APRIL-MAY, 1977

THE WESTERN CANADIAN LUMBER WORKER
ee

By R. DENNY SCOTT
IWA Research Economist

(NOTE: The following article
is a condensed version of a
longer study which reviews
and analyzes the relationship
between employment and
energy. A copy of the entire
paper may be obtained by
writing to the IWA Research
Department at 1622 North
Lombard Street, Portland,
Oregon 97217.)

FUTURE ENERGY NEEDS
AND THE EMPLOYMENT
PICTURE

Projected . shortfalls ~ of
petroleum, natural gas, fossil
fuels and even hydroelectric
power and unprecedented
increases in energy prices are
causing a national reassess-
ment of energy policies. The
federal government is deeply
involved in energy-related
legislation and regulations.
Industry is rushing around
trying to guarantee future

energy supplies, and heighten-
ing the drama are ballot
measures in several states
related to the construction and
operation of safe nuclear
power generating plants.
Sometimes lost in the swirl of
debate is the important
question of how energy relates
to jobs. If future energy needs
are not met, will plants be

forced to cut back operations, ~

thereby causing layoffs and
unemployment? Just what is
the relationship between non-
human energy and jobs for
working people? :

The International Wood-
workers of America expressed

concern over U.S. and Can- -

adian energy policies in a 1973
Resolution at the convention in
Vancouver, B.C. The resolu-
tion called upon the Interna-
tional Union to study energy
problems and the potential
effects they might have on IWA
members.

GNP, GROWTH
AND EMPLOYMENT

One of the underlying
assumptions in the energy
supply debate is that the
United States gross national
product (GNP) — the total of
goods and services produced
each year — must grow at least
as fast as it has in the past in
order to assure “‘full’’ employ-
ment. Some argue that in-
creases in energy must be
available in order to sustain an

average annual GNP growth
rate of about 3.5 per cent.
However, a major Ford
Foundation study released in
1974 brings into question the
validity and wisdom of project-
ing future energy needs and
emplyment trends on the basis
of past performance. While in
the past there has been a
defined relationship between
GNP growth, energy growth
and employment growth, it
cannot be assumed that the

same ratios will apply in the :

future. The study points out
that if we continue to increase
U.S. energy consumption as we
have during the last 20 years

we would need to add the
equivalent of one Alaska pipe-
line each year. At historical
growth rates, energy in resi-
dential, commercial and trans-

. portation uses would roughly

double between now and the
year 2000. It would triple for
industrial use.

The most plausible circum-
stances for a continuation of
historical rates of growth in
energy consumption would be
unexpected good fortune in
keeping energy prices down,
combined with government
policies. that promote con-
sumption. According to the
estimates of the Ford Founda-
tion study, fuel prices have to
stabilize at 1971 levels between
1985 and 2000 to be consistent
with historical rates of energy
growth. In the past, energy
represented a small fraction of
industrial and residential
expenses. As a result, there
was little economic incentive

to explore attractive conserva-
tion measures.

PRICE TRENDS

The Ford Foundation study
concludes that price trends
implicit in historical growth
projections are not realistic in
view of current expectations
about future energy prices. On
the basis of information now
available, continued growth of
energy consumption at rates
approaching those of the past
is unlikely without a large
Scale government commit-
ment.

If itis unlikely that historical
rates of energy growth can be
sustained, is it possible to
obtain continued GNP growth
and em emg growth while

ess ?

The Ford ~oessci. ll also
approached this problem by
using the econometric model to
test whether or not the
sneha grow “
prosper energy wt!
_ Yates lower than historical
levels. The annual average

ergy growth rate over the
20 years has been 3.4 per

cent. This study tested a 1.9 per
cent annual consumption rate
and a zero growth rate in
energy use.

If energy growth were cut
from an average annual rate of
3.4 per cent to 1.9 per cent and
certain known energy saving
technologies, such as better
insulation and better auto fuel
economy, were introduced, the
lower energy budget would
provide essentially the same
level of energy services as are
provided in the historical
growth model (i.e., miles of
travel, quality of housing,
levels of heating and cooling,
manufacturing output, etc.).

Zero energy growth, as
envisioned by the Ford
Foundation study, represents a
modest departure from the cir-
cumstances and conditions
projected for the historical
growth model. It includes all
the energy saving devices of
the 1.9 per cent average annual
growth rate plus extra em-

phasis on efficiency. The main
difference would be in a
distinct redirection of
economic growth away from
energy-intensive industrial
toward economic activities
that require less energy and
more workers. Zero energy
growth would be achieved in
steps to avoid serious disloca-
tion so that actual _zero growth
would not be a fact until about
1985.

There is much talk — and
considerable anxiety — about

the supposedly close and un-

breakable relationship bet-
ween energy consumption and
employment. Both fhe
econometric model and the
analytical work of the Ford
Foundation project reveal that
such commonly held fears are
unfounded. While it is true that
a sudden and unexpected
energy shortage can cause,
and has caused, major unem-
ployment, the study concludes
that a long-term slowing of
energy growth signalled by
clear policy commitments,
slowly rising prices, and ap-
propriate compensatory
policies could actually in-
crease employment.

