Labour market transitions in a greener economy – CEPR

The Transition to a Greener Economy and the Role of Sustainable Development Goals (SDGs)

The transition to a greener economy is a necessity (Kanzig 2024). It will require significant shifts in the way goods and energy are produced and consumed (European Parliament 2024) as well as the reallocation of production factors, including workers. Although the overall effects in terms of aggregate economic output and employment could be relatively small, the effects are likely to be concentrated – by economic activity, geographical area, and workers’ characteristics – with a risk of amplifying inequalities in outcomes and opportunities. In particular, the transition is expected to induce a contraction of jobs in high-polluting activities (often labelled ‘brown’ jobs) and an expansion of so-called ‘green’ jobs, or those involving green activities according to the O*NET classification (Valero et al. 2021, Vona et al. 2018, Vandeplas et al. 2022, Causa et al. 2024, Causa and Phillips 2024, O*NET  2010).

A Just Transition in the Labour Market

A just transition in the labour market should minimize costs for individuals and communities. Achieving this will require policies to improve the allocation of workers and support the re-employment of dismissed ones, especially towards greener occupations, while managing and minimizing the scarring effects associated with job losses in polluting industries. In addition, given the marked differences in industrial specialization across regions, policy interventions should be place-based.

Education and Training for Green Jobs

Workers in high-polluting occupations tend to have lower educational attainment (Causa et al. 2024). In cases of job dismissal, they often experience larger earnings losses compared with workers in non-energy-intensive and transport sectors (Barreto et al. 2024). Comprehensive labour market policies and effective educational systems and upskilling programmes can help mitigate such losses and the risk of scarring, while also accelerating the green transition.

In addition, policies fostering access to quality education and training can help fulfill the increasing demand for workers in green jobs (as defined in Causa et al. 2024) since, net of other observable characteristics, the odds of getting a green job are twice as high for workers with high levels of education, especially in STEM fields (Figure 1).

Labour Market Institutions and Policies

In terms of promoting transitions from joblessness to employment in green jobs, beyond the key role of education and training, labour market institutions are instrumental. These include active labour market policies, cash support to unemployed workers, and well-designed institutions to promote effective collective wage bargaining and social dialogue. Progress in this area is particularly beneficial for women, less-educated workers, and those living in rural areas.

On the other hand, the transition from unemployment to green jobs is less likely in countries with relatively high employment protection and product markets and occupational entry regulations that hinder business and labour market dynamism.

Housing Policies and Geographical Mobility

The labour market literature shows that housing policies favoring residential mobility tend to facilitate the spatial reallocation of workers and promote business dynamism, enhancing the ability of workers to seize job opportunities. This is also the case in the context of the green transition: for example, hirings from studies are hindered by strong house price dynamics, with higher house prices acting as possible barriers to geographical mobility. Social rental housing and the provision of housing allowances increase the odds of an individual moving from joblessness to a job, including a green job, with the benefits of housing allowances being more widespread than those of social housing. At the same time, these housing support policies are associated with significantly lower risks of long-term unemployment, especially for lower-educated individuals. Finally, reducing excessively rigid rental market regulations could also lift barriers to geographical mobility and enhance transitions from joblessness to employment.

References

1. Adalet McGowan, M and D Andrews (2017), “Skills mismatch, productivity and policies: Evidence from the second wave of PIAAC”, OECD Economics Department Working Papers, no. 1403.
2. Andre, C and P Gal (2024), Reviving productivity growth: A review of policies, forthcoming.
3. Andrews, D, A Caldera Sánchez and Å Johansson (2011), “Housing Markets and Structural Policies in OECD Countries”, OECD Economics Department Working Papers, no. 836.
4. Barreto, C et al. (2024), “The ‘clean energy transition’ and the cost of job displacement in energy-intensive industries”, OECD Social, Employment and Migration Working Papers, no. 310.
5. Bassanini, A and A Garnero (2013), “Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data”, Labour Economics 21, 25–41.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth
• SDG 10: Reduced Inequalities
• SDG 11: Sustainable Cities and Communities
• SDG 12: Responsible Consumption and Production

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
• SDG 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.
• SDG 11.3: By 2030, enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable human settlement planning and management in all countries.
• SDG 12.2: By 2030, achieve the sustainable management and efficient use of natural resources.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions several indicators that can be used to measure progress towards the identified targets. These include:

• Share of the population with tertiary education
• Adult participation in training
• Probability of transitioning from unemployment to employment
• Odds of getting a green job
• Employment protection and product market regulations
• Housing policies and residential mobility

Table: SDGs, Targets, and Indicators

Source: cepr.org