Who’s fit for the low-carbon transition? Emerging skills and wage gaps in job ad data

As governments worldwide increase their commitments to tackling climate change, the number of low-carbon jobs is expected to grow rapidly. Yet understanding the characteristics of and skills required in low-carbon jobs in comparison with high-carbon or ‘generic’ jobs remains a challenge, due to fundamental difficulties in accurately identifying low-carbon jobs with precision. As a result, existing analyses tend to focus on aggregate green employment dynamics or on narrowly defined segments of the green economy that are easier to identify, such as renewable energy or traditional environmental sectors like waste and water. Consequently, public debate tends to exaggerate the argument that the low-carbon transition kills jobs, while downplaying both the job creation effect and the reskilling costs.

This paper provides evidence on the characteristics of low-carbon jobs in the United States using online job postings data from 2010 to 2019. In developing a novel method to accurately identify low-carbon jobs and to compare important aspects of these jobs to those of similar roles in the same occupational group, it reveals the potential skills gaps and hiring difficulties emerging in specific labour markets affected by the low-carbon transition. The authors find that compared with high-carbon or generic jobs, low-carbon jobs have higher skill requirements, especially across technical and managerial skills but also in social, cognitive and IT skills. The findings suggest there will be labour reallocation costs as workers transition into low-carbon activities. This suggests a role for targeted public investment in reskilling to minimise transitional costs and ensure a workforce fit for the low-carbon transition.

Key points for decision-makers

• The precise assessment of skill requirements of low-carbon activities will become increasingly important, as massive labour reallocation towards low-carbon activities is expected under ambitious decarbonisation scenarios.
• The authors’ method for identifying low-carbon jobs using job advertisement data allows them to reveal precisely how low-carbon jobs compare in terms of geographical distribution, skill requirements and wages vis-à-vis similar jobs within the same occupational groups, such as engineers or construction workers.
• They find that low-carbon jobs constitute a steady 1.35% share of online job ads.
• Low-carbon jobs have higher skill requirements than generic jobs, especially across technical and managerial skills, although the size of the skills gap varies across occupations.
• High-carbon jobs also have high skill requirements, and the skill gap is relatively narrower between low- and high-carbon vacancies than between low-carbon and generic jobs. This indicates that retraining low-skilled high-carbon workers may not be exceedingly costly.
• The wage premium for low-carbon jobs, which might compensate for higher skill requirements, has declined over time. This coincides with the turnaround in US green policies during Trump’s presidency.
• The geographical overlap between low- and high-carbon jobs is limited. The low-carbon transition could exacerbate existing regional inequalities if low-skilled displaced workers face limited alternative employment opportunities locally.
• Overall, the low-carbon transition entails potentially high labour reallocation costs associated with reskilling labour to be more suited to low-carbon activities and with earning losses experienced by people who lose jobs in high-carbon sectors. These aspects are often ignored when evaluating the labour market impacts of environmental policies.
• Public investment in skills is therefore needed to deliver a smooth, rapid and ‘just’ transition. Policymakers can use the approach taken in this paper to monitor skill gaps associated with specific technologies and sectors that are relevant for a local economy, thus improving the effectiveness and the targeting of retraining programmes.