The US administration has committed to ambitious climate goals and is casting the transition to net-zero emissions as an opportunity to create new and high-paid “green” jobs. However, labour market transitions can be difficult for some workers. Take the example of a coal miner. If they wish to switch to a non-polluting job, how easy would it be? Would it entail moving across the country? Write KATHARINA BERGANT, RUI C. MANO and IPPEI SHIBATA.

Our research found that the answer is not as straightforward as might be expected. On one hand, the miner won’t have to go very far to find a non-polluting job, as green jobs can typically be found close by. But the transition to a green job may still prove difficult because it requires different skills.

The good news is that our research also found that US labor markets have responded flexibly in the past to transitions away from polluting industries, without major disruptions to employment or average workers’ pay.

Geographical patterns                                                                            

Our research takes an existing classification of green-intensive jobs based on the underlying number of tasks that use fewer natural resources or make their business more environmentally friendly. Pollution-intensive jobs are those most prevalent in highly polluting industries.

When we analyzed the geographical patterns of green- and pollution-intensive jobs in the US, we found that pollution-intensive jobs are clustered in more rural areas, particularly in the Southeast and Southwest. They are particularly prevalent in extractive industries, like mining, but also in wood and textile industries and in sectors like electric power generation, transmission, and distribution.

In contrast, green jobs are typically located in the West, Southwest, and in pockets of the Midwest, especially in more urban areas. Notable green sectors include research and development, engineering services, and aerospace manufacturing.

Still, we found that areas rich in green-intensive employment tend to either neighbor or overlap directly with pollution-intensive rich areas. In fact, 72 per cent of commuting zones rich in pollution-intensive jobs are also rich in green jobs or border another zone that is.

Fundamental differences

While green and polluting jobs may share the same geographical area, we found that they are substantially different from each other.

Green jobs tend to be more skilled and relatively less vulnerable to automation. And they attract a wage premium, even after considering skill levels, age, gender, and geography. We estimate the wage premium of green versus polluting jobs to be around 2 per cent and slightly trending upward over time.

These systemic differences make transitioning from a polluting to a green job difficult, even if it is offered in the vicinity of the old job.

Workers in polluting-intensive jobs, however, find it easier to move to a neutral job—one that is neither green nor polluting, partly because most jobs are neutral. Therefore, greening in the labor market can happen more easily through workers in polluting-intensive jobs finding new neutral jobs first, rather than moving to green jobs directly.

Past data confirm these patterns. As more green jobs become available, these patterns could change, and moving to a green job may become easier over time.

Experience from past green transitions

To understand the ongoing transition, we studied the labor market impacts of past transitions, starting with the Clean Air Act enacted in 1963. The Act requires the US Environmental Protection Agency to develop and enforce regulation to protect the public from air pollution.

Our analysis showed that firms that were not compliant with the regulatory limits subsequently shed workers. To give a sense of the magnitude, if a particular industry in an area were to be found non-compliant, total employment in that industry would decline by 2 per cent after two years. However, we also found that total employment in that geographical area would remain roughly unchanged.

This suggests that workers who lose jobs in non-compliant industries can find work in other industries within the same geographical area.

Easing the transition

Our findings show that the much-needed green transition will require a shift in the labor force. This is not typically seamless and may entail costs for some workers. As green jobs require higher skills, policy can play a crucial role by helping workers gain the needed skills and become more competitive.

Environmental regulations are also an effective tool to help incentivize the transition from polluting to green jobs without negatively affecting overall employment or average pay.

Even though there are likely to be significant negative effects in specific parts of the country, our research also suggests that local governments won’t see any meaningful impact on their fiscal positions after such environmental regulations come into effect.

With the right policy tools, the US is well placed for the green jobs transition. Along with the ongoing green infrastructure push, a well-rounded policy package should include carbon taxes and a training program for lower-skilled workers so they can find jobs in low-polluting industries that pay more and benefit the economy. A tax break to low- and mid-income workers, like an earned income tax credit, will also provide them with income support during the transition while addressing inequality concerns.

• Bergant is an Economist in the IMF’s Research Department.
• C. Mano is a Deputy Division Chief in the IMF’s Research Department.
• Shibata is an Economist in the IMF’s European Department.

• Editor’s Note: Follow the link below to read the infographics in the original article: https://investadvocate.com.ng/2022/12/14/how-the-green-transition-will-impact-us-jobs/