Employment and Sustainability

MAREK HARSDORFF

 

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Former President Barak Obama has said that the defining challenge faced by his successor is achieving economic growth that is equally shared and truly sustainable
(Obama 2016). Tackling these two key issues—social justice and environmental sustainability—is not only an immense task but, in addition, one that is often perceived to necessitate a trade-off. This chapter argues that employment and sustainability actually reinforce each other. A job-led green growth strategy delivers more equal results than conventional and capital-led growth. Thus, a strategy that focuses on green employment has the potential to achieve both objectives.

  • First, this chapter discusses the conceptual link between employment and the environment and the physical interaction between jobs, natural resources, environmental destruction and social justice in particular.
  • Second, the nascent green structural transformation driven by business, consumer and policy shifts is analyzed under the lens of employment and inequality.
  • The chapter ends with some policy conclusions to promote a just transition to environmentally friendly job-rich economies where benefits are more equally shared and growth environmentally sustainable.

Beneficial Physical Interaction between Labor and Nature

“There are no jobs on a dead planet,” read a campaign slogan adopted by the labor movement in the run-up to the historic Climate Change Agreement in 2015, which captured the essence of the link between the environment and employment: Economies and businesses depend on the natural environment to grow, create and sustain jobs. At the same time, unsustainable economic growth destroys the natural environment which, in turn, has negative consequences on economies and jobs. Borrowing a term from biology, symbiosis—defined by the German mycologist Heinrich Anton de Bary as “the living together of unlike organisms”—can help us understand the close and long-term interaction of mutual dependency there is between employment and the environment. The climate’s regulatory function is critical for the food production system on Earth. Agriculture provides employment to 1.3 billion people, which is close to 40 percent of the global workforce and is the world’s largest provider of jobs. But nature not only provides the climate necessary for agriculture, it also provides construction materials, wind, water and solar energy for renewable energy jobs, medicinal plants for health services and cultural value for tourism jobs (Millennium Ecosystem Assessment 2005). However, despite providing employment at first, fossil-fuel-based economic growth, environmental destruction, and deforestation are resulting in a changing climate and natural environment, which in turn are having a negative impact on most jobs worldwide (see figure 1).

Figure 1: The link between employment and sustainability

employment-and-sustainability

An important dimension of the link between employment and the environment is that of inequality and poverty. Indeed, it is the poor who disproportionally depend on natural resources for their jobs and income. Studies from Brazil, India and Indonesia indicate that while agriculture, forestry and fishery make up less than 10 percent of the national GDP, for the poor, natural-resource-based activities and income make up more than 75 percent of their GDP (TEEB 2010).

ThinkstockPhotos-148250627.jpg

Outsourced Externalities: Worrisome Global Trend

At a global level, two worrying trends can be observed: the deterioration of employment and inequality, and the simultaneous deterioration of the environment. Using the proxy of vulnerable employment and material efficiency for the environment, both indicators show worsening trends.1

Global material use is a good proxy for environmental sustainability because the more material is used by economic activity the higher the environmental impact in terms of material extraction and pollution stemming from processing, using and discarding materials. Achieving economic growth with less material use—relative decoupling—means economies become more sustainable. However, from 2000 to 2010 global material use increased from 7.9 tons to 10.1 tons per capita, growing faster than the global GDP. Actually, while at a national level relative decoupling is observed in most economies, globally, material efficiency declined. In 2000, 1.2 kg of materials were required to produce one USD of GDP, rising to 1.4 kg per USD in 2010. The reason for the increase in material intensity at a global level is a shift of global production away from highly material-efficient economies—Europe, the US, Japan and South Korea—to less efficient economies such as China, India, Brazil and South Africa (see table 1).

Table 1: Global material intensity in kg per USD 1970-2010

Global-material-intensity

Coupled with this deteriorating environmental trend, the incidence of vulnerable employment is increasing. In 2000, close to 1.4 billion workers were in vulnerable employment, increasing to around 1.5 billion in 2015 (see table 2).

