UT Study: Department of Energy Major Force in State Economy

A major player in the area’s economy, the Department of Energy (DOE) and its related subcontractors in 2006 provided 11,914 full-time jobs with a payroll totaling $763.2 million. In addition, DOE spent more than $982 million on goods and services and paid nearly $21.6 million in state and local taxes.

But DOE’s impact didn’t stop there.

Every job, every salary and every dollar spent rippled across the state’s economy, creating still more jobs and income.

UT’s Center for Business and Economic Research (CBER) recently completed an in-depth analysis of the economic impact of DOE’s payroll and non-payroll spending in the state. This study, which looked at fiscal year 2006, is the sixth such report CBER has done for DOE. Previous reports were done for fiscal years 1999, 2000, 2001, 2003 and 2004.

The benefits of DOE’s presence can be broken down into three pieces — the direct effects of DOE, the indirect effects, and the multiplier effects, the report explains. Income and employment are created directly as DOE pays workers’ wages. Income and employment also arise indirectly when DOE buys goods and services from other businesses in Tennessee, supporting jobs and payroll spending in these businesses.

Finally, the ripple effect of all this economic activity is captured by the multiplier. For example, DOE employees make purchases from local businesses, including retailers and restaurants. The direct, indirect and multiplier effects together capture the income, employment and tax revenue benefits of DOE operations.

UT economists estimate that each dollar of income directly paid by DOE in the state translates into $2.10 in total personal income for Tennessee residents. The total personal income generated in the state by DOE-related activities was about $2 billion in 2006.

Similarly, the economists estimate that every DOE job translates into 3.8 additional jobs in the state’s job market. Given that, DOE spending supported 44,889 full-time jobs in the state in 2006. These jobs were supported through the purchase of goods and services in Tennessee, visitor and guest scientist spending, and the effects of DOE employees spending their income in Tennessee.

“This is a relatively high number of ‘spinoff’ jobs,” said Matt Murray, CBER associate director and lead researcher on the study. “That reflects the high average annual salary of DOE-related employees and DOE’s extensive use of contracted employees.”

Further, CBER economists estimate that DOE’s payroll and non-payroll spending led to a $3.6 billion increase in the state’s gross domestic product, the market value of all final goods and services produced. That means every dollar directly spent by DOE in Tennessee in 2006 increased the state’s gross domestic product by $1.83.

Other major findings in the CBER report:

• DOE employs a highly trained and educated workforce. Of its more than 11,000 employees in 2006, 999 held doctorates, 1,757 held master’s degrees and 3,154 held bachelor’s degrees. The average annual salary was $64,059.

• DOE, its contractors and their employees donated more than $6.4 million in charitable contributions, community grants and equipment to organizations across Tennessee in 2006.

“The presence of DOE and its contractors in Tennessee gives rise to many benefits, both quantitative and qualitative,” the report concludes. Not only does DOE provide employment and income for many state residents, “DOE also provides the state with national recognition as a leader in manufacturing, advanced materials, neutron sciences, biological sciences and transportation technologies. With its (research and development) capacity and technology sharing programs, DOE plays a significant role in enhancing Tennessee’s competitive position in attracting private firms to locate within the state. In addition, DOE is active in bringing federal research grant money to the state and its institutions of higher education. The DOE facilities provide an excellent resource to the University of Tennessee through expanded research capabilities and academic programs.”

The Department of Energy has three main operations in Oak Ridge — the Oak Ridge Office (ORO), the Y-12 Site Office of the National Nuclear Security Administration (NNSA), and the Office of Scientific and Technical Information (OSTI).

ORO is one of DOE’s most diverse field sites in the country with programs making national contributions in the fields of science, national security, nuclear fuel supply and technology development, while accomplishing environmental cleanup, reindustrialization, and economic development for benefit of the regional economy. Among the programs it administers is the Oak Ridge National Laboratory (ORNL), a multi-program science and technology laboratory managed for DOE by UT-Battelle LLC since 2000.

Matt Murray, CBER, (865) 974-6084, mmurray1@utk.edu
Mike Koentop, DOE, (865) 574-3264, koentopm@oro.doe.gov
Amy Blakely, (865) 974-5034, amy.blakely@tennessee.edu

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