Is Obama's Bet On Green Jobs Risky?

Jun 13, 2011

President Obama flies to North Carolina on Monday for the latest meeting of his jobs and competitiveness council. His administration is betting that green technologies — from wind and solar power to advanced batteries and biofuels — will create jobs of the future.

If the Department of Energy were a James Bond film, Arun Majumdar would be Q, the tech whiz who oversees futuristic gadgets. Majumdar, whose official title is director of the Advanced Research Projects Agency for Energy, helps steer government investments to new energy technologies, some of which he acknowledges may ultimately fail.

"Of course these are risky," he said. "We don't know which ones are going to win down the line, which ones going to actually make it in the market and produce hundreds of thousands of jobs and really change the world."

The White House is gambling that one or more of these technologies eventually will produce hundreds of thousands of jobs and change the world.

And it's a gamble with real money.

Majumdar's program has received $500 million since Obama took office.

Clean energy projects on the whole have received almost $95 billion.

The president is confident the country will win this bet.

"I don't want the new breakthrough technologies and the new manufacturing taking place in China and India," Obama said at a recent clean energy event at a factory in Indianapolis. "I want all those new jobs right here in Indiana, right here in the United States of America with American workers."

But Ian Shepherdson of High Frequency Economics doubts that the White House or anyone can see into the future with confidence.

"The problem is that usually when the economic cycle gets going it delivers surprises," he said. "In the 1990s the big surprise was the extended tech boom and the birth of the Internet, which I guess no one had predicted very well in advance, and in the cycle of the 2000s it was the housing boom.

"So I think this time around it'll be something else but I would hate to put a guess on where the next big growth sector will be."

There are reasons to believe that clean energy is a good investment, though.

This part of the economy is small and growing fast. So far it gets a good bang for the government buck.

"If you took the government's stimulus program on green activities, you get 17 jobs more or less per $1 million of expenditure," says economist Robert Pollin of the University of Massachusetts-Amherst, who the Commerce Department hired to run the numbers.

For comparison's sake, Pollin calculates that the military creates about 11 jobs for every $1 million; the oil and gas industry produces about five jobs per $1 million.

Pollin says clean energy gets a better payoff because kick-starting a new industry requires a lot of manpower.

"There's way more jobs in clean energy because essentially there's a lot more construction jobs, there's a lot more manufacturing jobs, there's a lot more transportation jobs," he says. "So it's really the process of building the new industry that makes it a good generator of jobs."

But the risk, says Economist Jagdish Bhagwati of Columbia University and the Council on Foreign Relations, is how to keep those jobs and prevent them from going over to someone who becomes more competitive. The minute the U.S. masters a technology, he says, another country can come along and snatch the advantage.

"I think the fallacy consists in saying that if I invested so much in a specific activity, that that is going to be a static permanent steady-state situation," he said. "We are living in a world of flux today, there's no way you can get out of it."

For example, the U.S. invented the car. Japan eventually took the lead. Now, the American auto industry is back. But nothing is permanent.

Economist Matt Rogers says that's all the more reason the federal government must keep its foot on the clean energy gas pedal.

Before Rogers joined consulting firm McKinsey and Co., he oversaw the Energy Department's clean energy grants through the Recovery Act.

"The bigger payoff for most of these technologies occurs over time," he said. "So you see a very large multiplier on the demand and a very large mulitplier on the jobs as these technologies get cheaper."

He says while the market can be slow to put its weight behind unusual new technologies, the administration's philosophy is that if you give these strange little snowballs a nudge down the hill so they can start gathering snow, then gravity — or the markets — will keep the best of them rolling and take care of the rest.

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