Fernando Alvarez
Senior Research Economist, CAF -Development Bank of Latin America-
Like any transition process, the energy industry will cause disruptions in different markets, generating winners and losers. Understanding who they are is essential to know how prepared an economy is to face the transition process, whether there will be resistance to the process and to anticipate the policies that will be necessary to take advantage of it in the best way.
In this blog we aim to understand how the energy transition will affect the labor market, and in particular if there is a wage gap between green jobs, that is, those that will increase their demand due to the transition, and non-green jobs. To carry out this categorization we use the classification provided by the O*NET network (Occupation Information Network), where green occupations are characterized by being those that will see their demand increase either because the occupation was generated due to the transition (for example technical in solar panels); because the occupation will need to be readjusted to face the transition (e.g. architects who will need to learn how to adapt buildings to face the new transition) and occupations that already exist, which will not see the required skills change but will see their demand increase. anyway, like electricians. This categorization is used in data from the Program for the International Assessment of Adult Competencies (PIAAC), which provides standardized data on cognitive skills tests, to characterize green jobs and answer the question if a gap exists. salary between both types of jobs.
The data show that the size of green employment is at least 7% and 9% in Latin America and OECD respectively. The Latin American countries that PIAAC includes are Chile, Ecuador, Mexico and Peru, and they present sizes of between 5% and 8% at least. Table 1 presents the differences between different characteristics of the worker and the job in both types of occupations. It can be seen that there is evidence of gender gaps. On average, the proportion of men in green jobs in the countries of the region is 18 percentage points higher than in non-green jobs. Green jobs show a higher incidence of people in the age range of 31 to 50, while those categorized as non-green have a higher proportion of people with higher education, except in private jobs.
In terms of company and job characteristics, green jobs tend to be more frequently located in the private sector and larger firms, and are more likely to be a formal, full-time job than non-green jobs. . Regarding the required skills, people who work in green jobs have, on average, better scores in numerical or mathematical skills, and with greater intensity of abstract tasks and less intensity of routine tasks.
For the wage gap analysis, we compare wages between workers in both types of jobs, and find a wage premium for green jobs. However, this could be due to the characteristics of these jobs, for example, that they tend to be in larger companies or that they are more likely to be formal; or that demand different skills, or that have a greater proportion of abstract tasks, which, whether green or non-green, show higher salaries on average. To try to answer this question, the salary differences are compared incorporating these characteristics as controls, that is, the salary difference that would exist between occupations for people and jobs with similar characteristics.
For the countries of the region, the gap is reduced by 20%, from 0.21 to 0.18, when controls are incorporated for characteristics of the job, the company (especially its size), the skills of the workers and the level of abstraction. of tasks in employment. However, even incorporating such controls, there is a considerable unexplained wage gap. In contrast, in OECD countries, the wage gap between green and non-green jobs is reduced to the point of being statistically non-significant when including these controls.
This wage premium that persists in Latin America suggests that there may be labor frictions in the region that make it difficult to reassign workers between types of jobs. These frictions could be on the supply side, for example, due to greater bargaining power for workers in green occupations, or on the demand side, for example, due to the existence of greater competition for workers from the companies. If the first mechanism is present then there should be wage differences when entering labor markets, while if the second effect is present we should observe heterogeneity in wages throughout the life cycle.
