Job Creation and Local Economic Development 2023

Executive summary

Tackling climate change and environmental degradation is one of the most formidable tasks the world faces. Yet, a lack of workers with relevant skills could hold back the green transition. The environmental and climate challenges of our time call for new sustainable solutions and significant reductions in emissions, which will affect industrial production, consumption and energy provision globally. This shift to a sustainable and net-zero economy will result in a significant transformation of local labour markets, as workers move into different occupations and sectors. The green transition compounds megatrends such as digitalisation and demographic change that have also been reshaping the geography of jobs and the world of work.

The greening of the labour market will have several effects on people, places, and firms. First, new types of jobs will emerge, creating opportunities in occupations that may not yet exist. Second, it will likely result in the loss of some existing jobs, especially in highly polluting activities such as coal and gas extraction. Third, the green transition will lead to a shift in the skills required for many other jobs throughout the economy - from construction to fashion to scientific research. Addressing these challenges requires a rethinking and updating of education curricula and training courses to enable workers to attain the skills demanded by the changing labour market. But because the geography of these transitions will also differ, a place-based strategy will be vital, with local economic development and business support programmes complementing national green transition policies, particularly for small and medium-sized enterprises.

However, an absence of a universally agreed definition of “green” jobs may hamper policy design. This shortcoming means there is scant evidence on the green transition’s impact on labour markets, especially on the geography of green jobs within countries and the socio-economic effects on different types of workers within communities. This report fills that void. It provides novel estimates of regional differences in the share of and the demand for green jobs across 30 OECD countries by looking at the tasks workers perform.

The effects of the green transition on local jobs and communities

Local economies differ in terms of the risk of job loss as well as the opportunities for “green” jobs

While the green transition is a global megatrend mainly spurred by policy, its labour market impact is inherently local. Both the risks and opportunities for workers are uneven across different places within the same country. Regions relying on high-emission sectors are more likely to see jobs disappear due to green policies. Likewise, economic opportunities and “green” job creation will not materialise equally everywhere. Therefore, aggregate effects or national data can conceal regional disparities in the labour market impact of the green transition.

Around 18% of workers in the OECD have jobs with a significant share of green tasks that directly help improve environmental sustainability or reducing greenhouse gas emission. However, the share of those “green-task” jobs differs across regions, ranging from 7% to more than 35%. Some regions, including many capital regions, are at the forefront of the green transition – they already have a high and increasing share of green-task jobs and a low share of “polluting” jobs at risk of disappearing. In other regions, a high share of polluting and green-task jobs coincide, which creates space for job transitions. However, there are also regions with above-average risk of job displacement that have not yet managed to capture the benefits of the green transition. Overall, few regions with a low share of green-task jobs show signs of catching up.

Despite the increasing attention to climate change in the public discourse, local labour markets have not become much greener over the last decade. Yet, momentum has been building recently. The share of workers in green-task jobs grew overall from 16% in 2011 to 18% in 2021, ranging from 10 percentage point increases to 7 percentage point decreases across OECD regions. While most regions have not made much progress in greening their labour force, recent regional labour demand suggests momentum is growing. Since the start of the pandemic, growth in the demand for green-task jobs has outpaced overall labour market demand by 30 percentage points. Additionally, the share of green vacancies is higher while the share of polluting vacancies is lower compared to the current employment shares, which may be the first signs of a shift towards a more environmentally friendly labour market

The green transition may deepen divides within local labour markets

The green transition has a strong gender dimension in the labour market. Women tend to be under-represented in green-task jobs, accounting for only 28% of them, requiring policy efforts to raise female participation in the green transition. On the other hand, men will be the most affected by the disappearance of polluting jobs.

Without policy action, the green transition may have other significant distributional effects. Green-task jobs tend to offer up to 20% higher pay than other jobs. While future green jobs might shift towards medium- and low-skilled occupations, in activities such as waste management, retrofitting or construction, so far, high-skilled and educated workers have predominantly captured the employment opportunities brought about by the green transition. In contrast, people with lower educational attainment and in medium-skilled occupations are at higher risk of displacement due to the green transition.

