The cost of job loss in carbon-intensive sectors: Evidence from Germany
The green transformation of the economy is expected to lead to a sharp reduction in
employment in carbon-intensive industries. For designing policies to support displaced
workers, it is crucial to better understand the cost of job loss, whether there are
specific effects of being displaced from a carbon-intensive sector and which workers
are most at risk. By using German administrative labour market data and focusing on
mass layoff events, we estimate the cost of involuntary job displacement for workers
in high carbon-intensity sectors and compare it with the displacement costs for workers
in low carbon-intensity sectors. We find that displaced workers from high carbon-intensity
sectors have, on average, higher earnings losses and face stronger difficulties in
finding a new job and recovering their earnings. Our results indicate that this is
mainly due to human capital specificity, the regional clustering of carbon-intensive
activities and higher wage premia in carbon-intensive firms. Workers displaced in
high carbon-intensity sectors are older, face higher local labour market concentration
and have fewer outside options for finding jobs with similar skill requirements. They
have a higher probability to switch occupations and sectors, move to occupations that
are more different in terms of skill requirements compared to the pre-displacement
job, and are more likely to change workplace districts after displacement. Women,
older workers and those with vocational degrees as well as workers in East Germany,
experience particularly high costs in case they are displaced from high carbon-intensity
sectors.
Published on November 13, 2023
In series:OECD Economics Department Working Papersview more titles