AUTOMATION REDUCES
EMPLOYMENT

The five largest manufactur-
ing groups are primary
metals; stone, clay and glass;
food and kindred products;
chemicals and allied products;
and paper and allied products.
They annually consume two-
thirds of the energy used by
U.S. manufacturing. In 1971,
they employed 4.8 million
workers — 7.3 per cent of the
total employment in the United
States. Total U.S. employment
increased 41 per. cent between
1950 and 1971, but total employ-
ment in these five industries
remained static.

An Oregon Task Force on
Energy Report released in 1973
presented some useful figures
showing the quantity of energy
used in differing industrial
sectors and the production and
employment relationship to the
energy expended. Oregon
industry consumed 121.5
trillion BTU’s of energy in 1972
and it was divided as follows:

natural gas — 48 per cent; -

electricity — 34 per cent; and
oil — 18 per cent. By far the
state’s largest industrial user
was the paper and _ allied
products sector which used 60
per cent more energy than the
next largest consumer —
primary metals. Lumber and
wood products is the state’s
third largest energy user.
When energy is viewed as an
expenditure, it is apparent
from the accompanying table
that different production and
employment ‘‘returns’’ are
achieved with a given expendi-
ture of energy. For example, a
billion BTU’s consumed by the
paper industry translates into
$4,900 of product output and
two-tenths of one person
employed. This is certainly an
energy-intensive industry
when compared to _ the
estimates for all manufactur-
ing where $25,400 of output and
one and one-half jobs is
achieved with each billion
BTU’s. The lumber and wood

‘products industry is roughly

twice as efficient in energy use
as the average for all manu-
facturing, obtaining 3.1 jobs
per billion BTU’s and $48,000
worth of finished goods.

The high energy-use indus-
tries are also the industries
requiring the largest invest-
ment in capital equipment. It
costs a great deal more to build
a pulp mill or aluminum

smelter than it does to build a
sawmill or food cannery.
Cheap energy prices in the past
have provided one incentive
for increased capital expendi-
tures. Advances in technology
and automation, fed by cheap
fuel, have enabled industry to
substitute capital for more

_expensive labor. This has been

the predominant method of
increasing labor productivity.

REPLACING LABOUR

The trend in all manufactur-
ing industries has been
towards replacing labor with
energy-consuming capital
equipment. This trend is seen
most dramatically in highly
automated industries such as
pulp and primary metals. As
the price of capital increases
because of rising interest
rates, and as the price of
running the expensive equip-
ment spirals because of energy
prices, the economic returns of

those large investments are
diminishing. Economic returns

in the past have been derived
from reducing labor cost per
unit of output but the evidence

’ is that these returns are falling

off. It takes a larger and larger

’ outlay for automated machines

to reduce labor cost. We may
even have reached the point in
some sectors where it would be
wiser to reverse the historical
trend and begin substituting
human energy for non-human
energy. Revised technology
would be necessary to begin
the move towards reducing the
capital and BTU need per unit
of output.

CONSERVATION

Professor John P. Holdren, a
specialist in energy and
resources at the University of
California, comments on the
opportunity for energy conser-
vation in the United States and
its relationship to our standard
of living:

The notion of a one-to-one
link between energy use and
well-being is the most
dangerous delusion in the
energy-policy arena. Sweden,
Denmark and Switzerland all
had higher gross national
products per capita in 1974
than did the United States,
despite energy use per capita
around half that in the United
States or less.

It is time we studied how. the
frugal Europeans get so much
prosperity from so little
energy. By carving the fat
from our energy budget and
wisely applying these savings,
we probably could hold United
States energy growth between
now and the year 2000 to 1 per-
cent per year, instead of the 3
to 4 per cent so widely forecast.

If our goal is to maximize
human well-being, accounting
both for the benefits of energy
use and the likely costs, we
should not aim at more energy
growth than this, and I believe
it possible we should aim at
less.

ENERGY WASTE

More than one-half the
current U.S. energy budget is
waste. For the next quarter
century the United States could
meet all its new energy needs
simply by improving the ef-
ficiency of existing uses. The
energy saved could be used for
other purposes and relieve us
of the immediate pressure to
commit enormous resources to
dangerous energy sources

before we have fully explored’

all alternatives. Energy
derived from conservation
would be safer, more reliable,
and less polluting than energy
from any other source ...
Moreover, a strong energy
conservation program would
save consumers billions of
dollars each year.

A- recent study looking at
potential conservation
Strategies that would have
application in the Pacific
Northwest found that a high-
impact energy conservation
program in the residential and
commercial sectors would
provide more regional employ-
ment than could be created
through the construction of
new power plants — nuclear or
otherwise — to generate the
equivalent amount of energy.

Furthermore, the jobs created
would benefit semi-skilled and
unskilled workers as opposed
to the technical and highly
skilled jobs called for in the
construction and operation of a
nuclear plant.

According to the study, a
conservation program
designed to reduce 1995 energy
consumption by 27 per cent
would generate employment
opportunities in the manufac-
ture and installation of. insula-
tion and double-pane windows.
There is no reason to believe
that similar measures taken in
the industrial sector would not
also create new jobs.

The opportunities for energy
Savings in U.S. industry are
vast. Manufacturers, -for
example, produce large quan-
tities of steam in-house while
purchasing almost all their
electricity from utilities. If the
steam were first used to gener-
ate electricity and then used as
steam for its original purpose,
more electricity could be
produced than the entire indus-
trial sector now uses. This
transition, obviously, calls for
the construction and manufac-
ture of steam-powered electri-
city generating plants.

TO BE CONTINUED