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00:00:34 Mary McCaughey
Hello everyone, and welcome to this edition of Eurofound Talks. Today, Eurofound talks green transition and particularly the impact on employment. Will there/won't there be an impact and will it be positive or negative? In today's context and as part of today's discussion, we're clearly going to be talking about climate change and environmental degradation. We all know it's happening and certainly at the beginning of November this year, we have already heard from EU scientists that 2023, the year that we are operating in, is set to be the warmest of the past 125,000 years.
So, we know that change is happening and we can see the impacts on a day-to-day basis: storms, floods, we see heat rising and we see changes across our economies and our societies as a result. There's no doubt that we need to make changes and we see them at a personal level, at the individual level, at societal level and, indeed, at global level to some degree, perhaps not enough, but the EU has set out to do its part to address some of these issues and has looked to become the first climate-neutral continent with net-zero greenhouse gas emissions by 2050. It's an ambitious target but it is the target that the EU policymakers and, indeed, national-level policymakers in the EU have agreed to and have set this as an objective. To achieve this, it means that we have this context within which we operate, the European Green Deal, and as part of that there is a policy package which is called ‘Fit for 55’. This was agreed in 2021 and it contains decarbonisation objectives, which are aimed at making sure that we reach this 55% emission reduction target by 2030, based on the 1990 levels.
These objectives are important for Europe, clearly, and they will definitely have an impact on many aspects of our lives and work. But, one of the core questions is how will it impact on our economies and more specifically, how will it impact on employment? Will we see changes that are good for our societies or are we going to see changes that will have a detrimental effect? Of course, the European Green Transition is part of the twin transition, digital occurring in parallel, and while we have looked in the past at the impact of digital changes, today is the European Green Deal and its impact. We want to make sure as part of this that no one is left behind and no place is left behind. The question is, is this achievable? I'm hoping today, as I'm joined by John Hurley, who is a co-author of a new European study on this, that he will have some of the answers at least to this question. John Hurley is a senior research manager here at Eurofound and has worked on labour market issues for many years. Welcome, John.
00:03:55 John Hurley
Welcome, Mary. Thank you.
00:03:56 Mary McCaughey
So, John, let's get straight down to it. Will this Fit for 55 programme and, by extension, the broader carbon reduction measures, will it actually have a negative or a positive effect on jobs in Europe?
00:04:14 John Hurley
Well, according to our estimates, which are based on a macroeconomic model which is used by a lot of the EU institutions and which we used for this study, we reckon that there will be small marginal gains in employment on the 2030 horizon, but really very small; we're talking about 0.1% of employment – around 200,000 jobs in a labour market which is around 200 million jobs. So, that's in the core scenario. One qualification of that is that these estimated gains come on top of the gains that were already estimated based on the Paris Climate Agreement objectives, which were of a larger order. When we did an earlier version of these estimations, we estimated that there would be 0.5% employment gains based on implementing policies in line with the Paris climate objectives. So, in total we're talking about possibly in the order of 1 million net new jobs arising from all of the decarbonisation policies that the EU has been pursuing on a decade-long perspective. Yes, small gains but gains nonetheless.
00:05:35 Mary McCaughey
But gains nonetheless, and I suppose the important thing here is, as you say, you're talking about an overall, maybe 1 million net new jobs as a result of this. Clearly, that means also some jobs are going to be lost in different sectors and different places and different countries. Can we drill down a little bit and do a little bit of a deep dive as to where those jobs will be created and lost, in terms of sectors, perhaps in terms of countries?
00:06:04 John Hurley
Well, just to be precise again, the small gains that we're estimating arise from the implementation of the Fit for 55 policies, so specifically these policies that were introduced in the last number of years and which effectively accelerate the decarbonisation policies of the EU as a whole.
00:06:22 Mary McCaughey
That's an important point to make, John, because what we're talking about here is applying the Fit for 55 measures. Other people, other agencies and institutions are looking at different methodologies, which perhaps have a different basis for that calculation.
