Green Jobs Sink Down Under

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Remember when President Obama declared that insulation was sexy? In the wake of the global economic downturn, a “green jobs” formulation has been launched, not just here, but in every major world capital. While the White House’s financial and rhetorical commitments to the creation of green jobs are significant, no administration has made these policies as central to their government as that of Prime Minister Kevin Rudd in Australia. The results there should provide a cautionary tale for President Obama, whose trip “Down Under” is currently scheduled for June.

The creation of "green jobs" fits a simple (if not simplistic) Keynesian/Van Jonesian paradigm: Let’s pay people to retrofit their homes and offices for greater energy efficiency, and in doing so drive down unemployment and green house gas emissions in one fell swoop.

In Australia, a hastily assembled $2.7 billion(AUS) plan to insulate over two million homes started in July has led to thousands of lay-offs, the electrocution deaths of four insulation installers, almost 100 house fires, and the demotion of Australia’s Environment Minister – former “Midnight Oil” frontman Peter Garrett. It stretches the imagination to think of a national public policy going any more wrong.

It all seemed so straightforward last summer. In a nation where around half the homes have little to no insulation (partially due to the country’s temperate climes) and emit a significant portion of overall green house gases, the idea of giving Australians a $1,600 credit towards insulating their houses made perfect progressive sense - both ecologically and politically.

Rudd’s Administration made the insulation plan the centerpiece of a $4 billion “energy efficient homes” package. Treasurer Wayne Swan, in his first address after Australia's stimulus bill was passed, trotted out Craig Langstone, the owner of a small insulation company. In disturbingly glowing terms, Swan predicted happy days with the green jobs program: “Thinking of Craig Langstone makes me think about what we can do together if we try, the jobs we can create and the jobs we can save.”

Within a month of the program’s start, problems arose. At their root was a profound breaking of central economic tenets: the laws of supply and demand. The massive and immediate Federal intrusion into the insulation marketplace created significant shortages in supply of materials, as well as of qualified labor, with deadly results. Along with this, it incentivized a huge market for scamming (or “rorting,” as the Aussies say).

Supplies of standard, paper-backed “pink” insulation sold out across the country, leaving installers to use the much more dangerous foil-based reflective insulation. Stapling this insulation into the tight and dark attics of older homes with exposed wiring became a cruel game of “Australian Roulette”. In October following the first electrocution death of an installer using foil insulation, Malcolm Richards, president of the nation’s Master Electricians Association, forecast more danger ahead based solely on the government program: “In the normal course of events, foil products would not be used,” but with the inflated demand, workers were “grabbing whatever they can lay their hands on.”

Meanwhile, an international con operation emerged, prompted by the opportunity to earn a quick $1,600. Installers who couldn’t even spell insulation telephoned unsuspecting Australians, urging them to remove their insulation, even though many did not qualify for the program. The Herald Sun recently interviewed a resident of Mount Martha, who received a call from an offshore telemarketer who claimed to work with the Australian Government: “I could barely understand them. They just said they were authorized by the Government. I said I already had insulation, my home was only built in 1995. But they wouldn't take no for an answer, they said it didn’t matter.”

There have been hundreds of cases where predominantly older Australians have been duped into having good insulation removed, only to be replaced by an inferior – and, in some instances dangerous – product. Some of these “cowboy” installers paid for their shoddy work and inexperience with their lives, others paid with their “client’s” houses; nearly one hundred homes suffered electrical fires caused by the foil insulation. A recent Federal audit revealed that 16% of homes insulated under the program do not meet government standards, while at least 8% have been made “unsafe”.

The Rudd government’s initial response to the debacle was deflection, blaming both the installers and even the installation process. After the third installer was electrocuted in early February, Minister Garrett laid the responsibility at the feet of the dead: "Metallic foil is conductive, and when installed incorrectly, without undertaking the mandatory risk assessments and in breach of clear program requirements, this product can be dangerous.”

Another senior administration official, Robyn Kruk, testified: “With all respect, the strategies were put in place in an industry that has inherent risk,” adding, with words which perhaps deserved more serious deliberation last spring: “There is probably only one way of ensuring a risk free environment in this regard and that is not to go into ceilings to put in place insulation.”

The fiasco has resulted in the program’s suspension with a possible re-authorization in June.

And as for the green jobs? Experienced insulation installers have, ironically, been swept up in the program's failure. Insulation company owners like Tony Arundell of Eureka Insulation in Sydney find themselves on the verge of bankruptcy, having horded evermore costly supplies, which now sit in warehouses, and hired dozens of workers who now must be laid off. In a recent interview for Australia’s ABC News, Arundell, who’s run the business for almost three decades, cited the debt he’s incurred due to the Federal program. "Now we're held with stock and Yellow Pages commitments that we can't get out of to the value of $250,000. It's hit us pretty hard." He and others have let go thousands of workers who may not be available if the program re-initiates in June.

