Jobs Versus the Environment: An Industry-Level Perspective

Abstract

The possibility that workers could be adversely affected by increasingly stringent environmental policies has led to claims of a “jobs versus the environment” trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries: pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. Combining a unique plant-level data set with industry-level demand information, we find that increased environmental spending generally does not cause a significant change in employment. Our average across all four industries is a net gain of 1.5 jobs per $1 million in additional environmental spending, with a standard error of 2.2 jobs—an economically and statistically insignificant effect. There are statistically significant and positive effects in two industries, but total number of affected jobs remains quite small. These small positive effects can be linked to labor-using factor shifts and relatively inelastic estimated demand.