CONSIDER THE FOLLOWING ITEMS

“While there are conflicting views about whether any changes in total employment would be positive or negative, there are likely to be quite significant impacts in terms of shifting employment patterns between sectors as economic development shifts from “brown” to “green” economic sectors.”

Green Growth Studies: Energy, Preliminary Version, Organization for Economic Cooperation and Development (OECD), 2011.

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“Across the range of issues to be addressed, policy initiatives should be designed in terms of: cost-effectiveness, adoption and compliance incentives, and ability to cope with uncertainty and provide a clear and credible signal to investors.”

Towards Green Growth, Organization for Economic Cooperation and Development (OECD), 2011. 

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“Many countries are using a menu of policy incentives instead of a single policy approach. Policy makers realize that these incentives need to be coherent, stable and designed for the long-term to be able to attract the necessary funds for robust deployment and strong markets that ultimately will reduce the cost of renewable energy.”

Report of the Secretary-General – Promotion of new and renewable sources of energy (Advance unedited copy), UN Department of Economic and Social Affairs, Division for Sustainable Development, August 15, 2011.

COMMENTS

Global job and income growth are in trouble whether the world makes the transition to a cleaner and more sustainable economy slowly or quickly.  If the transition is done slowly the world will suffer large job and income losses due to the negative impact of environmental pressures on economic growth.  Losses will also occur because of a poorly designed “green” investment strategy.

If the transition is done quickly, job and income losses due to environmental pressures will be reduced, but more losses will be caused by the “green” investment strategy itself.

The current strategy for transitioning to a clean and sustainable global economy relies heavily on market competition and traditional governmental policy tools to put downward pressures on the costs of producing cleaner energy and to motivate business enterprises to create alternatives to resources that are being depleted.  Thus, the current strategy leaves the institutional forces that are slowly eroding global employment and income levels in tact.

At the core of those institutional forces are the scope and intensity of competition among business enterprises and governments.  Global scale communications, trade agreements, investment flows, and commodity flows now bring many more investors and business enterprises virtually face to face in the same markets.

Faced with many more competitors, business enterprises invest heavily in finding ways to reduce labor costs.  Moreover, governments abet these efforts by helping their domestic business enterprises with policy structures and financial subsidies that encourage investments in machines rather than workers.  In this economic environment, job destruction and wage reductions in some sectors and regions of the world economy generally outpace job creation and wage growth in other sectors and regions of the world economy.

An accelerated “green” transition will exacerbate the gaps between job creation and job destruction, wage growth and wage decline.  It will shift more investment funds to the energy sector, which is very machine and technology intensive.  More investment funds will also go to enterprises engaged in the development and production of resource alternatives, enterprises that tend to be more highly automated and employ fewer workers that the enterprises they replace.  The net result will be a further decline in global demand for workers and lower wages.

The transition to a clean and sustainable world economy can be done without harm to employment and income growth, but only by simultaneously reducing system wide downward pressures on job and income growth.  This can be done by making increased governmental management of global market forces and the increased use of governmental employment and income programs (to supplement private sector employment and compensation levels) components of the “green” transition strategy.