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fedgazette
V O L . 22 NO. 4
minneapolisfed.org
Regional Business & Economics Newspaper
G R E E N : W H AT R O L E
GOVERNMENT? page 8
Address market failure. Hint: It’s not jobs.
………………………………………………
AR E D E V E LO P ME N T
INCENTIVES DOING
THEIR JOBZ? page 9
An interview with university researchers look-
ing at the popular Minnesota program.
S TAT E - O W N E D B A N K
SHINES IN
THE SPOTLIGHT page 12
An interview with Bank of North Dakota
President Eric Hardmeyer.
DE NOVO BANKS:
A F A I L U R E O F Y O U T H ? page 14
District’s young banks share unique features.
TA K I N G R O O T
Organic farming continues to grow
page 15
The
in the district.
S M A L L TA L K :
great
AN INTERVIEW WITH
S M A L L -T O W N
AD V OC ATE S page 17
green hope
Challenges and opportunities abound in rural Green jobs offer new opportunities,
communities. but don’t believe everything in the sales pitch
1,300 megawatts of electricity, enough to crews install turbines and maintenance work-
power close to 400,000 homes all year, accord- ers keep them spinning, pumping dollars into
ing to the state Public Utilities Commission. the local economy. A report last year by
See the enhanced
But that’s just a start. By some estimates, Minnesota 2020, an environmental advocacy
fedgazette online at
minneapolisfed.org
Continued on page 2
fedgazette GREEN JOBS OCTOBER 2010
Page 2
group, claimed that if done right, the If that surprises you, you’re not alone. But the perceived promise and the and pollution, and creating products
wind industry “can create thousands of The push for a cleaner, less carbon- resulting push for green jobs often lean and services that are environmentally
jobs, [and] revive the economic base of intensive economy has brought with it a on figures and other analysis that one beneficial, or at least more benign than
many Minnesota communities hit hard widespread, parallel argument that it might say are color blind. The very def- their predecessors. There is some con-
by the recession.” will usher in a wave of so-called green inition of a green job is squishy, which troversy surrounding what green jobs
There’s just one little annoyance: As a jobs—a catch-all phrase that encompass- makes green-job estimates and projec- are and, importantly, are not (see arti-
job creator, wind power doesn’t pack es a variety of jobs related in some way to tions equally soft and hard to trust. cle on page 6). But for the moment, set
much punch. For example, the new the environment. During a visit to south- More careful analysis suggests that the this definitional matter aside.
Prairie Wind development near Minot, eastern Wisconsin in mid-August, net job impact of the green movement You don’t have to look too far or
N.D., has 77 turbines with a capacity of President Barack Obama promoted will likely be smaller—possibly much wide for reports trumpeting the job
115 megawatts. It has eight operations renewable energy and other “cleantech” smaller—than advocates might have virtues of green. A June 2009 report
and maintenance employees—about one opportunities that would “lead to more you believe. from the Center for American Progress
for every 14 megawatts of capacity, accord- than 800,000 jobs by 2012.” This might not be a big deal were it and the Political Economy Research
ing to figures from Mike Eggl, a senior Without doubt, a shift toward alter- not for the green zeal of public policy, Institute calculated that an annual,
vice president with Basin Electric Power native energy sources, greater energy with efforts at all government levels to decade-long investment of $150 billion
Cooperative, which operates the facility. efficiency and environmental aware- accelerate the development of green in clean energy would generate 1.7 mil-
Coincidentally, Basin is building a ness offers the economy new opportu- jobs at the local, regional and state lev- lion net new jobs. A report by the
300-megawatt natural gas power plant nities to sprout and take root. Given els. Despite the best of intentions to Conference of U.S. Mayors identified
near Elkton, S.D., which expects to the current economic malaise, many help a dreary employment market, pol- 750,000 green jobs as of 2006 and pro-
employ 31 full-time employees—rough- believe the green stars are aligned to icymakers likely have an outsized view jected job growth of 2.5 million by 2013
ly one worker for every 10 megawatts. deal with carbon emissions and climate of government’s ability to grow— (and 4.2 million by 2038) if the nation
It’s also building a new 385-megawatt change while also kick-starting job indeed, will into existence—more jobs, adopted a 40 percent renewable energy
coal-fired power plant in Wyoming, creation, which has lagged as the particularly green ones. standard.
