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

The work by JUSTDECARB team at the LSE, Misato Sato and Aurélien Saussay together with their collaborator Francesco Vona (University of Milan) has successfully used job vacancy data in the US and UK to uncover the skill requirements of the zero-carbon economy and to reveal unique characteristics of low carbon jobs in terms of wages, skills and localization.

According to their results, across both the US and UK low carbon vacancies are more likely to require skills of all major types namely technical managerial social cognitive and IT. This suggests low carbon jobs are systematically more skills intensive than their generic counterparts. In particular requirements are higher in technical managerial skills and social skills for low carbon jobs compared to generic jobs. However low carbon jobs also require higher IT skills and cognitive skills which are also in high demand with the ongoing digital transformation. The emerging skills gap resulting from the low carbon transition is therefore larger and broader than previously considered in the cross-occupational analysis for the US.

Exploring the wage gap within narrowly defined occupational groups reveals there has been a shift over the last decade. In the earlier half of 2010s low carbon jobs paid a positive wage premium in most occupations of up to 15%. Yet in recent years this premium has largely shrunk and often disappeared both in the US and UK. The positive wage premium during the earlier period could suggest there was a skills shortage and/ or concomitant wage growth or policy pass through to compensate workers for meeting higher skill requirements of low carbon jobs. A positive low carbon wage premium found in medium/low skilled occupations such as in construction and building or process plant and machine operatives suggest a skills shortage. The lack of a positive wage premium in recent years despite having higher skill requirements is problematic for attracting workers to take up low carbon jobs. The decline in the wage premium coincides with the turnaround in US green policies during Trump’s presidency.

In the low skilled occupations where concerns about displaced workers are focused the geographical overlap between low and high carbon jobs is limited in both the US and UK. This suggests that the low-carbon transition could exacerbate existing regional inequalities if low-skilled displaced workers face limited alternative employment opportunities locally. High-carbon manual jobs are extremely spatially concentrated around centres of coal crude oil gas and shale oil & gas extraction. In the US this includes Wyoming West Virginia Oklahoma and Texas and the Appalachian region while in the UK these jobs are located close to the North Sea. In contrast low-carbon vacancies are more dispersed in both the UK and US.

Overall the low-carbon transition entails potentially high labour reallocation costs associated with both the reskilling workers to be more suited to low-carbon activities and the demands on regional labour mobility due to the location of low carbon jobs. Policymakers can use the approach using low carbon key words and job vacancy data developed by this research programme 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.

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