Job Creation and Local Economic Development: Bridging the great green divide

Job Creation and Local Economic Development

BRIDGING THE GREAT GREEN DIVIDE

About the OECD

The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.

About the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE)

The Centre helps local, regional and national governments unleash the potential of entrepreneurs and small and medium-sized enterprises, promote inclusive and sustainable regions and cities, boost local job creation and implement sound tourism policies.

About the Local Employment and Economic Development (LEED) Programme

The Programme’s mission is to build vibrant communities with more and better quality jobs for all. It supports national and local governments through tailored reviews, capacity building, research and reports on innovative approaches to local development.

About this policy highlights

This booklet reproduces highlights from the report Job Creation and Local Economic Development 2023: Bridging the Great Green Divide, which provides novel insights on challenges and opportunities for local labour markets as a result of the green transition. This report falls within the Programme of Work of the OECD’s Local Employment and Economic Development Programme.

The full book is accessible at Job Creation and Local Economic Development BRIDGING THE GREAT GREEN DIVIDE

The great divide in green jobs

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 shift to a sustainable and net-zero economy will transform 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.

Greening labour markets will have different effects on people, places, and firms, creating new types of jobs but also displacing some existing jobs, especially in highly polluting activities such as coal and gas extraction. The green transition will lead to a shift in the skills required for many other jobs in the economy -

Defining green jobs

Green jobs can be defined in different ways. To zoom in on the geographic and social effects of the green transition and link it to employment policy, this report classifies green jobs based on the tasks they entail.

It identifies jobs as green if at least 10% of their tasks are green, that is they support the reduction of greenhouse gas emissions directly or improve environmental sustainability.

The analysis draws on the taxonomy of the Occupational Information Network (O*NET) of the U.S. Department of Labor that categorises the tasks of occupations into green or nongreen, and matches it with regional data on employment by occupation.

from construction to fashion to scientific research. As the geography of these transitions will differ, a place-based lens will be vital, with local economic development, skills development and business support programmes complementing national green transition policies.

So far, systematic evidence on the opportunities and risks for local labour markets in the green transition has been missing. This report fills that gap, shedding light on the geography of green jobs and possible impact on socio-economic inequality. 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.

Identify installation locations with proper orientation, area, solar access (…) for photovoltaic (PV) arrays

Install photovoltaic (PV) systems in accordance with codes and standards (…)

Activate photovoltaic (PV) systems to verify system functionality and conformity to performance expectations

Monitor construction activities to ensure that environmental regulations are not violated

Inspect and monitor construction sites to ensure adherence to safety standards, building codes, or specifications

Measure dimensions and verify (…) elevation of structures or fixtures to ensure compliance to building plans and codes

Cut, surface, polish, and install marble and granite or install pre-cast terrazzo, granite or marble units.

Lay and set mosaic tiles to create decorative wall, mural, and floor designs

Level concrete and allow to dry

The green transition will change the jobs people do and the local communities where they work

Green task Non-green task

Solar Photovoltaic Installers

Construction and Building Inspectors Tile and Marble Setters

The green

transition is creating a great green job divide between regions

While the green transition is a global megatrend, its labour market impact is inherently local. The risks and opportunities for workers are not the same across communities, often concentrated in specific places. Regions relying on high-emission sectors are more likely to face the disappearance of jobs due to green policies. Economic opportunities and green job creation will also not materialise equally everywhere.

Overall, around 18% of workers in the OECD have jobs with a significant share of green tasks that directly help improve environmental

Share of green jobs across regions

sustainability or reducing greenhouse gas emission. However, the share of those “green-task” jobs differs widely across regions. It ranges from 7% in some regions to around 30% in metropolitan regions such as Stockholm, Paris and Vilnius. Some 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. Other regions with above-average risk of job displacement have not yet managed to capture the benefits of the green transition.

