With the global shift toward transitioning to a green economy, the main challenge facing countries and governments is how to reconcile the economic policies needed to achieve this goal with social and climate conditions, aiming to minimize the potential negative impacts on national economies and societies.
In this context, the Bertelsmann Foundation presents a German vision for tackling this challenge in its report titled “Sustainable Employment: The Effects of Transitioning to a Green Economy on the Job Market.” The report explores ways and strategies for making the green economy transition while minimizing harm to the job market as much as possible. It also discusses the most important measures currently being considered to achieve this goal, highlighting both the sectors that will be negatively and positively affected in terms of employment, and concluding with key findings and recommendations.
Comprehensive Sustainability
The report begins by stressing the importance of Germany adopting a social market economy system to support its journey toward a greener economy. It calls for adapting and updating the dynamics of this economy to address the emerging challenges. The social market economy aims to protect economic freedom and effective competition, alongside enhancing prosperity and social security. However, this system has been facing several compounded challenges recently, such as climate change, depletion of natural resources, shrinking future labor force, and digital transformation. To achieve the desired goal, sustainability must be integrated into this economic model.
A sustainable social market economy model may present contradictions between its various dimensions, highlighting the need for comprehensive policies to reduce conflicts between economic, social, and environmental factors. These policies should also promote synergy between these dimensions. One notable conflict is the balance between environmental sustainability and maintaining high employment rates, especially in the industrial sector. High employment can contribute to climate change and its various impacts, such as threats to water and food supplies. Thus, concerns arise that necessary measures to preserve environmental sustainability might jeopardize welfare and employment.
Influencing Factors
Germany is diversifying its paths to achieve its goal of transitioning to a green economy, focusing on taking various measures and initiating them swiftly, while also paying attention to long-term forecasts resulting from these initiatives. These forecasts are published every two years, analyzing factors that will impact the modernization of the economic model, such as “Industry 4.0,” electric mobility, climate policies, and changes in transportation behavior.
In mid-2022, the seventh edition of these forecasts was released, examining key drivers of the desired economic transformation, assessing existing measures, and developing a predictive model to measure progress toward carbon neutrality and the expected structural changes in the labor market. The report highlights several key factors that should be considered due to their expected long-term impact on social, economic, and environmental dimensions. Among the most important are:
- Transitioning to renewable energy as the primary source in various sectors, which has gained significant momentum recently due to increasing calls to reduce factors contributing to climate change, such as fossil fuel use. Clean energy, like solar and wind power, is seen as inexhaustible and has gained new ground.
- On July 21, 2022, the European Central Bank raised interest rates for the first time since 2011, which is expected to alter consumer and household behavior, as well as investment behavior, particularly in the residential construction sector, due to changes in financing costs.
- Global conflicts and wars, such as the war in Ukraine, have led to long-term increases in defense spending, diverting funds from various investment opportunities.
- The shift towards organic farming, which uses less fertilizer and produces cleaner and healthier food, also increases reliance on human labor in production, promoting food security while protecting the environment.
- Adapting to climate change through preventive measures, such as flood prevention techniques.
Economic Measures:
There are three key economic dimensions considered among the most important measures to be followed, according to the report, in the transition to a green economy. These are:
Alliance Agreement: In 2021, the Social Democratic Party, Alliance 90/The Greens, and the Free Democratic Party, in cooperation with the German Ministry of Labor and Social Affairs, formed a coalition to achieve the following goals: increasing reliance on renewable energy and sustainable mobility, promoting organic farming, and enhancing the circular economy.
Transition to Sustainable Mobility: This is achieved through ongoing efforts to create an environmentally friendly and sustainable transport system by providing the infrastructure necessary for the transition and offering government support to public transport companies if needed.
National Hydrogen Strategy: Approved in 2020, this strategy has established a framework for the future production, transportation, use, and reuse of hydrogen to provide clean energy production.
These measures, however, are not sufficient to achieve the intended goals of the green economy transition, which will be clarified when discussing the expected outcomes.
Green Jobs:
The impact of the green economy transition varies across different economic sectors. Some jobs or sectors may gradually disappear or see a decline in employment rates. On the other hand, new sectors will emerge to support the transition. The report divides the sectors into two categories: winners and losers of the green transition, which are detailed as follows:
Winning Sectors: Many industries are expected to thrive due to the green economy transition, such as the construction industry and related fields like architectural and engineering offices, as well as physical and chemical inspections. This is because these industries are primarily responsible for creating and developing the new infrastructure necessary for expanding renewable energy production and strengthening the sustainable transport system (green transport).
Information technology companies and information services are also expected to be among the winners, as the socio-environmental transformation relies heavily on advanced digital transformation. Structural changes in the labor market and the spread of digital transformation will boost the education and training industries, ensuring a skilled workforce capable of keeping up with these changes.
Losing Sectors: The automotive manufacturing sector and related industries, such as internal combustion engine production, car sales, maintenance, and repair, are expected to face significant disruptions due to the green economy transition. In the long term, internal combustion engine vehicles may disappear from the roads, replaced by electric vehicles and green transportation.
Sectors with high energy consumption, such as glass, ceramics, chemical products, and metals extraction industries, are also likely to be affected. This is due to the anticipated rise in costs associated with the transition to renewable energy. However, in the long run, these industries are expected to recover once the costs of using renewable energy decrease.
Expected Results:
The report concluded that the three dimensions of the desired green economy affect and are affected by one another. Therefore, it must be understood that it may not be possible at first to reconcile the various goals of these dimensions. In fact, some social objectives may need to be postponed, and the negative effects on the labor market endured, with the intention of addressing these effects through new measures and actions later on. Below are the key economic goals and the expectations for their implementation:
1- Carbon Neutrality Goal: The report mentioned that one of the main existing objectives is for Germany to achieve carbon neutrality by 2045. However, if current measures continue at the same pace and no changes occur in any assumptions or influencing factors, the goal of achieving net balance in greenhouse gas emissions is destined to fail. It is expected that reliance on fossil fuels will remain at 40% to meet energy production needs by 2045.
2- Meeting Labor Market Needs: According to the assumptions and measures in place, it is expected that approximately 3.29 million jobs will be created across the German economy by 2040. However, around 3.89 million jobs will be lost at the same time. This is attributed to the structural changes in the labor market resulting from the shift from the manufacturing sector to more services, demographic changes, and increased digital technology, which in turn will reduce the demand for human labor in the economic process.
In conclusion, the report recommended several measures to mitigate the negative effects of the transition to a green economy on the labor market. These include focusing on creating more jobs in newly emerging economic sectors, avoiding over-reliance on digitization or artificial intelligence as a substitute for human labor in the production process, and heavily investing in education and training, especially in developing vocational education that combines theory and practice. This type of education has been neglected for many years, with the situation worsening after the COVID-19 pandemic. The main goal here is to provide the required scientific expertise and create suitable working conditions that delay early retirement for older workers, while also working to enhance career paths for women and supporting initiatives that empower women. Additionally, it advocates for active policies to facilitate the migration of skilled labor, provide appropriate training, and quickly integrate new arrivals to benefit from their qualifications.
