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Labour Market, Scottish Economy

Understanding the impact of the transition to net zero on low paid jobs

Discussions about the necessities and trade-offs around the transition to net zero are back on the news agenda this week. The changes required to meet net zero targets are complex and challenging yet the risks of not doing enough are immense.  Inherent in this are trade-offs but also opportunities. An ordered transition where businesses and households have certainty over what they will need to do is the best way to minimise harm to incomes and to maximise the benefits that can be realised.

For many businesses and households, the costs associated transition to net zero will be manageable, and perhaps even cost effective in the long run. But for some, the upfront costs will be difficult to manage. Whilst there is a general awareness of the direct costs that will fall on households from, for example the phasing out of gas boilers (a devolved policy, so not affected by the UK Prime Minister’s recent announcement) there is also the impact in livelihoods due to changes in the structure of the economy. At the moment, all the attention is on the ‘just transition’ for workers in carbon-intensive industries, in the North East in particular. But the impact on jobs could be far wider than this.

The Joseph Rowntree Foundation asked us, along with colleagues in the Strathclyde Business School, to look into the potential for disruption to jobs in the wider Scottish economy, particularly in relation to low paid jobs. Our assessment of the available literature and various Scottish Government plans, reports and action plans didn’t provide much to go on, so we embarked on some experimental mapping and modelling of the potential intersection of net zero and low pay.

Today we published a report that we hope provides a rationale and a way forward for government, and others, to consider this issue fully. Whilst we can’t yet confidently put a figure on it, we have found that there is potential for significant disruption to jobs in sectors that employ large numbers of low pay workers, including retail and hospitality.

The mechanisms through which this impact could be felt are varied. Issues we looked at included the knock-on impact from depressed wages in areas where carbon intensive businesses cease trading. We also considered the impact on the viability of businesses with large commercial footprints who may need to invest large amounts to bring buildings up to new energy efficient standards.

There are many unknowns in this type of analysis, including the sufficiency of government policy and the behavioural response from consumers. For example, the Scottish Government is hoping to see car use reduced in Scotland. Households may also independently decide they wish to reduce car use. It is easy to see how this could impact on the viability of out-of-town shopping centres that rely on customers arriving by car and if there aren’t serious efforts to provide adequate replacement public transport or alternative active travel routes, these large centres of employment may become unviable.

Some of the scenarios that we work through may not lead to jobs disappearing completely, but simply shifting to other places or other sectors. There are two further issues to consider here. Firstly, low paid workers tend to be less flexible on where they can work, due to a variety of factors including available transport and difficulties finding affordable childcare to cover long commuting times. They also tend have less of a financial buffer to deal with even short periods of unemployment. Secondly, simply moving low paid jobs from one place to another misses a crucial opportunity to maximise the benefits that the transition to net zero could bring by providing career pathways into new, higher paid, growth sectors.

There is an opportunity here to better join up Scottish Government ambitions on tackling poverty and the transition to net zero that is currently missing from both the Just Transition plans and the Fair Work Action Plan. We hope this analysis will be useful in informing the future development of this work.

Authors

Emma Congreve is a Senior Knowledge Exchange Fellow and Deputy Director at the Fraser of Allander Institute. Emma's work at the Institute is focussed on policy analysis, covering a wide range of areas of social and economic policy.  Emma is an experienced economist and has previously held roles as a senior economist at the Joseph Rowntree Foundation and as an economic adviser within the Scottish Government.

Ciara is an Associate Economist at the Fraser of Allander Institute. She has a broad research experience across different areas including poverty and inequality, the voluntary sector, health, education, trade, and renewables and climate change. Ciara has an MSc in Applied Economics (Distinction) and a first-class BA Honour’s degree in Economics and Finance, both from the University of Strathclyde.

Pauline Anderson

Pauline works in the Department for Work, Employment and Organisation. Her expertise lies in the broad area of skills, jobs and working life – with a particular focus on green jobs, skills and a ‘just’ transition to net zero. She sits on the Climate Emergency Skills Action Plan (CESAP) Implementation Steering Group.

Matthew Hannon

Matthew works as a Professor of Sustainable Energy Business and Policy at the Hunter Centre for Entrepreneurship, Strathclyde Business School. His research examines the business models, policies and technologies necessary to accelerate the transition to a net-zero economy.

Josh Oxby

Josh works as an international people-centred energy policy advisor and consultant. He is completing his PhD on the employment and skills impacts of the Scottish NetZero 2045 just transition at the Hunter Centre for Entrepreneurship, Strathclyde Business School. He sits on the Scottish Government’s Climate Policy Engagement Network (CPEN) in his capacity as a UN-SDG Youth Advisor.