In most countries, capital regions have been leading the way in green job creation thus far. They tend not only to have greener, but also less polluting, labour markets. In 19 out of 25 countries with data for multiple regions, the capital region has the highest share of green jobs in the country. On average, the share of green jobs is 4 percentage points higher in capital

regions than in the rest of their respective country, while the share of polluting jobs is almost 7 percentage points lower. For example, the share of green-task jobs in Ile-de-France (which includes Paris) is 30% compared to 22% in the rest of France, and the shares of polluting jobs are 10% and 16% respectively.

Capital regions stand out with more green-task and fewer polluting jobs

The change in the geography of jobs in the green transition could widen regional economic disparities. Within countries, regions with a higher share of polluting jobs tend to have significantly lower GDP per capita. Since polluting jobs face a higher risk of displacement,

those regions might experience greater job losses than more affluent regions and a reduction in economic activity, which could lead to further economic divergence across regions in OECD countries.

Empowering women to power the green transition

Women are significantly under-represented in green-task jobs in local labour markets. More than two-thirds of green-task jobs (72%) are held by men and less than one-third (28%) by women. There is not a single region across 30 OECD countries with gender parity in green jobs. More can and must be done to attract women into greentask jobs to accelerate the green transition in the race to reach net zero by 2050.

Gender disparities also exist in polluting jobs. Men face a higher risk of displacement in the green transition because they also do most of the polluting jobs. On average, men face a higher risk of displacement caused by the green transition, with 83% of polluting jobs held by men.

Women are significantly under-represented in green-task jobs

Non-green jobs Green jobs

What is driving the green gender divide?

Women are significantly underrepresented in the occupations that matter for the green transition. For example, in engineering professions (physical and engineering science technicians, engineering professionals), which are among the most common green jobs, women constitute less than 1 in 4 workers. Women also rarely work in construction, which plays an important role for the green transition.

The fields of study in higher education still reveal a gender bias. More than half of green workers hold a degree in one of three fields: engineering (23%), business and administration (22%), and architecture and construction (11%). However, only 8% of workers with an engineering background are female, and in architecture and construction the share of women is only 15%.

Gender divergence starts from a young age. Despite girls routinely performing well on science and maths at school, they are less likely than boys to aspire a career in STEM-related occupations. At the age of 15, boys are already twice as likely to expect to work in a green job as girls (21% and 10%, respectively). For example, while a similar share of girls and boys aspire to be architects, boys are over four times more likely than girls to indicate engineering as their profession of choice. Gender norms contribute to girls perceiving STEM subjects negatively.

Source: Eurostat (2021), Labour Force Survey.

Left unchecked, the green transition could deepen economic and social divides within countries for decades

The green transition also risks widening the gap between workers. So far, the majority of workers in green-task jobs are highly educated and have higher levels of skills. More than half of workers in green jobs have completed higher education, compared to about one-third of those in non-green jobs.

High

Future green jobs might shift towards medium- and low-skilled occupations, in activities such as waste management, retrofitting or construction. However, today the workers in green jobs tend to be more highskilled and more highly educated compared to non-green jobs and, in particular, polluting jobs.

Workers in greater need of reskilling are less likely to participate in training. Continuous education and adult learning are vital tools for managing labour market transformations such as the green transition. They provide workers the training they need to up- and reskill or to move into a new occupation or sector. However, individuals that work in polluting jobs have significantly lower training rates (12%) than other workers (20%). Across regions, there is also a misalignment of training needs and training participation. Regions that have less green labour markets record lower training participation among their workforce.

educated workers are overrepresented in green-task jobs

Slow pace in race to reach net zero and green the economy

There has been almost zero progress in creating green jobs across the OECD for a decade

Despite the attention to climate change in the public discourse, local labour markets have not become much greener. The share of workers in green-task jobs grew just 2 percentage points across 30 OECD countries over the last decade –from 16% in 2011, to 18% in 2021, with significant

Positive momentum for green job creation seems to be growing

Encouragingly, positive momentum has been growing for the greening of local labour markets. Recent labour demand for green-task jobs has been rising faster than labour market demand overall as firms increasingly seek green talent, i.e. workers that have green skills. Since the start of the pandemic, growth in the demand for green-task jobs has outpaced overall labour market

differences within countries. Across OECD regions, the change in the share of green-task jobs ranged from 10 percentage point increases to 7 percentage point decreases. Without urgent action on skills, the green transition could deepen inequalities and threaten progress towards 2050 net-zero goals.

demand by almost 30 percentage points. The share of green vacancies is higher while the share of polluting vacancies is lower compared to the current employment shares, which may be signs of a shift towards a more environmentally friendly labour market.