Most disturbing is that the full deleterious impact of the program – both in safety and financially – has yet to be realized. Environment Minister Garrett recently commissioned the inspection of thousands of newly insulated homes to assure their safety at the cost of tens of millions of dollars. It is believed that almost 1,000 homes may be unsafe. Joe Hockey, spokesman for the Opposition Treasurer forecast that government costs due to future lawsuits could top $1 billion.

For the recently fired installers, Rudd has announced a new $41 million fund for re-training. Some are understandably suspicious. Michael Tempny - another insulation company owner, interviewed by Australia’s The Age newspaper , demurred, ‘‘If it was something that was going to help my employees then I would definitely look at it, but if it's just a way that we can re-employ them to do nothing, then that doesn't really work."

All this said, the story of the Rudd government’s insulation program is not simply one of incompetence – though it is certainly that – but a tale of how an ideology clouded the minds of senior government officials in the creation of the program itself, causing them to run through a number of red lights in the pursuit of “green jobs”. A singular theme of recent attacks on both the Prime Minister and Environment Minister has been criticism of their repeated dismissals of contrarian studies and voices leading up to the bill’s passage. Garrett’s job hangs in the balance because an April 2009 independent risk analysis which warned of “major fall-out” due the rushed launch date apparently didn’t make it to his desk until February.

Rudd turned a deaf ear to industry experts who called for better accreditation guarantees for installers, and a more customized and focused approach to the program rather than the blanket $1,600.00 credit. Last October, Opposition climate change spokesman Greg Hunt, accused: "It appears that his industry consultations made it absolutely clear that a figure of $1000 to $1100 would have been appropriate as a cap for the [insulation] rebate. Most significantly, he [Rudd] and Mr. Garrett appear to have been warned that if they over-inflated the price by fifty per cent, retailers would simply lift the price to the $1600 figure.” That’s exactly what happened.

In light of these actions, it is difficult to view the Rudd government as anything other than a progressive bull in the policy china shop. To continue the bovine imagery, the implosion of the insulation program gores progressive oxen from Keynesianism to “green jobs.”

But the principal of centralized decision-making must also come under severe inspection. Janet Albrechtsen, a columnist for the right-leaning Australian puts it best: “Here is a textbook lesson in what happens when government throws money at industries they don't understand and have no business being in. In short, we are learning that the bigger the government, the bigger the problems.”

At each stage in the policy-making process, when administrative officials were presented with options, they leaned towards the most expensive, the broadest, and the fastest course with the least amount of local input or oversight. Maybe when President Obama steps off Air Force One in Sydney later this month his first words to the Australian Prime Minister should be, “Heckuva job Rudd-y.”

Pete Peterson is executive director of Common Sense California, a multipartisan organization that supports citizen participation in policy-making (his views do not necessarily represent those of CSC). He also lectures on state and local governance at Pepperdine’s School of Public Policy.



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In theory it's a great idea.

In theory it's a great idea. Unfortunately, anytime a government is involved, it never seems to work as intended. In the meantime the rest of us get to pay more while subsidizing the wrong people. Big government at it's finest.

Agreed to an extent

I agree that this is a relevant cautionary tale for America. At the same time I think it's important to start learning green skills as the whole world starts to become green. Therefore I think getting certifications like the BPI certification that teach you how to save money while conserving is important.

...yeah, what we need is a green jobs FDR.

Reading this article, the problem is clearly not that government is investing in infrastructure whose payouts are too long-term for individuals to feasibly undertake, the problem is clearly that they're not doing it well enough.

In the 1930s, infrastructure improvements were critical to the success we enjoyed from wartime productivity and economic prosperity thereafter. They too seemed wasteful and invasive one year after the fact. But ten years later, the work of the WPA and CCC that hired the unemployed workforce of the Great Depression was critical to the overwhelming productivity that allowed us to win World War II.

Green jobs breaks along the same lines - it's a move essential not just to climate security, but much more immediately, to our national security. Conserving energy allows us to reduce our reliance on foreign dictatorships that help to support terrorism. This fight is not just about feeling good about being green. It's about our future. Supply crunches are inevitable; it's better they occur now when we can plan for them than when energy is more scarce or our enemies become powerful.

But where we've stopped short is that there's no WPA; no CCC. We contract out the work, insisting private industry is always preferable to public service, and then right-wingers like this complain when the fraud and waste so common in private industry is applied to our tax dollars.

Have you ever hired a private contractor to replace your insulation? It's often difficult to find a good one on the market - and for that good one to be the "lowest bidder." Compare this with the challenge of finding a municipal water authority that provides acceptable water, or a police force whose response time is reasonable, or a transit operator that delivers his passengers to their routed locations. It's very, very rare, especially in major cities, that you find public servants who are straight NOT doing their job, or trying to upsell you on more work you don't need, or doing the job so poorly it must be done again.

