‘Green’ Growth, ‘Green’ Jobs And Labor Markets
Public Disclosure AuthorizedPolicy Research Working PaperPublic Disclosure Authorized5990‘Green’ Growth, ‘Green’ Jobsand Labor MarketsAlex BowenPublic Disclosure AuthorizedPublic Disclosure AuthorizedWPS5990The World BankSustainable Development NetworkOffice of the Chief EconomistMarch 2012
Policy Research Working Paper 5990AbstractThe term ‘green jobs’ can refer to employmentin a narrowly defined set of industries providingenvironmental services. But it is more useful forthe policy-maker to focus on the broader issue ofthe employment consequences of policies to correctenvironmental externalities such as anthropogenicclimate change. Most of the literature focuses on directemployment created, with more cursory treatment ofindirect and induced job creation, especially that arisingfrom macroeconomic effects of policies. The potentialadverse impacts of green growth policies on laborproductivity and the costs of employment tend to beoverlooked. More attention also needs to be paid in thisliterature to how labor markets work in different types ofeconomy. There may be wedges between the shadow wageand the actual wage, particularly in developing countrieswith segmented labor markets and after adverse aggregatedemand shocks, warranting a bigger and longer-lastingboost to green projects with high labor content. In thesecircumstances, the transition to green growth and jobcreation can go hand in hand. But there are challenges,especially for countries that have built their industrialdevelopment strategies around cheap carbon-basedenergy. Induced structural change, green or otherwise,should be accompanied by active labor market policies.This paper is a product of the Office of the Chief Economist, Sustainable Development Network. It is part of a largereffort by the World Bank to provide open access to its research and make a contribution to development policy discussionsaround the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authormay be contacted at a.bowen1@lse.ac.uk.The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank andits affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.Produced by the Research Support Team
‘Green’ growth, ‘green’ jobs and labor marketsDr Alex BowenaaPrincipal Research Fellow, Grantham Research Institute on Climate Change and theEnvironment and Centre for Climate Change Economics and Policy (CCCEP), London Schoolof Economics and Political Science.JEL: J23, J24, Q01, Q54, Q56Keyword: sustainable development, climate change, green job, green growthAcknowledgements: This paper was produced as background material for the report onGreen Growth managed by the Office of the Chief Economist of the SustainableDevelopment Network. I would like to thank Uwe Deichmann, Stéphane Hallegatte, MichaelSpackman and particularly Mike Toman for helpful comments. I remain responsible for allerrors and omissions.
1. IntroductionThe challenge of human-induced climate change has led to renewed interest in sustainablegrowth as a means to promote human development. Growth – of the right type – remainsan effective way of lifting people out of poverty (see, for example, Collier, 2007). Growth ofthe wrong type will eventually be self-defeating, as environmental degradation reducesproductivity and welfare. The OECD has noted that “green growth is gaining support as away to pursue economic growth and development, while preventing environmentaldegradation, biodiversity loss and unsustainable natural resource use” (OECD, 2010). Thereis particular concern about the consequences of human-induced climate change. As theWorld Bank’s World Development Report 2010 argues, “Economic growth alone is unlikelyto be fast or equitable enough to counter threats from climate change, particularly if itremains carbon intensive and accelerates global warming. So climate policy cannot beframed as a choice between growth and climate change. In fact, climate-smart policies arethose that enhance development, reduce vulnerability, and finance the transition to lowcarbon growth paths” (World Bank, 2009). Stern (2010) thinks that “the new industrialrevolution and the transition to low-carbon growth constitute a very attractive path. It islikely to bring two or three decades of innovative and creative growth and large and growingmarkets for the pioneers. Low-carbon growth, when achieved, will be more energy-secure,cleaner, safer and more bio-diverse than its predecessors.”But what are the consequences of ‘green’ growth for labor markets? UNEP (2011) hasargued that “the greening of economies is not generally a drag on growth but rather a newengine of growth; that it is a net generator of decent jobs, and that it is also a vital strategyfor the elimination of persistent poverty.” The recent global economic downturn triggeredmany proposals for ‘green’ fiscal stimuli to promote growth and, in particular, jobs (see, forexample, Pollin et al., 2008). The OECD has also suggested that investing in green activitieshas significant job creation potential (OECD, 2011).Yet some have claimed that the potential is overestimated and environmental policies mayhave much less attractive labor market consequences (e.g. Morriss et al., 2009). Michaelsand Murphy (2009) argue that “it is highly questionable whether a government campaign tospur ‘green jobs’ would have net economic benefits.” Hughes (2011) has written about the‘myth’ of green jobs, arguing additionally that job creation has no merit as a basis for judging2