Table 2: Global vulnerable employment

Global-vulnerable-employment

Vulnerable employment not only limits access to contributory social protection schemes, but is also associated with low productivity and low and volatile earnings. This has led to a global decline of the labor share in national income. Again, one of the reasons is the relocation of production to labor-abundant countries with lower pay and labor standards. This global wage-moderating factor was accompanied by an increase in decent-work deficits in emerging economies (ILO 2015b). Both trends have a social justice dimension. Not only are the poor most impacted by environmental pollution and degradation, but the declining labor shares are associated with more income inequality because capital ownership is more concentrated than labor endowments. Income increased by 20 percent for the top 1 percent of income earners, who own most of the capital, over the past twenty years. At the same time, the labor income share for the bottom 99 percent of income earners diminished (OECD 2012) (see table 3).

Table 3: Labor shares in national income of selected G20 countries

income-G20-countries

The redistribution from labor to capital coincides with the externalization of environmental costs. Partly, the reason is the relocation of production to locations with lower environmental and social standards, thereby also putting pressure on locations with higher standards. While there is no proof of causality, the ownership of capital becomes more concentrated (Piketty 2014). At the same time, capital, as a production factor, generally relies on more resource and material use and has, therefore, a higher impact on the environment. Inequality, resource extraction, and pollution often move hand in hand.

Taking the example of China, in 1990 it produced less than 3 percent of global manufacturing output by value. In 2015, due to a shift in global production, close to 25 percent of manufactured goods were produced in China. Its economic rise, which has seen its GDP grow on average 10 percent each year for more than a decade, makes the country’s industrialization not unlike those of the industrial revolution of the nineteenth century. However, due to its sheer size, China’s environmental and social footprint is far greater than that of any other country in history and has come at the expense of significant social and environmental wellbeing, and public health. The rapid economic growth lifted hundreds of millions of people out of poverty. However, the relocation of millions of workers from rural to urban contexts in relative low-pay and highly polluting industries has made of China one of the most unequal countries in the world. The poorest 25 percent of Chinese households own just 1 percent of the country’s total wealth. According to the Financial Times (January 14, 2016) China’s Gini coefficient for income was 0.49 in 2012, far greater than the US at 0.41. Today, China accounts for 30 percent of global carbon emissions, being the biggest emitter in the world (Oliver et al. 2015). China’s Ministry of Environmental Protection estimated the cost of pollution at around USD 227 billion, 3.5 percent of the country’s GDP. Life expectancy north of the Huai River is 5.5 years lower than in the south, due to air pollution (Chen et al. 2013).

The environmental and social crisis in China is manifested by a rapid increase in social unrest and protests, known as “mass incidents.” The number of such mass incidents has increased from 8,700 in 1993 to more than 120,000 by 2008. While official numbers of mass incidents were not published, cases of various forms of “violations of social order” rose from 3.2 million in 1995 to 13.9 million in 2012. The Chinese Academy of Social Sciences and China’s official trade union federation identify, among others, unemployment, poor labor relations, wage disputes and environmental pollution as the major causes of unrest.

Global Negative Feedbacks Jeopardize Jobs and Force Migration, Notably of the Poor

The Stern Review (2006) suggests that in a business-as-usual scenario long-term climate change will reduce welfare by an amount equivalent to a reduction in consumption per capita of between 5 percent and 20 percent globally. For example, water availability and crop yields are expected to decline by 20 percent, with a 2°C increase in global temperatures hitting hardest the poorest jobs in non-irrigated agriculture, notably in Africa. Moreover, reductions in labor productivity of up to half of “normal levels” are reported in developing countries with high heat exposure, notably in outdoor work such as construction. Even worse, an estimated 12.6 million people died as a result of living or working in an unhealthy environ ment in 2012—nearly one in four of total global deaths. This has severe impacts on labor markets and raises the question of social justice, since the poorest are the most affected (Prüss-Üstün et al. 2016).

Disasters induced by climate change have an even more direct impact on jobs. The World Bank estimates the loss of lives and property due to global flood to increase from$6 billion in 2005 to $52 billion per year by 2050. According to the 2013 US Geological Survey report on sea-level rise, 1 billion people live and work in low-lying flood-prone areas directly affected by the phenomenon (Taketawa et al. 2013). In 2014, Typhoon Hagupit hit the Philippines, affecting 800,000 workers. The 2011 drought in East Africa affected 13 million people, most of them farmers and pastoralists. In 2008, 20 million persons were displaced globally by extreme weather events, compared to 4.6 million displaced by conflict and violence. Future forecasts predict between 25 million and 1 billion environmental migrants by 2050, the single most important cause for migration. This large amount of migrant workers will put a strain on labor markets everywhere (IOM 2015).