which will employ 80 to 85 when finally nation climbs out of recession. That doesn’t necessarily mean that More recently, a July 2010 report by
operating, or about one worker per 5 In Michigan, a state ravaged by the policymakers should take their green the Center for Climate Strategies and
megawatts. The coal project will also recession and its dependence on a ball and go home. Though some criti- Johns Hopkins University projected that
employ 1,200 during peak construction, declining auto industry, a May 2009 cize any government role in promot- 2.5 million net new jobs, $160 billion in
compared with about 230 for Prairie report on the future green economy ing—some might say forcing—a shift to added output, and cheaper energy
Wind, where the peak construction said it provides “a dynamic opportuni- a greener economy, economic theory prices could be achieved by 2020 if poli-
period was also shorter, said Eggl. ty to rebuild the state’s job base, attract offers solid rationale for government cies and other measures found in state
“We like wind, coal and natural gas. new investment, and diversify the involvement when markets fail to prop- climate plans were implemented
We don’t have a stake in which one has state’s economy. We may be at a tipping erly incorporate all costs—in this case, nationwide.
[advantages] over the other,” said Eggl. point of awareness, understanding, the societal costs of greenhouse gas Some reports have also found that
But he acknowledged that there are “sig- and opportunities that a green econo- (GHG) emissions and other pollution green jobs and firms are growing at a
nificantly more” jobs attached to coal my can provide for Michigan’s work- from the burning of fossil fuels. faster rate than the overall economy—
plants on a proportional basis. force, businesses, and communities.” Effective government policy along no small matter at a time of high unem-
Xcel Energy has the most wind-gen- It seems that almost everyone wants these lines—carbon taxes, cap-and-trade ployment and frustratingly slow job cre-
erated power of any utility in the coun- to be connected to green jobs. State permits—might be decidedly less sexy, ation. Last year, Pew Center on the
try, yet “it’s really hard to quantify” the and local governments are competing less “do something” for policymakers States found that total job growth in the
effect of the green movement specifical- with each other over who is the green- and more politically difficult. But such clean energy sector was much stronger
ly on company employment, said Beth est and how to best promote green policy focuses on the market failure in (9.1 percent) from 1998 to 2007 than in
Chacone, environmental policy manag- jobs. Even the American Petroleum question (pollution and GHG emis- the overall economy (3.7 percent).
er for Xcel. “I know [the green econo- Institute claims that the oil and gas sions) rather than promoting the vague A green jobs report in Michigan,
my] gets a lot of press, but we’re not industry has created 1.2 million green notion of green jobs and lets the market based on a survey sample of about 360
sure there is job creation.” jobs during the past decade. figure out where economic opportuni- green-shaded firms, found that 70
ties—and by extension, jobs—lie in the firms had been formed since 2005—“a
new, greener economy. much higher rate of startups than is
FEDERAL RESERVE BANK OF MINNEAPOLIS
(Editor’s note: This analysis accepts, seen in the overall Michigan economy.”
Regional Business & Economics Newspaper as a practical matter, the prevailing Firms in the sample also added more
view among scientists that emissions of than 2,500 jobs—an employment
ISSN 1045-3334 carbon dioxide and other greenhouse increase of 7.7 percent—a stark contrast
gases are harmful to the global cli- to the average decrease of 5.4 percent
Subscriptions are available without charge. Back issues are available on EXECUTIVE EDITOR Terry J. Fitzgerald
the Web. Articles may be reprinted if the source is credited and Public Affairs
mate. It does so to analyze the eco- in all industries statewide.
