TRANSFORMATIONS: WHAT DO WE KNOW?
5. POLICY OPTIONS TO STRENGTHEN LABOUR MARKET PERFORMANCE
Labour market challenges can be better addressed when effective policies are in place. Most labour market policies, including active as well as passive labour market tools, can support the effi-ciency and equity of economic transformations.
Green industrial policies should therefore have employment and social policy components. Good jobs and business success in emerging green sectors are interdependent. On the one hand, workers want to benefit from new and decent jobs;
on the other hand, only if workers are well-trained, mobile enough and prepared to take on new chal-lenges can a green transformation be successful.
5.1. MOBILITY ASSISTANCE AND SKILL ADJUSTMENTS
The workforce needs to be allowed, and encour-aged, to successfully shift through a green transition. The ability to manage transitions successfully is included in the ILO work under the term workforce mobility. Such mobility can take various forms. Workers need empowerment to fulfill new assignments or take on new jobs within the same enterprise, for example in an electric utility company that shifts its operations from fossil fuel based energy to renewables. Workers may also have to change jobs, leaving the enter-prise but remaining in the same industry, or they may have to shift to different sectors.
To facilitate these transitions, dedicated enter-prises should be supported in establishing training systems to ensure that employed and unemployed workers can upgrade and adjust their skills or even be retrained as needed. Reform of education systems may also be necessary, espe-cially to help young workers enter the labour market. Public employment services can help re-allocate job seekers to open positions.
Geographical mobility should also be supported, especially when massive shifts of the industry structure result from green industrial policies.
This may be the case, for example, when shifting from fossil to renewable energy: Fossil energy plants are usually located next to energy-intensive industries and cities, whereas renewable power plants are located where the respective power resources are abundant. Shifting energy systems will therefore affect spatial distribution, and work-ers will have to move physically (ILO 2011).
5.2. PROMOTING ENTREPRENEURSHIP
Green transformation will not necessarily be driven by large, existing firms. It offers opportu-nities for start-ups and small firms that develop new ideas and green innovations. In this regard, employment considerations should not only concern employees but also the promotion of self-employment and entrepreneurship. Green industrial policies should include a variety of measures for that purpose, for example to improve access to credit or support the formaliza-tion of informal enterprises, which is particularly important in developing countries.
5.3. REVENUE-NEUTRAL GREEN TAXES
Empirical evidence suggests that levying envi-ronmental taxes while reducing taxes on labour produces positive employment effects (Schlegel-milch et al. 2017, this volume). This approach, called revenue recycling, increases economic efficiency by internalizing environmental costs.
Considering the economic consequences in isolation from social and health benefits, three interacting effects must be managed wisely: the primary cost of the introduction of new green taxes will reduce economic activity; revenue recy-cling will have a positive effect on the economy;
and levying new taxes on top of already existing taxes that interact with the existing taxes will add additional costs (Goulder 2013). Thus, from a purely economic perspective, the potential of an economic expansion depends on the strength of the revenue recycling effect, in relation to the sum of the first and third effects.
The first effect has been discussed widely in the context of high-income countries. The Canadian province of British Columbia introduced a reve-nue-neutral carbon tax in 2008 with reductions in corporate and personal income taxes, and with lump-sum payments to low-income households.
Yamakazi (2015) reports that emission-intensive and trade-exposed industries suffered from fall-ing employment opportunities due to the new tax, while other sectors increased their employ-ment, suggesting a movement of labour between sectors. On an aggregated level, he concludes that the tax reform had positive effects on employment. In Germany, green taxes have been recycled to cut pension contributions, thereby
62 lowering labour cost. Estimates suggest that the green tax reform created around 250,000 jobs in 2003 alone (EEA 2011).
Verifiable evidence for lower and middle-income countries is very limited. Findings from high income countries may not be representative of developing countries because of differences in factor prices, endowments and labour market characteristics (Bowen and Kuralbayeva 2015).
Importantly, the economies of many developing countries are characterized by large informal labour markets. Kuralbayeva (2013) focuses explic-itly on modeling labour market characteristics of developing countries with an informal sector and rural-urban migration. She concludes that revenue-neutral green tax policies can reduce unemployment in the private sector: by using the additional government income to reduce payroll taxes, the cost of employment in the formal sector decreases. At the same time, environmen-tal taxes decrease the income of self-employment in the informal sector. Thus, in the model, the tax burden shifts towards the informal sector, which then creates incentives to operate formally and reduces formal unemployment (Kuralbayeva 2013).
Landa Rivera et al. (2016) assess the effect of carbon taxes and revenue recycling on the Mexi-can economy. They conclude that such reform would be beneficial for the economy and the envi-ronment, yielding a double dividend: emissions would decrease, while GDP, employment, wages, but also inflation, would increase. Schlegelmilch
et al. (2017) suggest that revenues should be recy-cled in ways that meet the respective national priorities and enhance political support for envi-ronmental tax reforms.