00:06:37 John Hurley
Yes. It's also important to say that the Fit for 55 is a package of policies, it's an evolving package of policies. A lot of the targets and objectives that we were modelling here have actually changed and become more ambitious subsequently, including the renewable energy share. The objectives in that regard are more ambitious than they were when we did this modelling exercise.
00:07:03 Mary McCaughey
So, it's sort of an ongoing, changing process.
00:07:06 John Hurley
It's an ongoing, changing process. Fit for 55 marked an acceleration of existing decarbonisation policy to be more ambitious and then subsequently they're becoming more ambitious again. So, that's an important point to make and it's just as important to say that the very modest employment gains that we're talking about in this particular report relate to the Fit for 55 policies and the particular policies that we were able to incorporate in the model.
00:07:33 Mary McCaughey
Which will account for any different types of figures we're seeing across different places where people are making different types of predictions.
00:07:39 John Hurley
Well, in general, we start the report by looking at the other evidence from our colleagues at CEDEFOP and other agencies and from other pieces of research. What I would say is that, in general, our estimates of modest and net employment gains are more or less a consensus amongst all of the attempts to model the impacts of climate change or of climate change policy. So, I don't think we're out of it. I think we're in the range of the estimates that we see. They're either very, very minorly negative or very, very minorly positive.
00:08:25 Mary McCaughey
OK, so let's get down to the detail. Where are the sectors that we will see growth and where will we see loss, and what countries will be least or most affected?
00:08:34 John Hurley
Well, on our 2030 horizon, first of all what we do in this analysis is we look at a baseline scenario which is basically a ‘business as usual’ scenario and in the ‘business as usual’ scenario we forecast it will be about 6.7 million net new jobs in the EU in 2030 compared to 2019. So that's about a 3.5% increase in employment. The Fit for 55 policies introduce an extra 200,000 jobs to that figure. So, that’s again a reasonably modest amount but it is nonetheless a small, modest gain, it's not a loss.
In terms of the sectors that will be impacted, the one sector that really stands out as being impacted is construction, positively. There are very, very strong construction sector implications from decarbonisation policy in terms of retrofitting existing homes, insulating homes, also in actually just the construction effort required to build new facilities, build wind turbines, build the renewable energy infrastructure and more generally. So, we foresee that there'll be about 300,000 net new jobs in construction in Europe, so construction alone accounts for more than 100% of the net gains arising from Fit for 55.
Sectors that will lose, well, clearly mining and extractive industries, very unsurprisingly, will lose, but again their losses will be less than those that we will gain in construction. I think it's very important to say that the mining extractive sector in Europe is quite small. It accounts for 1 in 400 jobs, so around half a million people are working in the mining sector and it has been contracting anyway for all sorts of other reasons for many, many years, so decarbonisation is probably going to accelerate that process, but it has been an ongoing process anyway. Then, agriculture would be one of the other sectors that will also be affected. It has high levels of non-CO2 emissions, nitrous oxide, methane and the like. These are hard to abate and it's also a sector which, in any case, is structurally contracting in terms of employment and has been for many years. But we also foresee there will be employment losses in agriculture.
00:11:10 Mary McCaughey
Is that sort of sectoral division reflected well in terms of country or geographical location of these jobs?
00:11:18 John Hurley
Well, what it means is that regions and countries which have a higher share of mining or extractive employment or, indeed, agricultural employment will tend to be more negatively affected. Construction tends to be reasonably evenly dispersed across the Member States and across regions. But it's fair to say that we can identify regions, such as some of the southern Polish regions, some Romanian regions, which have an ongoing dependence, well, dependence is the wrong word, but they have a high share of mining employment, and it's in those regions that we see significant employment losses foreseen in the model.
