02-11-08

ISU study finds economic impact of ethanol in Iowa to support 8,169 jobs

AMES, Iowa -- Iowa State University economist Dave Swenson projects in a new report that when the 15 ethanol plants currently under construction in Iowa are brought online within a year or so, there will be 1,865 jobs in the state's 42 ethanol operations.

Swenson's report also determined that for every job at an ethanol plant, 3.38 jobs in the rest of the state's economy will be supported. That means the state can soon expect to have 8,169 jobs supported by the ethanol industry.

The new report, titled "The Economic Impact of Ethanol Production in Iowa," presents a positive outlook on the state's biofuels industry, which is outperforming other manufacturing sectors in the Iowa economy. It estimates the economic impact of the current 5,440 ethanol-related jobs in the state to be $245 million.

Other studies have projected even higher estimates in terms of job creation and tax revenue created by Iowa's biofuels industry. Swenson is confident about the accuracy of his data, and notes that the results are still very positive.

"Eight thousand jobs indicates a substantial impact to the Iowa economy, particularly when you consider that the state has added just 42,000 jobs in the last seven years" Swenson said. "Other studies have distorted the reality of how many jobs are producing ethanol by overestimating that number."

According to Swenson's report, employment in the chemical processing sector in Iowa -- which includes ethanol producers -- has been documented in federal statistics through 2006. By the end of that year, the entire sector had grown by 579 jobs across the state.

Swenson used newer data from both the Bureau of Economic Analysis and the Quarterly Census of Employment and Wages -- compiled by the U.S. Department of Labor -- to isolate and estimate the number of organic chemical jobs in 2006. He then used data compiled by The Des Moines Register in the last quarter of 2007 to estimate the size of Iowa's ethanol producing industry and its likely growth through the end of 2008 and beyond.

He also drew on a 2006 study by ISU economists that projected potential economic inputs to regions of Iowa from the addition of an ethanol processing plant. It found that there are 35 jobs, on average, in a modern plant producing 50 million gallons of ethanol per year.

Swenson understands that may not be what Iowans want to hear.

"There's a great battle for public sympathy and public subsidy to maintain Iowa's position in the biofuel industry, so there's a tendency to seek the highest numbers you can to make your case," Swenson said.

He hopes his report provides a more realistic picture on ethanol-supported jobs, particularly when it comes to the debate over public funding.

The report is available at http://www.econ.iastate.edu/research/webpapers/paper_12865.pdf.

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