policy. Policies to promote ‘green’ jobs have even been alleged to be “terribly economicallycounterproductive” (Alvarez et al., 2010).This paper explores the possible relationship between labor markets and policies to promotesustainable growth – improving well-being with societies taking proper account of resourcedepletion and environmental impacts. In Section 2, the concept of ‘green’ jobs is discussed.In Section 3, some of the empirical estimates of job creation are reviewed, concentrating onthe issue of how labor markets are assumed to function. Most of the literature is focused ondeveloped industrial economies, but there have been attempts to estimate some of theemployment consequences for developing countries. However, it is not clear that thesemake appropriate allowance for the range of ways in which labor markets function, an issuediscussed in Section 4. Section 5 draws attention to the heterogeneity of developingcountries with respect to the opportunities for job creation in green growth. In Section 6,the question of the skills necessary to support green growth is considered. Finally, some ofthe possible implications for policy design in developing countries, and for researchpriorities, are considered.2. The concept: What are ‘green’ jobs?There is no single agreed definition of a ‘green’ job. That makes it hard to compare studiesof ‘green’ job creation (GHK, 2009) and has led some researchers to eschew use of the termcompletely. In a loose sense, though, ‘green’ jobs can be regarded as those associated withenvironmental objectives and policies.Some definitions of ‘green’ jobs or related concepts focus on occupations and skills with anidentifiable environmental focus, but most focus on employment in industries (or specificprojects) the products of which are deemed to be of environmental benefit. Such benefitscan be defined more or less broadly – for example, some concentrate on renewable energy,including or excluding biofuels, while others also include environmental services and/oremployment related to improving energy efficiency or developing less-carbon-intensiveproducts (e.g. building railways).3
UNEP has adopted a definition that attempts to incorporate aspects of job content as well asthe characteristics of industry gods and services (UNEP/ILO/IOE/ITUC, 2008). It defines‘green’ jobs as “work in agricultural, manufacturing, research and development (R&D),administrative, and service activities that contribute substantially to preserving or restoringenvironmental quality. Specifically, but not exclusively, this includes jobs that help toprotect ecosystems and biodiversity; reduce energy, materials, and water consumptionthrough high-efficiency strategies; de-carbonize the economy; and minimize or altogetheravoid generation of all forms of waste and pollution.” This definition takes a broad industryperspective, extending beyond employment in narrowly defined environmental services. Inprinciple, it embraces employment in producing any goods and services that have smalleradverse environmental impacts than existing close substitutes. UNEP also argues that thereis a spectrum of ‘greenness’: “There are different degrees to which technologies, products,businesses, and business practices can be said to be green, ranging from reactive andremedial measures on the one hand to proactive measures on the other.” In other words,cleaning up pollution after the event is less green than stopping the pollution in the firstplace. That appears to beg the question as to the most efficient way of dealing with anenvironmental problem and would lead to the classification of many environmental servicesas less green than, say, employment in the packaging industry.However, UNEP adds the rider that “green jobs need to be decent work, i.e. good jobs whichoffer adequate wages, safe working conditions, job security, reasonable career prospects,and worker rights. People’s livelihoods and sense of dignity are bound up tightly with theirjobs. A job that is exploitative, harmful, fails to pay a living wage, and thus condemnsworkers to a life of poverty can hardly be hailed as green.” UNEP suggest that, at aconservative estimate, there were more than 2.3 million jobs in the renewable energy sectoraround the world in 2006, and more in construction, providing improved energy efficiency inbuildings, in low-carbon transport and in other environmental activities. But that compareswith an employed labor force globally of around 1.8 billion.Thus the UNEP definition also extends to characteristics of the jobs themselves. However,their definition conflates different social objectives in one term. The rider is particularlyproblematic in developing countries where more employment may be desirable for the relief4
of poverty and an increase in overall productivity – even if the jobs created pay little morethan a subsistence wage or the employment is in less green industries and skill classes.Some definitions focus on a subset of industries producing environmentally desirableoutputs. Thus some studies, notably by the European Commission’s EnvironmentDirectorate, have used the OECD/Eurostat definition of the environmental goods andservices industry (OECD, 1999), comprising “activities which produce goods and services tomeasure, prevent, limit, minimize or correct environmental damage to water, air and soil, aswell as problems related to waste, noise and eco-systems. This includes technologies,products and services that reduce environmental risk and minimize pollution andresources.” That covers pollution management (e.g. air pollution control) and resourcemanagement (renewable energy plants and water supply). On this