The Myth of Green Jobs

There is no more fashionable solution to the current global recession than "green jobs." President Obama, Britain's Gordon Brown, Nicolas Sarkozy of France, and China's Hu Jintao are all eagerly promoting clean-technology industries, like wind and solar power, or recycling saw grass as fuel. It sounds like the ultimate win-win deal: create jobs, cut down on energy dependence, and save the planet from global warming, all in one stimulus plan. Ever since the recession began, governments, environmental groups, and even labor unions have been spinning out reports on just how many jobs might be created by these new industries—estimates that range from tens of thousands to millions.

Those kinds of predictions, however, may be overoptimistic. As a new study from McKinsey points out, the clean-energy industry doesn't have much in common with old, labor-intensive manufacturing industries like steel and cars. A more accurate comparison would be to the semiconductor industry, which was also expected to create a boom in high-tech jobs but today employs mainly robots. Green-tech workers—people who do things like design and build wind turbines or solar panels—now make up only 0.6 percent of the American workforce. McKinsey figures that clean energy won't command much more of the total job market in the years ahead. "The bottom line is that these 'clean' industries are too small to create the millions of jobs that are needed right away," says James Manyika, a director at the McKinsey Global Institute.

On the other hand, a booming green sector could fuel job growth in other industries. Here, too, the story of the computer chip is instructive. Today the big chip makers like Intel employ only 0.4 percent of the U.S. workforce, down from a peak of 0.6 percent in 2000. But indirectly they helped create millions of jobs by making other industries more efficient: throughout the 1990s, new technologies based on advanced semiconductors helped firms achieve massive gains in labor productivity and efficiency. Companies in retail, manufacturing, and many other areas got faster and stronger.

McKinsey and others say that the same process could play out today if governments focused less on building a "green economy"—by which they really mean a clean-energy industry—and more on greening every part of the existing economy. U.S. efforts to promote corn-based ethanol, and giant German subsidies for the solar industry, for instance, are incredibly counter-productive. In both cases the state is creating bloated, inefficient sectors, with jobs that are not likely to last.

A better approach would be to push businesses and consumers to do the basics, such as to improve building insulation and replace obsolete heating and cooling equipment. In places like California, 30 percent of the summer energy load is sucked up by air conditioning, so the state government now offers low-interest loans for consumers to replace old units with more efficient ones. Consumers pay back the loans through their taxes and pocket the energy savings. When that money is spent, it drives demand and thus job growth in other areas.

The energy and efficiency savings that companies can achieve lead even more directly to jobs. It's no accident that Walmart, a company that looks for savings wherever it can find them, is one of the only U.S. firms that have continued growing robustly throughout the recession. In 2008, when oil hit $148 a barrel, Walmart insisted that its top 1,000 suppliers in China retool their factories and products, improving environmental standards and doing things like cutting back on excess packaging (which makes shipping cheaper). The company then added 22,000 jobs in the United States alone in 2009.

The policy implications are clear: governments should stop betting on particular green technologies and start thinking more broadly. As the McKinsey report makes clear, countries don't become more competitive by tweaking their "mix" of industries but by out-performing in each individual sector. Green thinking can be a part of that. The United States could conceivably export much more to Europe, for example, if America's environmental standards for products were high enough to meet European rules. Protecting the environment is often portrayed as a political red herring that undercuts how competitive American business can be. In fact, the future of growth and job creation in this country may depend on it.