While climate change is probably the biggest environmental threat, the loss of biodiversity an environmental threat, the loss of biodiversity and degradation of ecosystems will also have serious implications for jobs and inequality. Some people, a large proportion of them small-scale and poor fishers, were engaged in the capture of fisheries and aquaculture in 2012. With more than 50 percent of today’s capture fish being overexploited, the trends indicate that global fisheries may collapse by 2050—and with it employment (FAO 2014).

A Green Structural Transformation Is Underway, Yielding Environmental Benefits and Creating Decent Jobs

As a response to the present environmental and social risks of unsustainable economic growth, changes in policy, business models, and the behavior of investors and consumers have led to the first signs of a structural transformation towards greener economies.

The Paris Agreement on Climate Change committed 195 countries to keep global average temperature rise below 2°C, while adapting to the changes. To achieve the target, renewable energies need to grow to 80 percent of the total energy mix by 2050, with a near total phasing out of fossil fuels by 2100. The Sustainable Development Goals call for a socially and environmentally integrated sustainable development path. At the national level, China’s thirteenth Five-Year Plan for 2016-2020 seeks to achieve 18 percent less carbon intensity by 2020 compared to levels recorded in 2015. This is in line with many countries’ realization: decoupling growth from pollution is possible with positive employment and thereby social equality effects.

Investments in renewable energies reached USD 285 billion in 2015, surpassing investments in oil, gas and coil fossil-fuel-based industries are more capital-intensive than renewable industries. Construction, operation and maintenance of renewable technology creates more direct jobs per unit of energy generated. In addition, renewable energy, harvested locally, has longer value chains which require more indirect jobs in supplying industries. Decentralized systems create an even higher number of jobs in operation and maintenance, as those have to be locally serviced (see table 4).

Table 4: Average number of Jobs per GWh in Construction, Operation and Maintenance in renewable and conventional energy production systems

Jobs-per-GWh

Unsustainable economic growth destroys the natural environment which, in turn, has negative consequences on economies and jobs

For example, a recent study in the United States considered the economy-wide effects of reducing emissions by 40 percent by 2030 through a mix of clean energy and energy efficiency. The assumption is that a USD 200 billion investment per year would be necessary for achieving the target, which would result in a net gain of about 4 million jobs. The net effect takes into consideration the loss of 1.5 million jobs in fossil- and energy-intensive sectors as well as the creation of 4.2 million jobs in environmental goods and service sectors and their supply chains. In addition, the study assumes that savings derived from energy efficiency and lower energy costs would be reinvested, creating an additional 1.2 to 1.8 million jobs. The net gains of about 4 million jobs would reduce the unemployment rate by 1.5 percentage points, thereby reducing inequality (Pollin et al. 2014).

Increased Material Efficiency: A Future Source of Productivity Growth in a Circular Economy

Businesses have come to realize that gains can be made not only in clean energy technology but in the space of a circular production system which yields a less resource-intensive economy. Global companies are adopting circular production systems, moving away from produce-use-discard dynamics in favor of produce-use-reuse ones and circular service systems. Moving from linear economies, which are manufacturing-driven, towards circular systems, which are service-driven, will create net new jobs due to the simple fact that service is more labor-intensive than manufacturing. McKinsey estimates that a circular-economy scenario would result in a 7 percent increase in Europe’s GDP by 2030, as opposed to a business-as-usual scenario. The scenario adopts available technology for a circular production system in food, mobility and housing (Ellen MacArthur Foundation and McKinsey 2015). Additionally, employment effects are estimated to be positive. In Europe, every percentage point reduction in resource use is estimated to lead to 100,000–200,000 new jobs (Council of the European Union 2014). Today, material efficiency, which as shown above has been sluggish and even reversing in the last years, is seen as an untapped source of future productivity growth—unlike the trend of the past fifty years, whereby the main source of labor productivity has been the replacement of labor with capital (see table 5).

Table 5: Global labor productivity per person employed in 2015 US$

labor-productivity-per-person

An energy- and material-efficiency scenario was built for five European countries reducing emissions by more than 75 percent. In such a circular-economy scenario the number of additional net jobs are estimated at 1.3 million (Wijkman and Skånberg 2016). Increasing the recycling rate of key materials in the European Union to 70 percent could create an additional 560,000 new jobs by 2025, notably in reach of poorer households (Friends of the Earth 2010). Further to manufacturing and service jobs, green economy creates employment, notably for the less skilled, in conserving biodiversity and managing and restoring the natural environment, which in Europe stands at 14.6 million jobs (Nunes et al. 2011).