However, not all places record such positive momentum for green jobs. The growth in the demand for green jobs is highly uneven across OECD regions. It rose in roughly two-thirds of regions (68%), though the change ranged from a 7 percentage points decrease in Basilicata, Italy to a 11-percentage point increase in Southern Denmark. Supported by a fast “greening” of labour demand, regions such as Southern Denmark and Central Jutland may be on track to join the group of regions with the highest share of green-task jobs in the OECD.

Few regions that are lagging behind show signs of catching up. Regions with a low share of greentask employment, such as Asturias, Sardinia and Basilicata, are at risk of falling further behind with the demand for green-task jobs faltering over the last two years. Yet there are notable exceptions. In particular, the regions of Attica and Thessaly in Greece, have a below average share of green-task jobs but have experienced a significant increase in the share of green-task vacancies in total demand, 5 and 3 percentage points respectively.

The green transition will not succeed without a sufficient number of workers with the necessary skills. Firms across the OECD report labour and skills shortages, in particular for

green jobs. Giving workers of all educational backgrounds,and skill levels, regardless of gender, the opportunity to develop green skills must be a priority.

Speeding up the slow pace of growth in green jobs is critical to reach net zero

Lessons from the (recent) past

The green transition shares similarities with major labour market transitions

Communities across the OECD have undergone a number of labour market transitions that hold valuable policy lessons for the coming challenges of the green transition. Globalisation, digitalisation, or the phase-out of coal have all forced local labour markets to adapt and transition to new economic activities.

Like the green transition, digitalisation, globalisation and the exit from coal have been disruptive to local labour markets and communities. Their impact on regions and different people has been uneven, benefitting some places while creating new challenges for others. All entailed significant readjustment processes in the local labour market and changed the nature of many jobs.

In contrast to the green transition that has been largely policy-driven, most past or ongoing transitions have been largely market-driven. This gives policymakers more opportunities to

control both the supply and demand effects on labour markets, but it also comes with great responsibility in terms of getting policy right.

Local and national success drivers to manage the green transition

In managing the transformation to a greener economy, national and local governments could look to past transitions that highlight a number of local success factors:

• Having a clear and long-term vision for the local economy is crucial. Different levels of government need to agree on objectives on the future of a local economy and its transition there, to create trust and increase buy-in among workers, communities, and businesses. Clarity encourages private sector investments and workforce planning.

• Building strong and broad coalitions helps foster social inclusion, more effective policy,

and can help minimise public resentment. If coalitions include national and local government, workers, employers, educational institutions and other stakeholders, different communities and groups in a region feel heard. Public support helps to roll out initiatives to transition the local economy more effectively.

• Using regional comparative advantages can lower adjustments costs. Regions can use the skill sets of available workers and exploit existing local assets. Re-investing in outdated business models is ill-advised because it can create a harmful lock-in effect, instead of boosting innovative and growing economic sectors.

Local and national success drivers that help communities manage transitions

Being proactive in local investments or reskilling is helps manage a labour market transition successfully. Closures or job losses can be anticipated, combined with an early assessment of the potential for economic diversification. Timely action also includes examining investment needs in physical infrastructure as well as amenities that enhance the local quality of life, as retaining and attracting skilled workers becomes even more important. Support programmes,

especially in terms of retraining or upskilling, need to be in place before jobs are lost.

A good understanding of the impact of a transition on local jobs and skills needs sets the foundation for local economic resilience. To design effective reskilling policy, information on the characteristics of workers (age, skills, gender etc.) most affected is required.

Local actions for a green future

Tackling many challenges of the green transition calls for adapting and ramping up existing local labour market and skills systems. Yet, other challenges will require tailored policies. Local skills systems are already struggling to keep pace with the rapid change of jobs and skills needs,

and 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.

