How the Green Transition Will Impact U.S. Jobs

IMF News, December 13, 2022

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Supporting affected workers through transfers, tax breaks, and training would ease the shift in the labor force.
The US is well placed for the green jobs transition if policymakers combine environmental regulation with targeted fiscal measures and training.

Pollution-intensive jobs are clustered in more rural areas, particularly in the Southeast and Southwest.
Pollution-intensive sectors highlighted: extractive industries (like mining), wood, textile industries, and electric power generation, transmission, and distribution.
Green jobs are typically located in the West, Southwest, and in pockets of the Midwest, especially in more urban areas.
Notable green sectors: research and development, engineering services, and aerospace manufacturing.
Spatial overlap statistic:
- 72 percent of commuting zones rich in pollution-intensive jobs are also rich in green jobs or border another zone that is.

Green jobs:
- Tend to be more skilled.
- Are relatively less vulnerable to automation.
- Attract a wage premium even after controlling for skill levels, age, gender, and geography.
- Estimated wage premium of green versus polluting jobs: around 2 percent and slightly trending upward over time.
Transition implications:
- Even when green jobs are geographically proximate, switching from a polluting job to a green job can be difficult because the required skills differ.
- Workers in pollution-intensive jobs find it easier to move to neutral jobs (neither green nor polluting), partly because most jobs are neutral.
- Greening of the labor market can therefore proceed via movement from polluting roles to neutral roles, then potentially toward green roles as availability and skills adjust.

Case study: Clean Air Act (enacted in 1963) and regulatory compliance.
Labor market effects found:
- If an industry in an area were found non-compliant with regulatory limits, total employment in that industry would decline by 2 percent after two years.
- Total employment in the geographical area would remain roughly unchanged, suggesting displaced workers find jobs in other industries within the same area.

Key policy roles:
- Help workers gain needed skills to become competitive for green jobs.
- Use environmental regulations to incentivize transitions from polluting to green jobs without negatively affecting overall employment or average pay.
Recommended components of a well-rounded policy package:
- Carbon taxes.
- A training program for lower-skilled workers to enable them to 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, to provide income support during the transition while addressing inequality concerns.
Fiscal impacts:
- Although significant negative effects are likely in specific parts of the country, local governments are not expected to see any meaningful impact on their fiscal positions after environmental regulations come into effect.

Spatial proximity of green jobs to polluting jobs reduces the need for long-distance moves (example: a coal miner may not have to go very far geographically).
The primary barrier is skill mismatch; targeted training and support are crucial.
Transition paths may commonly go from polluting to neutral jobs first, then into green roles as skills and job availability evolve.

Katharina Bergant, Rui C. Mano, and Ippei Shibata, December 13, 2022.