Impact of reduced electricity use
Hello,
I have done an analysis estimating the impact of reduced electricity usage. The results show that lowering the amount of energy consumed in a city will reduce employment in the electricity industry (as is to be expected in I-O multipliers). However, when we were discussing our findings, representatives from the electric utilities found this to be difficult to believe - unless whole sections of the city were completely ceasing to use electricity, they claimed the same labor is required to maintain the system. So whether it's current electricity use levels or 10% lower, you'll need the exact same number of workers to maintain the infrastructure, run the plant, conduct customer service, etc. The change in consumption won't even have an impact on wear-and-tear they claimed, unless electricity consumption at a specific location ceased all together.
I am not sure how to address this issue regarding the use of IMPLAN. Do you have any advice of how to explain IMPLAN's estimates for the employment effects in electricity or any other utility for that matter?
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It is clear that the Output (i.e., Sales) of the electricity sector would decrease. IMPLAN then estimates the decrease in electricity sector Employment, Employee Compensation (EC), Proprietor Income (PI), Other Property Income (OPI), and Indirect Business Taxes (IBT), as well as the decrease in first-round Intermediate Expenditures, all according to the ratios found in the study area data (e.g., Employment per Output, Employee Compensation per Output). If it is true that the electricity sector would not reduce its workforce, then you could edit the direct employment impact to be 0. However, since EC and PI have fallen, these workers will now be earning less. If this is not expected to occur (i.e., the workers are expected to receive the same amount of pay and benefits), then the decrease must come from OPI and IBT. We don’t want to edit the direct IBT because it is not reasonable to expect the relationship between Output and IBT to change with the change in Output. Thus, if you want to keep Labor Income (EC + PI) the same, then the decrease that had come out of EC and PI will now need to come out of OPI (essentially corporate profits). If you can safely assume that this will be the case, then you can re-run the same analysis but customize the Event so that Employment, EC, and PI = 0. OPI is treated as a leakage anyway, so a reduction in OPI will have no impact. Thus, you do not need to decrease OPI as a part of your analysis – it is just your underlying assumption that corporate profits will fall. Done this way, your impact results will show the impacts of the decrease in Intermediate Expenditures only.
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