The Right Policy Mix

A win-win-win scenario for the environment, jobs and the economy will not happen by default. It requires the right mix of employment-led green policies as a lever to climate-resilient economic growth. The overall positive effect of greener economies on employment and equality is not unfolding by default, and must be analyzed in the context of declining industries, regional and global production and consumption shifts, changing business models, material and labor productivity, and technological innovation. Working conditions will change: new jobs will be created, others will transform, and some will disappear, whilst income and capital distribution and equality will be altered. Resource-dependent countries and extractive industries face downsizing, while jobs and industries in climatically vulnerable countries continue to be affected. More than one million jobs have been lost in coal mining in China over the last few years, while millions of jobs were affected and destroyed by the impacts of climate change in developing countries. This calls for social justice and a just transition as per the mandate of the International Labour Organization (ILO). Member states of the ILO adopted the Just Transition Guidelines to buffer the social consequences of climate change and promote decent work in a green economic restructuring (ILO 2008 and 2015a). To achieve job-led economic growth which is equally shared and is truly sustainable three key issues must be addressed:

Green Macro-Economic Fiscal Policy Reform.

Key to the future is the implementation of an environmentally friendly labor tax reform, such as a fiscal-neutral eco-tax that shifts the burden from labor to pollution and the use of resources. The ILO’s Global Economic Linkages (GEL) model indicates that if an eco-tax is combined with measures in support of employment multi-factor productivity would be 5 percent higher by 2050 than if green taxes are not used to support employment. The OECD’s Environmental Linkages model indicates that if revenues from an eco-tax are used to lower labor taxes, employment gains of nearly 2 percent are possible by 2030, as compared to a business-as-usual scenario (OECD 2011). At a global level, if a tax on CO2 emissions were imposed and the resulting revenues were used to cut labor taxes, then up to 14 million net new jobs could be created (ILO 2009). Tools and models for macro-economic employment assessments and projections are key for policy planning to guide economic diversification, climate resilience and structural change.

* * *

Investing into Equal Opportunities, Human Capital and Enterprises for Greener Economies

Putting in place social and labor market policies is essential to enable a transition to climate-resilient and greener economies which are also socially inclusive for women and men. Investing in skills, education, enterprise development and entrepreneurship to facilitate the transition and improve employability is critical because without skilled workers and competent enterprises the shift to a climate-resilient and greener economy will be neither technically feasible nor economically viable. The ILO’s Skills for Green Jobs report highlights the existing skills gap, and indicates that the main holding-back factor is the shortage of green human capital (ILO 2011). Social protection schemes are central and need to be linked to job-search assistance and matching through employment services. Making social protection work alleviates social, economic and environmental crises, while enabling structural change towards climate-resilient and greener economies.

Place Social Dialogue at the Center of Policy Making

Effective dialogue can help resolve crucial socio-economic and environmental issues and improve economic performance. Given that the transition towards a greener and climate-resilient economy will entail profound changes in production processes and technologies, as well as the reallocation of jobs, close cooperation between governments and social partners is central to the success of this transformation. The program of renovation of buildings for energy efficiency in Germany has mobilized about ¤100 billion over the past decade, making it the largest such program worldwide. It was originally proposed to the government by the German trade unions and employers’ organization as a “pact for the environment and employment,” creating and sustaining more than 300,000 jobs per year since its inception (BMVBS 2012). Effective social dialogue is necessary to ensure that policies are coherent and that change is adopted and long-lasting (ILO 2012).

BIOGRAPHY

MAREK HARSDORFF

An economist specialized in development cooperation and the environment. With an in-depth knowledge of the economic dynamics between employment and environmental policies, Harsdorff argues linking social, economic and environmental research to effective policy-making with the view of attaining mutually supportive solutions for sustainable development rather than conflicting ones. He currently works as an economist and policy advisor at the International Labour Organization’s Green Jobs Programme, active in more than thirty countries to ecologize their economies through job-led green growth strategies. He is providing policy advice and directing technical cooperation programs for the creation of green jobs.

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