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 Re-investing in outdated business models is ill-advised because it can create a harmful lock-in effect, instead of boosting innovative and growing economic sectors.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.