00:12:02 Mary McCaughey
So, some countries definitely affected more than others. Did you look, John, at how that could potentially affect mobility of workers. If you are in greater need of construction workers, will we see a rise in the level of intra-EU mobility when it comes to construction workers moving to the different countries that will require that kind of work?
00:12:25 John Hurley
Well, as I said, construction employment tends to be reasonably dispersed across the Member States. There are construction shortages, labour shortages in lots of countries which are actually losing workers to net emigration in Eastern Europe. I'm not sure if we should be looking for mobility, intra-EU mobility to resolve the issues of labour shortages in the construction sector. I think we have labour shortages in the west, the east and north and the south in this particular sector.
00:13:06 Mary McCaughey
So, not necessarily a driver.
00:13:08 John Hurley
Not necessarily a driver. I mean, I think the great driver for mobility, especially for people with mobile skills, as a lot of construction workers would have, is just the draw of higher wages in one country compared to another.
00:13:19 Mary McCaughey
So, the working conditions in the sectors, which we've talked about before in other podcasts.
00:13:24 John Hurley
Yes, but I think pay is probably the most important draw for construction sectors if they want to move from one place to another.
00:13:34 Mary McCaughey
Maybe just moving on a little bit from that, what kind of jobs…? We've talked about construction clearly here as being one of the main winners, if you want to see it in that way, but are there other jobs, for example, which would be considered high-quality, well paid jobs that we could see? Is that where the growth will be, or is it mostly in lower quality, low-paid jobs?
00:13:58 John Hurley
Well, it's not in low-quality or low-paid jobs necessarily, but one of the things that in a project we call the European Jobs Monitor, which looks at the changing structure of employment over the last three decades in Europe, one of the core findings of that research is that the demand for high-paid jobs and jobs requiring a high level of skills has been persistently greater than for any lower mid-qualified jobs. That process seems to have strengthened in the last 10 years and it's strengthened even further during the COVID years. So, the employment growth has been really almost exclusively in the top quintile of paid jobs. What's interesting about these forecasts or projections is that most of the net new gains are foreseen in the middle of the job distribution, primarily, as I said, in construction, and so this might actually be, effectively what we're saying is that decarbonisation policy according to these projections will actually sustain demand for the types of jobs which have actually been in disfavour in the labour market for the last couple of decades.
00:15:17 Mary McCaughey
That's an interesting development, actually. In terms of that, again, another link into that is the skills aspect. I mean, clearly you've identified some of the skills that will be less relevant in this context and some that will be more. But, this year being the European Year of Skills, can you see where we might be seeing skills profiles that we would need to enhance, or that we would need to develop to be able to respond to these requirements?
00:15:47 John Hurley
Well, I think it's clear that if we look in particular at construction, there are new use cases, which are decarbonisation use cases in the construction sector. I wouldn't necessarily talk about skills, because the study is more about occupations and sectors. But it's clear that a lot of the Member States now have targets for the installation of air-to-heat pumps or groundwater-to-heat pumps. These require new skills and in most cases the objectives are not being met. In other words, the actual objectives for installation are not being met at country level. They remain very, very ambitious in many cases. The skills required are probably not that different from a gas boiler installer in many cases, or at least there are some modification of the kind of skill sets that existing gas boiler installers would have. But we are slow at converting one type of skill, which is largely deployed using fossil fuels, to more sustainable forms of domestic heating. So, certainly we need more solar panel installers, we need more air pump, residential heating installers. So, we need a transformation of the skills. But these are skills that should not require too much of a reconversion effort on the part of the existing construction firms to do so.
00:17:32 Mary McCaughey
Did we look at who would be better placed to kind of provide that, to stimulate that, or to ensure that they benefit from the growth in these areas?
00:17:41 John Hurley
Well, there are lots of existing subsidies to do these types of conversion. Again, what we observe is that despite the subsidies, there still is a degree of tardiness in the actual adaptation of the workforce, the construction workforce, to ramp up to the level that the objectives that have been set at national level and at European level would require.