Achieving ambitious climate targets will require a shift towards less polluting and more resource efficient activities, meaning that some workers will need to switch jobs and develop new skills. For many workers in polluting jobs, the green transition means a choice between developing new skills or facing the risk of unemployment. However, the need to master new skills goes beyond this group. Broader re- and upskilling efforts are necessary, to avoid green skills shortages that could hamper the achievement of climate goals, especially in the context of unprecedented labour shortages in many OECD countries.

Too often, environmental and labour market policies are not aligned. Environmental policies, which drive the demand for green skills, have typically been developed in isolation from skills and labour market policies, which drive the supply. Urgent action is needed to meet climate policies with ambitious programmes to educate workers. Otherwise, skills shortages may stall the transition and the displacement of workers can lead to further divergence across people and places.

The green transition must match ambitious climate targets with ambitious programs to educate and equip all workers with the skills they need to succeed

Policy needs to anticipate changes in skills and job demand. Existing programmes typically respond to skills shortages, instead of anticipating them. To change that, policy makers need to know: (i) what skills are available in the local labour market, (ii) what skills are in demand, and (iii) how local skills demand will change in the future. Timely data that reflect the impact of environmental regulation on the labour market are needed, supported by sufficiently detailed information for sectors occupations and regions to take into account the uneven impact of the green transition.

Local and national governments need to develop a forward-looking and comprehensive adult learning strategy to help workers acquire skills required in a green economy. In many OECD regions, skills systems are not ready for the reskilling needs brought by the green transition and other megatrends, often already struggling to keep up with the changing labour markets. Individuals that need training the most tend to be least likely to get it. Moreover, training is not always aligned with local labour market needs.

Policy makers face a double challenge. They need to broaden access to adult learning offers, particularly for vulnerable groups, and get employers on board to ensure training meets local labour market demand. Local skills systems need to be responsive to the shift in skills needs in the green transition, based on systematic reviews of educational curricula.

National, regional and local governments need to act jointly to develop policies tailored to local challenges and opportunities of the green transition. Green policies may exacerbate already existing regional disparities in GDP per capita and employment – as they could lead to job losses in some regions and skills shortages in others. Tailored training offers may be needed in sectors and regions most affected by the green transition – both those that face significant employment risks and those that are at the forefront of the green transition. The engagement of regional and local governments can help design policies that respond to local needs, with local governments being wellplaced to initiate local skills coalitions.

While the benefits of a sustainable economy will be shared, its costs will fall disproportionately on individuals employed in polluting sectors and places dependent on such jobs. The experience of past transitions shows that without effective action, mass lay-offs can spill over to other sectors and have long-term scarring effects on local communities, possibly causing resentment that may lower participation in re-employment programmes or diminish support for the green transition.

Public Employment Services can help promote a fair and inclusive green transition. Supporting workers in polluting jobs, who tend to have lower education level and hold medium-skilled occupations, early on through a tailored mix of career guidance, training, and income support maximises chances of re-employment. Support for displaced workers that considers a worker’s characteristics, labour market demand and feasibility of career transitions will prove more effective.

Sound labour market intelligence and local action are vital to make the green transition work for everyone

The green transition could stutter without government support for industries, workers and communities hit hardest

Strategies to bridge the great green divide

Learn from past and ongoing transitions to prepare for the green transition

Act proactively and in cooperation with local stakeholder and communities to foster support

Analyse and map possible industries or sectors at risk of fundamental change or closure

Conduct risk foresight analysis in polluting sectors and evaluate whether sectors will have to fundamentally adapt or close. Map which individuals are at risk of job losses and identify communities and regions where negative economic effects concentrate.

Develop a long-term vision and clear strategy for economic adjustment to engage both public and private stakeholders

Develop a clear long-term vision that allows stakeholder to choose skillsets and invest in projects that will fit in this plan, thereby creating a positively reinforcing circle of strategy, skills availability, and capital investment.