5.4. DECENT WORK AND SOCIAL DIALOGUE
Social dialogue is a mechanism through which interested representative groups, such as trade unions and business associations, and the government aim to build consensus among major stakeholders. Effective dialogue can help resolve crucial social and economic issues and improve economic performance. Given that the transition towards a greener economy will entail profound changes in production processes and technolo-gies, as well as reallocations of jobs, close coop-eration between government and the social partners will be central to the success of this transformation (ILO and UNEP 2012).
A greener economy does not automatically create high-quality, decent jobs. Job quality needs to be monitored and measures taken to ensure that labour legislation is applied and workers and employers can organize and make use of collec-tive bargaining. In this regard, International Labour Standards provide both a legal and insti-tutional framework and practical guidance for work in a greener and more sustainable economy.
Similarly, while a green economy is very likely to be healthier and safer for workers and the public, caution is nonetheless needed to prevent possible new occupational hazards (ILO and UNEP 2012).
6 CONCLUSIONS
A green structural transformation creates oppor-tunities for more and better jobs, but it also poses challenges for employment and incomes. To evaluate the impacts of green transformation on employment, various definitions of green jobs are in use. Many statistical agencies use a narrow definition covering only sectors involving envi-ronmental goods and services. Looking at EGSS only, studies for the EU, the United States and other countries have demonstrated the poten-tial for the environmental sector in job creation.
Annual green job growth rates vary, but have been as high as 37 per cent in the case of Germany. The share in total employment ranges between 1 to 4 per cent.
However, when studying overall employment effects of green transformations, it does not suffice to look at the emerging green sector in isolation. Greening sectors, occupations and jobs
may happen in other sectors as well, and the narrowly defined EGSS may have spillover effects on other activities. While on the one hand new green jobs emerge, there will also be job losses in polluting industries. Estimations have shown that between 20 to 50 per cent of workers worldwide are currently still working in carbon-intensive industries, where the need to change business models, jobs and occupations is particularly acute. Thus, for a full appraisal of employment effects, detailed subsectors and general interac-tion effects between sectors need to be consid-ered. EGSS figures only capture a small part of the labour market change.
Moreover, employment considerations should not only focus on the number of jobs created or lost but also the quality of jobs. The ILO Decent Work Agenda–encompassing job creation, rights at work, social protection and social dialogue–can
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offer guidance on how the green economy should provide 'decent work' and be socially inclusive. To emphasize this agenda, ILO’s definition of green jobs limits the concept to those jobs that can also be considered as 'decent work'.
Labour market and social policies, in particular active and passive labour market policies, can and should support successful green transformation by enhancing the mobility and skills of workers.
Compliance with International Labour Standards in all sectors of the green economy can ensure commitment to job quality. Finally, well designed revenue-neutral green tax policies can have posi-tive effects for the environment and employment.
64
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APPENDIX
11 The Global Warming Potential (GWP) indicates the amount of global warming a gas causes over a given period of time, relative to CO2 (Brander, 2012). The period of reference is usually 100 years. The higher the GWP the most dangerous the gas with respect to CO2. Data on the GWP come from IPCC (2007).
This Appendix illustrates the methodology under-lying the figures and tables presented in the chap-ter. Data on GHG and employment by sector were taken from the World Input-Output Database (WIOD), 2013 release. The WIOD has been part of a project funded by the European Commission and officially launched in 2012. The core of the WIOD has been constructed by linking national supply and using tables with statistics in interna-tional trade (Erumban et al. 2011). It also includes socio-economic accounts, employment and envi-ronmental indicators on resource use and emis-sions (WIOD 2017).
CO2 emissions are calculated in the form of CO2 equivalents and therefore include also other GHG emissions. The WIOD contains information on other emissions and resource utilisation such as energy use, water consumption, or material use.
Unfortunately, only GHG emissions and energy consumption are systematically available for most industries and across countries. Energy consumption and GHG emissions are highly correlated and lead to a similar ranking. Water consumption and material use are only avail-able for a limited number of industries. While the available information on water consump-tion and material use is in line with the ranking based on GHG emissions, there are too many missing data points to establish a ranking on resource-intensity.
To conduct the analysis, information coming from the national input-output tables is merged with data on social and economic accounts for the period 1995 to 2011, along with environmental indicators for the years 1995 to 2009. In total, data is available for 35 industrial sectors based on the ISIC rev.3 classification in 40 countries (United Nations Statistics Division 2017). The database also includes information on emerging and devel-oping economies for which detailed sectorial information is typically difficult to find. In particu-lar, 33 countries are developed economies, 5 are upper-middle and 2 are lower-middle income countries. In addition, 13 out of the 40 countries are not OECD members, while 12 countries are not EU members.
The following countries are included in the analy-sis of the chapter: Australia, Austria, Belgium, Brazil, Bulgaria, Canada, China, Cyprus, Czech Repub-lic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, Spain, Sweden, Taiwan, United Kingdom and USA.
GHG EMISSIONS IN TERMS OF CO2 EQUIVALENTS