This is not to say there is no waste or something when the government actually hires temporary workforces - there most certainly is. But if we spend taxpayer money, we need to make sure the work it buys is up to taxpayer standards.

Anyway, all this article says is that we need higher and better enforced standards for our infrastructure investments. It doesn't persuade me as to why we shouldn't be thinking ahead to address complex national security challenges together.

To clarify...


Of course you could look at the Aussie story as simply a case of bad governance. That was part of the reason for my writing it. There should have been better oversight. But are you suggesting there should be a Federal "insulation workforce"?

This is a silly idea. There is already a well-employed insulation "industry" as there WAS in Australia until the Federal government "invaded" it. Certainly you're not saying that the Gov't should buy out these private contractors and supplies? What's next? Federalizing the auto industry...oops.

What I am also saying is that there is an INHERENT problem with these massive jobs programs (green or otherwise) in that they involve self-interested industry lobbying of gov't officials who obviously don't have a clue about how their legislation will impact businesses or society. Not mentioned in this piece is that the insulation industry - all in the name of being "green" - pushed the Federal Gov't to approve this bill. This also contributed to a poorly written bill that had a lack of oversight.

Your call for a new WPA would be interesting if not so discredited by history. You know as well as I that it was WW II that bailed FDR out of the Keynesian catastrophe. Surely, you're not looking for WW III to bail us out of this one?

Um... someone likes themselves a little slippery slope.

To be honest, I actually expected better. The slippery slope? Really?

The WPA and CCC got into road construction without nationalizing the entire road construction industry (most roads are still privately developed). They built power plants without eradicating private electricity generation. They hosted entertainment events without ending the private entertainment industry - not by a long shot. One does not necessarily imply the other.

This argument that stimulative government programs - especially in times of recession - and the long-term growth of powerful private industry cannot coexist is ridiculous. I'm sure you know that, so I'm going to leave it generally alone.

Suffice to say I wouldn't agree with the government supplanting private industry in the field of insulation (or really, any other field), but that's hardly what I suggested. A lot of insulators are currently unemployed (our housing stock being overbuilt and all), and could reduce government costs in the long-run by being hired for stimulus in the short-run. These long-run cost reductions will then pay back what we spent to hire them in the short run because our energy costs go will down along with our national security burden. In the meantime, they won't be sitting around waiting for a "normal customer" while they soak up limited unemployment checks.

As for the auto industry situation, I'll suggest to you that the auto industry in the United States is not an auto industry. Japan, Germany, and Korea all have successful and globally competitive privately-owned car companies. We, here in the land of "free enterprise," have ours half-owned by the government. Why? Because our auto companies are health care companies. A health care company does not have a competitive advantage in a market occupied by fellow producers who are full-time car companies, so they find themselves at a loss.

I agree with the initial point: there isn't enough oversight or background information in green jobs programs. I don't think that has anything inherently to do with them being too "green" and liberal. If anything, it's likely more to do with them trying to achieve public sector ends with a private sector means. This doesn't often work. In the private sector, things are efficient because the goal is to achieve revenue while keeping the costs of providing a service minimal. In the public sector, things are effective because the goal is to deliver a service while keeping revenue minimal. Neither is inherently good or bad; some are more suited to certain roles under different systemic conditions.

The point was not to emphasize the stimulative effect of FDR's programs themselves, but that badly-needed 'green jobs' investment could serve a similar role, if we consider both the past and present in their larger context. I worry you're regurgitating a talking points historical argument here without thinking it through. Even if I accepted that WW II lifted us out of the Depression (I'm not accepting this), then what made WW II successful at doing so? Was WW II not deficit spending? And even if it were not these things, how much of it could be attributed to our massive new infrastructure that was, some ten years later, beginning to pay for itself in lower production costs?

And, moreover still, even if I conceded all these points, I'd still feel like your more or less ahistorical argument still faces many, many more problems: the WPA, CCC and other infrastructure investments were not the only economic reforms FDR put in place. FDR also created extensive banking and financial regulation that made the markets more predictable for private investors. Most of these reforms remained in place through the entire 20th century, least of all WW II. So am I to believe the economic stimulus that was government spending on WW II was so effective that it even overcame the burdens of this intrusive government regulation? No, no I'm not. They're all pieces of a complex puzzle.

My argument, then, isn't as simple as merely "FDR's Keynesian programs made us successful; WW II did not." Both the WPA and WW II made us successful. No matter if you argue FDR's New Deal kicked in immediately, or later, or even never, both the New Deal and WW II production were government spending programs in economically difficult times.

So do we need a WW III? If you say so. It was never my argument that WW II alone lifted us out of the Depression; but it was yours. I actually thought that one can exist without the other. What was true, in my argument, of both the New Deal and WW II has potential be true of "green jobs legislation" - or rather, making what are inevitable investments in America's energy independence.