and environmental impact reviews for most businesses and their attendant projects are onerous and prohibitively expensive and largely require years to run their courses. This does not speak of the union pressure to restrict apprenticeship programs or induce formidable wage and benefit agreements before an approved "green" job project can create any jobs at all. Combining these issues with other regulatory uncertainties, few business executives are willing to wade through that hassle when those hurdles are not present in other states or countries, no matter how big the government largess.

Just ask former Democratic Assembly Speaker Bob Hertzberg. After leaving the legislature, he moved the solar-power company he founded, G24i, to Wales when he discovered how difficult it was to operate a business in California’s private sector. "With all the money and time it took us to go through the regulatory maze, we were basically chased out of the country." Millions of dollars of venture capital and dozens of "green" jobs exist far from California where there are few market barriers to overcome.7

In just the past couple of months, three California based solar panel companies - AQT Solar, Stion and W Solar Group - have decided to move their operations, manufacturing and hundreds of millions of dollars across the country, as California’s legal, tax and regulatory environments continue to deteriorate. There is little incentive to fully operate a business in California if profit margins and positive returns on investment are important. AQT Solar CEO Michael Bartholomeusz told the Solar Industry magazine, "California is such a wonderful incubator of talent and incubation. They incubate companies like us, and then companies migrate to other locations."8 Kevin Costner further illustrates the point when he invested $40 million of his own money and sited his centrifuge technology and ocean-cleaning device company in Nevada, miles and one state away from the Pacific.  Apparently, Costner did not get the memo from his fellow Hollywood blockbuster friend, Governor Schwarzenegger, to build his multi-million dollar "green" company in California, where it may have practical and immediate uses.  If it is too expensive even for the wealthiest actors to do business in California, then how is anyone else to compete?

The Gleaning

Recognizing that while the resources of the Earth are scarce, properly directed human ingenuity and enterprise tends to maximize any and all available resources making them nearly limitless. In the end, a state supported concept of "green" jobs is a political novelty and a feel-good command and control strategy rather than a substantial free-market policy. It is time for the government to stop playing favorites among job creators and level the playing field for all in the marketplace. For the sake of innovation and the opportunities for "green" jobs that would otherwise exist independent of a government mandate or subsidy, the legislature should cease, not expand, its patronage of the "green" jobs boondoggle. Indeed, if the legislature is intent on increasing any form of employment in California, improving the regulatory process should be its priority, rather than focusing on the product, no matter what color the job may be.


For more information on this report or other Environmental Quality issues, contact Lance Christensen, Senate Republican Office of Policy’s token "green" job at 916/651-1501.