00:18:08 Mary McCaughey
But there you're referencing the recovery and resilience funds and funds at EU level and at national level.
00:18:14 John Hurley
Well, there’s a lot of European funding, but then there's a lot of the national subsidies. In this country we have very, very ambitious targets in terms of heat pump installation by 2030, so there are a lot of funding instruments at national, regional and EU level.
00:18:36 Mary McCaughey
Can you just give me an idea? People talk all the time about different types of jobs. You’ve got white jobs, you’ve got blue collar jobs, we've got green jobs, we’ve even got brown jobs now. Can you talk to us about what we believe to be a green job and how does it differentiate from those others?
00:18:51 John Hurley
OK, well, I have to confess I'm a bit sceptical about these designations and these categorisations, especially of green jobs. When we think of jobs, we normally think of occupations and sectors. So, a nurse in the health sector, a craft and trades worker in the construction sector, something like that. Just with reference to that last category, because this is the type of job that we're saying there will be an increased demand for according to this study. Well, you can say that there are very green versions of that job and very non-green versions of that job. A gas boiler installer and somebody who's installing something which relies on fossil fuels, I would say that's not a green job. I would say that somebody with a modest change of skill sets who's installing air-to-heat pumps in residential dwellings is a green job. But in terms of our understanding of jobs as occupations and sectors, both are occupying exactly the same niche. So, I'm a little bit sceptical about the idea of green jobs.
00:20:03 Mary McCaughey
Defining them in that.
00:20:05 John Hurley
What I would think is a more useful way of thinking is in terms of green use cases. We know that if you're installing solar panels on the roof of a house, you're doing something which is going to reduce emissions and is more sustainable. We know that if you're installing an air-to-heat pump in a house, you're also doing something which is intended to and should reduce emissions and, again, is more sustainable. So, these are concrete use cases, and I prefer to think of use cases rather than green jobs.
00:20:42 Mary McCaughey
OK. Moving on to a slightly connected, but more societal issue, which is in recent research that we carried out, the Living, working and COVID-19 e-survey, we looked particularly at trust. Now, trust is something that's monitored on an ongoing basis across the European Union, at regional level, at national level, etc., and it can be in national governments, it can be in institutions and the media and, indeed, in the EU itself. We've seen that trust declined since COVID-19, since the end of the pandemic. I suppose the worry at both EU and national level would be if that trend continues, will it be further exacerbated by these kind of, we say there's a very moderate growth in overall jobs being created and of course we're only talking about Fit for 55 here, but when we look at this, is there a danger that these changes will actually exacerbate this decline in trust?
00:21:48 John Hurley
What I would say on that front is that the loss of jobs that we foresee which are concentrated in some sectors, such as mining and extractive or agriculture, these account for a reasonably small proportion of the working population. To me, I'm not sure if they're going to exacerbate problems of declining trust in institutions. I think possibly the danger is more that there is a perception that the whole decarbonisation policy adapts better to certain classes of people who tend to be well off anyway and that there are people who can afford to buy an electric vehicle with a subsidy.
00:22:31 Mary McCaughey
And install solar panels in their houses.
00:22:34 John Hurley
And install solar panels in their houses, and that's all very well, but for a lot of other people the rise in the cost of petrol or of electricity...
00:22:44 Mary McCaughey
…is another element of their cost of living crisis.
00:22:46 John Hurley
Exactly, it is just something which adds to their adds to their daily cost of living. So, I would say that these are the types of schisms that are probably more likely to undermine decarbonisation policy and to ferment feelings of mistrust.
00:23:05 Mary McCaughey
Division, in fact.
00:23:07 John Hurley
Indeed, yes.
00:23:07 Mary McCaughey
And those kind of these divisions, these duplicated inequalities or perceived inequalities which are across the board, available, evident in other areas also.
00:23:20 John Hurley
Yes, probably more as consumers than as workers that some of these divisions will reveal themselves.