• Some regions, including many capital regions, have already benefitted from the green transition and have a high and increasing share of green-task jobs and a low share of polluting jobs at risk of disappearing. In other regions, a high share of polluting and green-task jobs coincide, which creates space for job transitions. However, there are also regions with above-average risk of job displacement that have not yet managed to capture the benefits of the green transition. A closer look at demand suggests that few regions with a low share of green-task jobs show signs of catching up.

• A region’s ability to benefit from the green transition has, so far, depended on its industrial composition and the skills in the local labour market. Higher shares of scientific, technical and information activities in the region correlate with a higher share of green-task jobs. The top regions in terms of the share of green-task jobs also tend to have a higher share of population with tertiary education.

Local actions will be essential in creating green jobs and supporting the development of green skills

Alongside national governments, local actors will play an important role in managing the green, and just, transition. With both the challenges and opportunities of the green transition being place-specific, local actions or national initiatives tailored to local realities are needed. Additionally, local and regional governments cover the spaces where local development needs to be joined up with employment and skills policies.

While the actions for a green transition are being largely driven by policy, there are helpful lessons from past and other ongoing transitions that were typically more market driven. Digitalisation, globalisation, and the exit from coal, all entailed significant readjustment processes in the labour market. These shifts have created both new risks and opportunities, and had an uneven impact across local labour markets and different population groups. They show striking similarities to the green transition in several dimensions. Lessons from those transitions highlight the importance of setting a clear long-term vision for the local economy, leveraging regional assets, and acting proactively in areas such as investments or reskilling.

Many of the challenges brought about by the green transition can be tackled by adapting and ramping up the existing local labour market and skills systems, others will require tailored policies. Local skills systems are already struggling to keep pace with the rapid change of jobs and skills needs, and, often, to reach those individuals that would benefit the most from training. Therefore, governments need to double down on adult learning, and active labour market policies informed by skills assessment and anticipation systems. This requires active engagement from workers, employers, and public actors and targeted measures that address the uneven risk of job losses across regions, industries, and individuals.

Learning from other transitions. . .

Share a clear and long-term vision and strategy

• Develop a long-term vision and strategy for local economic transition, involving both public and private actors and civil society

• Provide support to groups most affected by the labour market transition to minimise push-back against green policies that create adjustment costs for some workers and sectors

• Align local re-skilling and re-education programmes to match demand and local development efforts

Use regional assets to restructure the local economy

• Use available skillsets to smooth the transitions of workers into jobs that require limited reskilling and exploit local assets or existing comparative advantages to lower adjustment costs

• Facilitate, instead of just postpone, economic transitions that are inevitable, especially by providing easily accessible career guidance and retraining programmes for workers at risk of displacement.

• Direct investments to innovation and raising local attractiveness (public services, cultural amenities) to retain (and attract) workers and generate quality jobs

. . .and rethinking local skills systems

Align environmental policy with employment and skills efforts

• Assess how environmental policies will drive the demand for green skills, to match skills and labour market policies, which are responsible for the supply of green skills

• Tailor skills and labour market policies to local needs by engaging local governments and collaborating with local stakeholders such as training institutions, PES, and social partners

• Support and incentivise firms to help workers develop green skills on-the-job, generate local green initiatives, and involve employers in the design and delivery of training offered by TVET

Develop a forward-looking strategy for adult learning based on sound labour market intelligence

• Review skills assessment and anticipation exercises to ensure that they (i) reflect the impact of environmental regulation on skills demand, (ii) are sufficiently disaggregated at the sectoral and regional level, and (iii) align with policy needs

• Systematically update educational and training curricula to reflect the shift in skills and knowledge for green jobs – ranging from awareness raising to comprehensive transition-oriented re-skilling

• Tailor training offers for up- and re-skilling with a special focus on occupations, sectors and regions heavily affected by the green transition

• Raise awareness of the impact of the green transition among employers, with a special focus on supporting SMEs, to overcome barriers in the adoption of green technology

  Offer targeted support for vulnerable groups within local labour markets to promote a just green transition

• Develop better intelligence on the local characteristics of individuals at risk of displacement to prioritise re-training and up-skilling efforts

• Leverage the social economy and private-public partnerships to broaden local employment and training opportunities to vulnerable groups