## The Right Labor Market Policies Can Ease the Green Jobs Transition _IMF Blog, April 13, 2022_ ## Source details **Canonical URL:** [The Right Labor Market Policies Can Ease the Green Jobs Transition](https://www.imf.org/en/blogs/articles/2022/04/13/blog041322-sm2022-weo-ch3) ## Other formats - [Markdown version](/en/blogs/articles/2022/04/13/blog041322-sm2022-weo-ch3/index.md) - [Structured JSON version](/en/blogs/articles/2022/04/13/blog041322-sm2022-weo-ch3/index.json) - [Bundle manifest](/en/blogs/articles/2022/04/13/blog041322-sm2022-weo-ch3/bundle-manifest.json) ## Bibliographic details - Authors: John Bluedorn, Niels-Jakob-Hansen - Published: April 13, 2022 --- ### Overview - Consensus on building a greener economy is often hindered by concerns over potential job losses and worker transitions between sectors. - With the right mix of policies, countries should be able to achieve net-zero greenhouse-gas emissions by 2050 while easing the transition for workers in more emissions-intensive industries. - The analysis summarized here is based on Chapter 3 of the IMF’s World Economic Outlook, “A Greener Labor Market: Employment, Policies, and Economic Transformation.” ### Achieving emissions objective - Limiting the average global temperature increase to well below 2 degrees Celsius over pre-industrial levels (the objective endorsed by policy makers in the 2015 Paris Agreement) requires a dramatic reduction in net emissions of greenhouse gases and a transformation of the labor market. - For advanced economies, a policy package designed to put the economy on a path for net zero emissions by 2050 would shift about 1 percent of employment from higher to lower-emissions work over the next decade. - For emerging markets, the equivalent shift is about 2.5 percent of employment over the next decade. - These shifts are smaller than the shift from manufacturing to services in advanced economies since the mid-1980s, which has come to almost 4 percent of jobs each decade. ### Labor mobility, wages, and job composition - Most jobs are neutral—neither green-intensive nor pollution-intensive; only a minority are green-intensive (improve environmental sustainability) or pollution-intensive (predominant in highly polluting sectors). - In advanced economies, the average green-intensive job earns about 7 percent more than the average pollution-intensive job (controlling for skills, gender, and age profiles). - Estimated probabilities of job-to-job transitions: - From pollution-intensive to green-intensive: between 4 percent and 7 percent. - From neutral to green-intensive: 9 percent to 11 percent. - From green-intensive to green-intensive (staying in green): around 41 percent to 54 percent. ### Policy package to achieve net zero by 2050 (model-based analysis) - The package has four elements: - An initial green infrastructure and R&D investment push starting in 2023, with spending gradually reduced after 2028. This supports a modest productivity increase in less emissions-intensive sectors. - A tax on carbon emissions rising gradually from 2023, with a sharper increase from 2029 onwards. This raises the relative price of more emissions-intensive goods and spurs growth in less emissions-intensive sectors. - A training program to help less-skilled workers move to greener sectors, starting in 2023. The training increases the productivity of lower-skilled workers in low-emissions sectors, encouraging firms to hire them and raise their wages. - An earned-income tax credit (EITC) reducing taxes owed by lower-income workers, starting in 2029, to offset the impact of the carbon tax on those workers and encourage more people to enter the workforce. ### Estimated impacts in a representative advanced economy - The policy package generates a labor reallocation to greener industries of about 1 percent over 10 years. - It increases total employment by 0.5 percent. - It boosts after-tax income for lower-skilled workers, reducing inequality. ### Estimated impacts in emerging markets - The package generates a shift of 2.5 percent of the workforce over 10 years toward greener sectors. - There would be an overall increase in employment in the near term as green investments kick in, but that would change to a 0.5 percent decline by 2032. - Because emerging economies have more employment in informal sectors where income taxes aren’t always paid, the package would need to be supplemented by direct cash transfers to low-income workers starting in 2029, alongside the EITC and the carbon tax. ### Policy implications and recommendations - Labor-market policies are essential to provide incentives for the transition to a net-zero economy by 2050. - Key policy actions: - Boost workers’ ability to find greener jobs through training programs. - Reduce incentives to stay in pollution-intensive occupations, including gradually rolling back job retention support introduced early in the pandemic as the recovery takes hold. - Implement the four-element policy package with correct timing: investment and training beginning in 2023, gradual reduction of investment after 2028, carbon-tax escalation from 2023 with a sharper rise from 2029, and income support (EITC and direct transfers where needed) beginning in 2029. - Correctly timed and implemented actions can ease the switch to greener jobs for a relatively modest segment of the workforce while boosting skills and incomes for the lowest paid workers and reducing inequality, making the transition inclusive. *Based on Chapter 3 of the World Economic Outlook, “A Greener Labor Market: Employment, Policies, and Economic Transformation,” and research by Diaa Noureldin, Ippei Shibata, and Marina M. Tavares.* --- ## References - [Chapter 3 of the IMF’s World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022) - [https://www.imf.org/wp-content/uploads/2022/04/WEO-Ch3-Chart-1-Blog.jpeg](https://www.imf.org/wp-content/uploads/2022/04/WEO-Ch3-Chart-1-Blog.jpeg) - [https://www.imf.org/wp-content/uploads/2022/04/WEO-Ch3-Chart-2-Blog.jpeg](https://www.imf.org/wp-content/uploads/2022/04/WEO-Ch3-Chart-2-Blog.jpeg) _Source: https://www.imf.org/en/blogs/articles/2022/04/13/blog041322-sm2022-weo-ch3_