basis, green jobsconstitute a small but significant share of total employment – 1.7% of total paidemployment in Europe (EC, 2007). That is probably a higher fraction than a global estimatealong UNEP lines would suggest; as UNEP notes, most of the documented growth in greenjobs has so far occurred mostly in developed countries.1 Jobs in the nuclear power sectorare not included, and these are not generally regarded as ‘green’, although they are in a lowcarbon industry. Employees in many jobs might find that their jobs are not counted as‘green’ despite the nature of the goods and services that they help produce. For example,jobs in the car industry are excluded, even though some may be devoted to developing lowcarbon vehicles.Some studies have developed their own terminology, using data from detailed employmentstatistics or detailed company databases. The Pew Center, for example, defines the ‘cleanenergy economy’ as follows: “The ‘clean energy economy’ generates jobs, businesses andinvestments while expanding clean energy production, increasing energy efficiency, reducinggreenhouse gas emissions, waste and pollution, and conserving water and other naturalresources” (Pew, 2009). It comprises five categories: Clean Energy; Energy Efficiency;Environmentally Friendly Production; Conservation and Pollution Mitigation; and Trainingand Support. Using data about individual companies, Pew estimates the USA’s ‘clean energyeconomy’ to account for about half a percent of all US jobs.1At the same time, developed countries are responsible for by far the largest share of the stock of greenhouse gases in theatmosphere. They have also probably made a disproportionate contribution to long-lived solid waste. Hence some of thegreen jobs reflect the unsustainability of developed countries’ economies.5
Some definitions start from a different analytical perspective and try to answer the question:“What are the employment consequences of introducing ‘green’ policies (e.g. ‘cap andtrade’) relative to a baseline case?” This approach requires implicit or explicit economicmodeling of the policies. Some studies in this vein count only jobs directly created by thepolicies (‘direct’ employment effects) while others include jobs created in the supply chainfor the products and services supported by ‘green’ policies (‘indirect’ employment effects).Kammen at al. (2004) and Wei et al. (2010) review several studies that estimate directemployment effects of promoting renewable and other low-carbon energy supply andenergy efficiency, focusing on the specific labor requirements of particular technologies(‘bottom up’ estimates, using simple spreadsheet-based analytical models in conjunctionwith engineering estimates). An important issue that arises is the timing and duration of jobcreation; there is a key distinction between construction, manufacture and installation,where jobs may be relatively short-lived, on the one hand and ongoing operation,maintenance and fuel processing on the other, where the length of jobs depends on thedurability of the relevant plant.They also consider studies that use input-output (I-O) tables to estimate both direct andindirect employment effects, taking account, for example, of the jobs created in businessservices provided to the renewable energy sector. These extend the scope of the estimateswhile sacrificing the greater granularity derived from engineering studies of specific energyprojects. I-O based studies also fall prey to the usual criticisms of input-output models: thatthey do not allow for changes in input-output coefficients induced for example by relativeprice changes and technological progress; that they are often out-of-date; that they dependon industrial classifications that do not distinguish some of the key sectors of interest; andthat they are highly aggregated. The meta-studies by Kammen and his associates attempt toderive standardized measures to compare estimates of jobs created per average megawattover the life of an energy facility. The authors also explore the implications of variousscenarios of exogenous energy efficiency improvements and renewable energy portfoliostandards for US employment in total. As they take into account jobs destroyed when fossilfuel-based energy is displaced by low-carbon sources, their projections are for a net conceptof employment change, but they do not take into account general equilibrium effectsthrough relative wage changes.6
Others go further still and include jobs created by the aggregate demand generated by theextra direct and indirect employment (‘induced’ employment effects). This approach allowsjobs to be counted as ‘green’ if they are created by ‘green’ policies, even if they are insectors with no obvious direct relationship to environmental objectives (e.g. tobaccoprocessing) or only a secondary relationship (e.g. construction). A question arises as towhether one should net off jobs destroyed in sectors disadvantaged by ‘green’ policies (e.g.coal mining). This issue is less relevant if one is simply trying to enumerate jobs associateddirectly with environmentally attractive goods and services. But it is crucial if one is trying toevaluate the overall labor market impacts of environmental policies. Some studies finessethis issue by focusing on the job creation implications of different fiscal stimulus packageswith greater or lesser reliance on ‘green’ spending, none of which are expected to destroyjobs. Pollin et al. (2008) is a good example of this type of study, utilizing an estimate of themacroeconomic multiplier effect of additional direct fiscal