00:23:26 Mary McCaughey
Yes, interesting, actually. One of the other inequalities, of course, that comes into play when we have these discussions is men and women and the ongoing differences and divides that there are in that area. We know that Europe has a very segregated labour market when it comes to gender. We know that, in particular, there are sectors that are particularly badly affected in this regard. Construction is one of these. So, are we looking at another aspect? We see a growth in construction over the next period of time, but does that mean automatically that we're going to be seeing a decline in women’s participation in the labour market as a result. Is it just going to add to our issues in terms of trying to close the gender employment gap and indeed the pay gap?
00:24:14 John Hurley
What we found is that, basically, sectors which are predominantly female employing have tended to have better and stronger employment growth over the last two or three decades than sectors in which males are predominant. So, a lot of the sectors that we've actually discussed, including construction, which we think is going to gain employment, you're quite right, it's a very, very gender-unbalanced sector, less than 10% of construction employment is female, and that hasn't changed much in the last two decades. But other sectors like agriculture, manufacturing, mining, these are in sectoral decline anyway. That sectoral decline is going to be exacerbated by decarbonisation policy, and these are predominantly male employment sectors.
So, what I would say is that the evidence that we have from other research is that two thirds of net employment growth in the EU over the last two decades has been female. That's what's contracting our gender employment gap. I think for structural reasons and for the reasons I've just indicated, it's likely that the gender employment gap will continue to contract, even in the post-COVID period, in the last few years since the beginning of the COVID pandemic, we have had very significant female employment growth once the recovery started. It may have been that women lost jobs in the first, initial year of the crisis, but during the recovery, it's women who have been taking the lion’s share of net new employment from 2021 onwards. I think that the decarbonisation policy in general will just accelerate the shift towards services employment. Around three quarters of our workforce now works in services and the majority of women work in services. So, I think the decarbonisation policy probably won't do anything to harm the contraction of the gender employment gap.
00:26:21 Mary McCaughey
So, you would actually say on the basis of the evidence that you're seeing a good news story coming down the tracks more generally, if we move away from Fit for 55 entirely but from a female participation perspective?
00:26:32 John Hurley
I would say so. I would say that services is where the majority of women work, and services should be boosted by the kind of induced income effects from all of the investment that will be required to decarbonise our societies. And I think, on the positive side for men, is that in one or two sectors where they are predominant, such as construction, there will be new employment opportunities and there will be employment opportunities for men not necessarily with third-level qualifications.
00:27:05 Mary McCaughey
These middle quintiles.
00:27:08 John Hurley
Mid-paid jobs, more trades-related jobs, yes
00:27:12 Mary McCaughey
Yes. OK, interesting. Well, hopefully we can come back in a couple of years, John, and revisit that, and I hope that you have right on your side at that stage. So, I think we've been through a lot and a lot of what you've said is actually positive. I think the takeaway is that it's a small advance in terms of the impact of the Fit for 55 policy package in terms of employment, but also in other areas. I would say that what you said in terms of the package evolving and the measures becoming more ambitious is an interesting one, because we will see changes and how that impacts on an ongoing basis. So, that's also something to keep an eye on.
If you were to take away to a policymaker that you meet on the street or in the elevator and you had two minutes to put your two main, three main points to them, can you talk to me about what they would be? Talk to me, as we say, in three.
00:28:13 John Hurley
Well, what I would say is that the main finding at a sectoral level in this analysis is that there will be a significant boost to construction sector employment. But the construction sector is one of the very, very few sectors where employment levels in 2023 in the EU27 as a whole are below where they were in 2008, fifteen years ago. We've lost construction sector employment in that period. Even in manufacturing we have significantly more people working in manufacturing now than pre-global financial crisis.
00:28:49 Mary McCaughey
So, essentially, from the Great Recession, we haven't seen it regain its position.
