Construction and Jobs

Additional investment in energy efficiency for residential buildings creates a substantial number of jobs in construction and its supplying industries. This is the conclusion of a scenario study for the Ministry of Infrastructure and the Environment carried out by SEO Economic Research and CE Delft.

Depending on the savings goal, investments of 2.5-4 billion euros a year result in a net employment effect of 67,000-110,000 full-time equivalents up to 2020. A considerable sum that entails investments in energy efficiency in all residential buildings. The investment creates new employment in construction and its supplying industries. These sectors are currently experiencing a substantial drop in demand. Unemployment in construction is rising rapidly at present, with some 40,000 job seekers.

Energy savings of 2% per year up to 2020 require around 20 billion euros of additional investment. A higher rate of energy saving (2%-plus) entails an upgrade of all owner-occupied dwellings to energy label C and all rented dwellings to energy label B. This adds up to 33 billion euros of additional investment.

The study focuses on energy efficiency in residential buildings, but the impact of the investment will be felt throughout the economy, e.g. because some industries are suppliers to construction. Multiple industries receive a boost from this, ranging from a few dozen to hundreds of millions of euros. Given these indirect effects an additional investment of 2.5 billion euros a year in energy efficiency ultimately boosts turnover in the Dutch economy by 3.8 billion euros a year. In the 2%-plus scenario the direct turnover is over 4 billion euros and the indirect turnover just over 2 billion.

In both scenarios the investments are so substantial that they will cause a displacement effect on the labour market, even given that there are currently some 40,000 job seekers in the construction industry. Displacement effects arise from higher wages as a result of additional demand. This attracts workers from other sectors; not every new vacancy will be filled by an unemployed person. Once the investment programme comes to an end in 2020 the additional employment disappears, as the investments are temporary.

The investments are assumed to be privately funded by households and companies. The investments generate energy savings. Dutch residents will enjoy additional annual savings on their energy bills, amounting to 1 or 1.5 billion euros (in the 2% and 2%-plus scenario respectively). In the long run private savings may outweigh the private investments, depending on the terms under which investments in energy efficiency are funded.