Develop programmes to support most affected individuals before closure of the polluting industries

The closing of polluting industries can cause unemployment concentrated in local communities, which can recover more quickly by anticipating plans for gradual re-skilling and re-employment. Providing easily accessible career guidance and well-designed income support to maintain household finances consolidates trust and participation in labour market programmes.

Include local stakeholders in re-adjustment strategies to provide political support and prevent resentment

Ensure that the strategy for economic readjustment is shared by local, private and public stakeholders increases that cooperation and effectiveness. Enforcing a structural adjustment plan top-down can spark protest and resentment, endangering political coalitions necessary for the green transition.

Invest in the attractiveness and competitiveness of affected regions

Focus upskilling and retraining on future-proofed skills with rising demand

To boost future employment and the competitiveness of atrisk regions, invest in the skills of the workforce, focusing on skills that are or will be in demand, helping to attract or grow companies and to provide easier reemployment of workers.

Use comparative advantages of a region to mitigate the costs of structural adjustment policies

Identify and exploit existing regional comparative advantages, thereby significantly lowering adjustment costs. Investments can be targeted to new and innovative industries to avoid lockin effect in ailing business models.

Invest in the attractiveness of a region to attract and retain workers and firms

Investment in heavily affected regions helps to avoid a downward spiral of unemployment and outward migration. It needs to include both physical infrastructure for firms as well as recreational facilities, education, and healthcare.

Step up efforts for local skills systems to deliver a green and just transition

Align environmental policy with employment and skills efforts

Match climate policies with programs to develop green skills and retrain

Increase collaboration between ministries responsible for climate policies and labour market and skills policies to avoid skills shortages that could slow down the green transition and support workers displaced by the transition in moving into new jobs.

Tailor skills and labour market policies to local needs Engage regional and local governments in skills and labour market policies to reflect the place-specific impact of the green transition. Build local green skills coalitions, including with training institutions, PES, and social partners, for better-informed policy response and buy-in for the green transition.

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

Review skills assessment and anticipation exercises to reflect the impact of the green transition

The review could focus on (i) reflecting the impact of environmental regulation on skills demand, (ii) ensuring that data is sufficiently disaggregated at the sectoral and regional level, and (iii) aligning the data collection and methodology with policy needs.

Systematically update educational and training curricula to reflect the shift in skills and knowledge for green jobs

Tailor training for up- and re-skilling to occupations, sectors and regions heavily affected by the green transition

Support employers in up-skilling their staff to develop green skills

Develop a comprehensive strategy to systematically review curricula. Take into account that skills changes in the green transition differ by occupation and, therefore, support should range from awareness raising to comprehensive transition-oriented re-skilling. Use up-to-date labour market intelligence and involve employers in the design and delivery of training offered by TVET to ensure that it aligns with local labour market needs.

To boost future employment and the competitiveness of at-risk regions, invest in the skills of the workforce, focusing on skills that are or will be in demand, helping to attract companies and to provide easier reemployment of workers.

Identify and exploit existing regional comparative advantages, thereby significantly lowering adjustment costs. Investments should be made in new and innovative industries and avoid lock-in effect in ailing business models.

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

Develop a better understanding of the characteristics and barriers faced by workers at risk of displacement and tailor support

Develop better intelligence on individuals at risk of displacement, including on age, level of education, prior experience, and employment barriers. Proactively identify workers at risk of displacement and offer support before they become unemployed. Support workers in identifying new employment opportunities by (i) helping workers reflect on their skills, (ii) exploring employment opportunities that they might have not considered otherwise based on proximity of occupations and feasibility of transition pathways, and (iii) directing them towards careers with better long-term prospects based on current and future labour demand at the local level.

Contacts: Karen MAGUIRE

Head of Division | Local Employment and Economic Development Programme Karen.MAGUIRE@oecd.org

Lukas KLEINE-RUESCHKAMP Manager | Local Labour Market Analysis Unit Lukas.KLEINE-RUESCHKAMP@oecd.org

More information: www.oecd.org/cfe/leed

Read the full report: https://oe.cd/JCLED2023 Stay

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