Proper labor market policies can facilitate the transition to green jobs
The measures include job training, tax credits for low-income workers, green infrastructure and R&D investment push and carbon tax.
Consensus on the need to build a green economy often raises concerns about potential job losses. It is one thing to accept that change away from fossil fuels is necessary. But how easily can a coal miner switch to a job installing solar panels?
The answer is not surprising: for some workers, change can be difficult. There is good news though. With the right combination of policies, countries will be able to achieve net-zero greenhouse-gas emissions by 2050 — reducing emissions pain for workers in high-emissions-intensive industries. According to our recent analysis, these policies include job-training programs and investment in green technologies Chapter 3 of the IMF’s World Economic Outlook.
Achieving the emission target
The goal, adopted by policymakers in the 2015 Paris Agreement, is to limit average global warming to less than 2 degrees Celsius above pre-industrial levels and to dramatically reduce net emissions of greenhouse gases. This green transition will also cause a transformation of the labor market, with jobs moving between professions and sectors. But the overall magnitude of that change is not as dramatic as it seems.
For sophisticated economies, our analysis shows that a policy package designed to keep the economy on the path to net zero emissions by 2050 will convert 1 percent of employment into high- to low-emissions work over the next decade. The change is huge at 2.5 per cent in emerging markets. However, those figures are smaller than the transition from manufacturing to services in developed economies since the mid-1980s. Nearly 4 percent of jobs were created each decade.
Such as Our analysis One reason employment changes are modest in developed economies is that minority jobs are green-intensive, such as those that improve environmental sustainability (such as electrotechnology engineers) or pollution-intensive, especially the most polluting sectors (such as paper mill operators). Most jobs are neutral-green or pollution-intensive.
Higher wages on green jobs can also help reduce transition. In our analysis of advanced economies, we found that the average green-intensive job earns 7 percent more than the average pollution-intensive job, even though skills, gender and age profiles are regulated. This is good news, because premium workers can be attracted to green jobs.
Procedures to facilitate adjustment
However, workers may still face significant challenges during the transition. In fact, it indicates that the data is difficult to turn green. Our analysis estimates that the probability of a person switching from a pollution-intensive to a green-intensive job is between 4 percent and 7 percent.
For those who go from neutral to green the odds are a little better -9 percent to 11 percent. In contrast, the chance of finding a green-intensive job is almost 41 percent to 54 percent higher if your last job is also green. This does not mean that workers in pollution-intensive jobs are unlikely to find green employment, but that they may need some help.
This explains why it is so important to formulate labor-market policies that will help shift the balance towards greener jobs and facilitate the transition for workers. That means increasing the ability of workers to find green jobs by providing training programs and reducing incentives to stay in more pollution-intensive occupations. This includes the gradual withdrawal of job retention support introduced at the beginning of the epidemic when recovery catches up, as such policies weaken incentives to change jobs.
This brings us back to our model-based analysis activity policy package that by 2050 economies could help achieve net zero emissions. It consists of four elements:
- With the initial green infrastructure and R&D investment push in 2023, spending will gradually decline after 2028. It supports modest productivity growth in low-emission-intensive sectors.
- Tax on carbon emissions gradually increasing from 2023, with a sharp increase from 2029. This will increase the relative cost of high-emission-intensive goods and boost growth in the low-emission-intensive sectors.
- A training program that will help less skilled workers move into the green fields in 2023. Training helps solve problems related to distribution by increasing the productivity of less skilled workers in low emissions sectors, encouraging companies to hire them and increase their wages.
- Earnings-Income Tax Credit (EITC), which reduces the taxes that low-income workers pay. It will begin in 2029 and offset the impact of the carbon tax on those workers. This will encourage more people to enter the workforce.
For the Representative Advanced Economy, we estimate that the policy package will generate labor relocation to about 1 percent of green industries in 10 years. It will increase total employment by 0.5 per cent and increase post-tax income for less skilled workers, reducing inequality.
The impact will be somewhat different for emerging-market economies, where large numbers of workers are employed in sectors such as mining. This would create a 2.5 percent change in the workforce over 10 years. There will be an overall increase in employment in the near term as green investments start, but it will turn into a 0.5 per cent decline by 2032.
Also, emerging economies generally have more employment in the so-called informal sectors, where income taxes are not always paid. Therefore, the package should be replaced by direct cash transfers to low-income workers from 2029, along with EITC and carbon tax.
Policy measures are needed to provide incentives to switch to a net-zero economy by 2050. Properly timed and implemented, these measures can facilitate the transition from a relatively modest segment of the workforce to green jobs, while at the same time increasing the skills and income of the poorest people. Paying workers wages and reducing inequalities. It also ensures that the path towards a green economy is inclusive.
—This blog, based on Chapter 3 of the World Economic Outlook, “A Greener Labor Market: Employment, Policies and Economic Transformation”, by Dia Nouraldin, Ippi Shibata and Marina M. It also reflects the research done by Tavares.