spending to calculate inducedemployment creation. It has stimulated a lively debate about the merits of trying to create‘green’ jobs by means of a fiscal stimulus (see Box 1).Box 1: Myths or reality of green jobs?This Box summarizes the debate between Morriss et al. (2009) and Pollin (2009) about greenjobs and comments on the implications for analysis in the context of developing countries.The supposed mythThe riposteCommentEveryone understands whata ‘green job’ isOne should focus on thegreen economy and overallemployment effects, not‘green’ jobsIt might be helpful if thegreen transition indeveloping countries createsunskilled jobs, given theextent of underemploymentCreating green jobs willboost productiveemploymentProperly designed spendingshould stimulate theproduction of useful goodsand services, not Keynesian‘make-work’Low carbon growthstrategies for developingcountries should emphasizethe potential for the supplyof clean energy – jobs in thissector would be productivebut, given low wage rates,jobs are quite properly likelyto be low productivity onesGreen jobs forecasts arereliableAll forecasting is subject touncertainty; the linear inputoutput approach is helpful aslong as the methodologicalMore emphasis needs to beput on the macroeconomicand general equilibriumadjustments and job7
caveats are recognizeddisplacement; modeling forthe US labor market at atime of high unemploymentmay not be very instructivefor developing countriesGreen jobs promoteemployment growthClean energy is more laborintensive than fossil-fuelindustry; low productivityjobs are better than zeroproductivity unemployment;the low-carbon transitionwill create higher paid jobstooThere is more scope foremployment creation indeveloping counties giventheir segmented labormarkets and lowproductivity; but low-carbonjobs may be low-wage jobsThe world economy can beremade by reducing tradeand relying on localproduction and reducedconsumption withoutdramatically decreasing ourstandard oflivingThe low-carbon transitionwould increase local content;trade patterns wouldchange; the USA is runningtoo big a trade deficitThis is problematic foremerging-market economiesthat wish to export to theUSA; more analysis isrequired of how world tradepatterns would change (e.g.if biofuels displaced fossilfuels)Government mandates are asubstitute for free marketsPricing an externalityrequires public policyintervention; but policiesshould work with marketincentivesHigh-quality collectivedecision-making andintervention in markets arechallenges for many poorercountriesImposing technologicalprogress by regul
of ‘green’ job creation (GHK, 2009) and has led some researchers to eschew use of the term completely. In a loose sense, though, ‘green’ jobs can be regarded as those associated with environmental objectives and policies. Some definitions of ‘green’ jobs or related concepts focus on occupations and skills with an
These jobs include welders, pipe fitters and machine installers. Defining jobs 1. Direct jobs are jobs supported from direct project expenditure, such as jobs supported when a compressor is purchased for installation on site. 2. Indirect jobs are those which are supported from spending in the wider supply chain, such as those
hotel jobs, representing a gain of over 160,000 hotel jobs since 2015. The total number of US jobs supported by the hotel industry increased by 1.1 million since 2015 and represents more than 1-in-25 US jobs (4.2%). A representative hotel with 100 occupied rooms supports 241 total jobs, including 137 direct jobs and 104 indirect and induced jobs.
Administrative and support services (up 327,000 to 550,000 jobs), Accommodation and food services (up 184,000 to 365,000 jobs) and Other services (up 95,000 to 150,000 jobs). Since 1996, there have also been high levels of jobs growth in Information and communication (up 180,000 to 426,000 jobs), Education (up 195,000 to 423,000 jobs) and .
PArt tHree: Policies for Broadly shared Prosperity 35 The First Pillar: Growth 35 Growth by creating jobs 35 Create jobs by investing in infrastructure and restoring communities 35 Create jobs by ensuring U.S. global competitiveness 36 Create jobs by enforcing full-employment monetary policy 37 Growth by fostering innovation 38
The split of employment across total jobs in the supply chain will differ according to the PAYGo and over the counter cash sales Figure 4. The off-grid solar industry will support around 220,00 high skill jobs, 290,000 medium skill jobs and 800,000 lower skill positions by 2022. Figure 5. Projected number of jobs for women and employees in
of the hot jobs. Figure 1 shows the top 10 jobs on the Hoosier Hot 50 Jobs list and their projected growth from 2002 to 2012. Can I Get a Hot Job Right Out of High School? The list demonstrates the importance for Hoosiers continuing their education. Table 1 shows the ten highest paying jobs on the Hoosier Hot 50 Jobs list
strong growth in low-wage, female-dominated jobs is projected for the future. Of the 20 jobs predicted to add the largest numbers of workers between 2012 and 2022, five are low-wage, typically paying less than 10.10 per hour— and all of these low-wage jobs are female-dominated.10 Another nine of these 20 high-growth jobs pay between
AGMA American Gear Manufacturers Association AIA American Institute of Architects. AISI American Iron and Steel Institute ANSI American National Standards Institute, Inc. AREA American Railway Engineering Association ASCE American Society of Civil Engineers ASME American Society of Mechanical Engineers ASTM American Society for Testing and .