SENIOR EDITOR David Fettig
is provided with copies. Permission to photocopy is unrestricted. Send cor- nomic and policy responses that have
EDITOR Ronald A. Wirtz
respondence to Public Affairs, Federal Reserve Bank of Minneapolis, 90
Hennepin Avenue, P.O. Box 291, Minneapolis, MN, 55480-0291; (612) MANAGING EDITOR Jenni C. Schoppers
evolved in response to environmental
concerns over GHG emissions and
Green = envy
204-5255. That economic promise, mixed with
REGIONAL ECONOMIST Tobias Madden
other pollution. The Federal Reserve
E-mail: letters@mpls.frb.org Rob Grunewald some desperation from the recent
Internet: minneapolisfed.org
A S S O C I AT E E C O N O M I S T
Bank of Minneapolis has no official
Phil Davies recession, has pushed many govern-
SENIOR WRITER
stance on the continuing debate over
One of the Minneapolis Fed’s congressionally mandated responsibilities Joe Mahon ments to aggressively promote, nurture
is to gather information on the Ninth District economy. The fedgazette
S TA F F W R I T E R
climate change.)
ART DIRECTOR Phil Swenson or lure more green jobs.
is published quarterly to share that information with the district, which
includes Montana, North and South Dakota, Minnesota, northwestern As the U.S. Conference of Mayors
Wisconsin and the Upper Peninsula of Michigan.
GRAPHIC DESIGNERS Rick Cucci
Mark Shafer Feeling a little green report noted—and others affirm—“The
The opinions expressed in the fedgazette are expressly those of the authors First, a quick word about green jobs. vast majority of green jobs are not loca-
or of attributed sources and are not intended to represent a formal position Their definition is wide-ranging, even tion dependent, so future green jobs
of this bank or the Federal Reserve System.
unwieldy. Green jobs generally refer to will be located in cities and metropoli-
those whose work is focused on using tan areas that are currently the most
energy more efficiently, reducing waste attractive for investment, or in areas
fedgazette GREEN JOBS OCTOBER 2010
Page 3
Continued on page 4
fedgazette GREEN JOBS OCTOBER 2010
Page 4
Other sources pointed out that As a result, “I think in many ways rainbow of jobs, not just green ones. It’s ment impacts the long-term function-
while the green movement will be a green jobs have been oversold. If peo- a myth, White said, that “green jobs are ing of our economy.”
contributor to any job recovery, it ple are looking for [a lot of] new green new and different. … There isn’t an For example, Wagner said, “The
doesn’t yet have the scale to pull the jobs around the corner, they aren’t identifiable suite of new green skills. movement to be more environmentally
economy out of its job slumber. there,” said White. “All jobs can and Most green jobs will involve traditional friendly is changing consumers’ prefer-
Sarah White is a senior associate should be greener. But green jobs are skills in traditional occupations.” ences and is changing what types of
with the Center on Wisconsin Strategy not going to solve the structural prob- That notion shouldn’t necessarily goods are produced in our economy.”
and formerly of the Wisconsin lem in the job market.” disappoint or deter advocates either. That’s likely to continue, even acceler-
Department of Workforce Develop- That’s because there is an ongoing Rather than something completely new ate, given greater recognition of envi-
ment. White said that green jobs have mismatch between labor skills and and different in the economy, green ronmental costs of burning fossil fuels,
“tremendous opportunity, and not just demand, but the mismatch is not jobs in many ways have always existed; which Wagner believes is a “long-term
for environmental, moralistic reasons.” unique to green jobs, White said. It innovation has regularly delivered new trend in our economy.”
But she added that somewhere along applies across the economy, and, products and processes that are less “Whether or not the trend continues
the way, the message of potential job according to White, the mismatch is energy-intensive because it helps firms to be labeled ‘green’ or some other label
creation, which could be driven by particularly relevant among low- and be more productive and thus profitable. remains to be seen,” said Wagner.
massive public and private investment middle-skilled workers. “We don’t have “Green jobs [are] not necessarily a “Green jobs have made a number of
in clean energy, was mistaken for a people ready for the workplace. … new phenomenon,” said Barbara headlines in the last few years, and some
promise of actual job creation. “The There’s not a lack of green skills. Many Wagner, a senior economist with the of that attention may fade over time.” f
environmental movement tied the workers don’t have basic skills.” Montana Department of Labor and
green movement to the jobs agenda Fix that problem, and you’ve gone a Industry and head of a multistate con-
without talking to people who under- long way toward fixing the mismatch sortium looking at green jobs. “The
stand labor markets,” she said. problem while preparing workers for a challenge is to ask how the green move-