00:28:52 John Hurley
It never recovered and it still hasn't recovered. And it's also a sector in which we have ongoing labour shortages in many of our countries, many of our Member States. So, I would say that we need to look at the quality of work in construction, in the sector. We need to look at the structure of employment more generally and try and encourage people to participate in this sector. We need something of a trades revolution as well, because the skills that are required to actually decarbonise or to lower the emissions coming from residential housing, they are adaptations of what existing construction workers or gas boiler installers do, but they are modifications. It requires a new skill set. So, there needs to be a bit of a trades revolution and a reskilling en masse in the construction sector.
One of the other findings – this is at a much broader level and it's more to do with the fiscal policy – in the model we also look at different implementations of the Fit for 55 policies and different ways of recycling the revenues that we get from, for example, the emissions trading system, from carbon taxes. We have very significant carbon tax revenues now in the EU, they're up to around 40 billion euros a year, and that’s a very, very, very significant chunk of money. One of the things that we model in one of the variants of the main scenario in this exercise was to look at what would happen if we reduce labour taxation both on the employer and the employee side and by channelling the carbon tax income to defray the costs of these reduced labour taxes. In that situation, we do have very significantly higher net employment gains. We're talking about, instead of being 0.1% it's around 0.4% net employment gains at the European level. So, how you actually use the income that you get from decarbonisation policy and in particular from carbon taxes and how you redeploy them and ideally to reduce the burden of labour taxation, that can have a very, very significant impact on the net employment outcomes.
00:31:12 Mary McCaughey
And, John, are those different options still being discussed or is this…
00:31:16 John Hurley
Well, these are ongoing sources of discussion. There's a certain amount of earmarking of the emission trading system incomes and revenues. But, to a certain extent, these are all open and evolving questions. As we were saying earlier, decarbonisation policy evolves literally daily. And so there are new targets, there are new ways of thinking about things. The carbon taxes are probably the keystone of European decarbonisation policy. And I guess what we're saying in this particular variant of the main model, we're trying to see, are there different ways of actually using the revenues to reduce distortionary labour taxes and, possibly, that could have some positive labour market outcomes.
00:32:11 Mary McCaughey
But, of course, that's at national level, because these are taxation policies and our decisions at a national level. And so what you're suggesting here, if I'm understanding correctly, is that national policymakers would be well advised to consider what they would like as an outcome. If you want to see these kinds of improvements in employment rates as a result of this calculation here, that there are ways of adjusting the taxation take, if you like, which could have a beneficial impact.
00:32:44 John Hurley
Well, most of the carbon tax revenues do end up in the national treasuries. They don't end up anywhere else. So, these are possibilities. How you actually repurpose these revenues and how you use them, it's still something that national policymakers do have some influence.
00:33:04 Mary McCaughey
…can affect. Well, that's certainly something that would be of interest to policymakers in the elevator or elsewhere. And I think, also, this aspect of the trades revolution that does require some level of reskilling, upskilling, but also requires access to the information and the funding that's available at EU level and at national level to ensure that that can be implemented effectively. Well, thank you very much, John. You've been really a source of information on this issue and much more today. Thank you for joining us today.
00:33:40 John Hurley
My pleasure.
00:33:40 Mary McCaughey
I would like to just draw attention to our listeners, that many of the issues that we've talked about today touch on so many of the other podcasts and information that we have available. Job quality, for example, labour shortages, indeed, even essential workers, as we had in our most recent podcast. And, of course the perennial issue of gender equality and so much more. I think what John has given us in terms of information shows how interrelated this particular issue, our Fit for 55 and its implementation and the impact on the employment market has on so many other of the issues that we deal with ongoing at Eurofound. Of course, as always, you can find this podcast and all of the others on Spotify, Apple podcasts or anywhere else that you access your podcasts and the Fit for 55 climate package impact on EU employment by 2030 report is already available on Eurofound’s website, which you can download and follow and indeed you can follow this subject and any other on our website and of course on our social media channels. So, tune in ongoing. And so, until next time, when Eurofound talks to you.
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