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Industrial Policy

Will the Green Deal be a job drain?

This article is from the first chapter of Work Reloaded, our editorial series on how employment is changing after COVID.

Europe’s vision for a decarbonized economy is full of question marks, but one is becoming ever more pressing: Will it be a job drain?

The bloc has some of the world’s most ambitious climate targets: slashing emissions by over half by the end of the decade, and reaching net-zero emissions by mid-century. But as lofty goals start percolating into sectoral legislation and get translated into business strategies, they raise the question of whether they will cause massive job losses in Europe — and looking at past technological shifts offers little hope.

The European Commission estimates that “at the aggregate level” its climate goals are unlikely to have “very significant effects on employment,” but it acknowledges that they will change the economic fabric, and therefore sectoral employment levels, according to its own impact assessment.

“I’m not that concerned about the aggregate,” said Carl Benedikt Frey, director of the Future of Work program at the University of Oxford. But aggregate employment figures hide regional cautionary tales, he added.

“If we look across places, we see very significant disparities in unemployment rates between different communities. And often it’s in places where factories have closed down, where jobs are moved abroad, or where they’ve been automated away, and where entire communities are struggling to adjust. And a hard question is: What do you do with those places?”

As Europe moves to clean up manufacturing and energy production, the risk is that its current industrial hotspots will turn into the once-flourishing coal regions of Britain’s Black Country or Belgium’s Meuse Valley: vestiges of wealth swept away by technological progress.

“In most likelihood, you will not have either-or, so you will have some new jobs being created … while at the same time it is very likely that some other existing jobs will disappear,” said Irene Mandl, head of unit at the European Labour Authority, an EU agency based in Bratislava.

Car industry woes 

Mustafa Kalay’s job is to ensure that gloomy scenario won’t materialize, at least not at Bosch’s plant in Stuttgart Feuerbach, in Southern Germany, producing powertrains for diesel, petrol, EV and fuel-cell vehicles. As a member of the works council there, he’s responsible for the retraining of his colleagues — from mechanics to electricians, from mechanical engineers to software developers.

“When it came to the transformation, we agreed with the management that we would train colleagues from old areas to new areas — for the future,” he said.

This way, he’s keeping some of the hundreds of thousands of jobs that the European Union’s push for decarbonization will make obsolete by transitioning them into sectors for which demand will grow as a result of the shift to green.

“It’s a bit difficult to tell if people will be made redundant. But because of the change in jobs, of course, the jobs are at risk … If Bosch can’t sell diesel, Bosch won’t employ people in diesel,” he said. 

Nowhere is this transformation more apparent than in Europe’s industrial heartland of Germany and its crown jewel, the automotive industry.

Regulatory pressure — a ban on the sale of internal combustion engines by 2035 in Germany and the U.K., ongoing negotiations to extend the same target to the EU — and the unexpectedly high uptake of electric vehicles have pushed Europe’s leading automakers to overhaul their production lines in order to stay relevant. But that shift has significant consequences for workers.

The Ifo Institute for Economic Research estimates that around 614,400 German workers are attached to the production of conventional engines, and by 2035, “they will have to do something else or they will retire. But in their current position, they are no longer needed,” said Oliver Falck, director of the Ifo Center for Industrial Organization and New Technologies.

While some will reach retirement age before becoming redundant, “it is not likely that the change in employment can be cushioned purely through natural fluctuation in employment,” Ifo wrote, estimating that about 100,000 jobs are at risk due to the shift to EVs by 2025, and another 80,000 by 2030. 

These numbers reflect existing regulation, but not the German government’s ban or the forthcoming tightening of EU rules. “Further regulation will further steepen transition paths, and this means that a larger number of employees could be affected,” said Falck.

That’s a well-known issue to Roman Zitzelsberger, district manager of Germany’s powerful union IG Metall in the state of Baden-Württemberg, the German car industry’s HQ. He sees the shift to EVs as inevitable, but not necessarily damaging, provided that future jobs are kept locally.

“If I look with a helicopter view at the whole situation, I see we can solve it, we can find a lot of solutions. But our members are not asking for the helicopter view, they ask for their concrete situation. They want to know what happens with me in the next five to 10 years? Is there a place for my son or my daughter in my industry? There are concrete, big challenges.”

While household names like Bosch or Volkswagen may be able to shift their production and workforce to EVs, the risk is higher for specialized companies that supply components to one single brand. “There will be some problems the smaller the company is and the closer it is to the combustion engine … some plants will be closed,” said Zitzelsberger.

That problem will spill beyond Germany: about 501,000 jobs across Europe are going to become obsolete if combustion engines are banned in the EU as of 2035, warned the European Association of Automotive Suppliers, CLEPA. Meanwhile, 226,000 jobs are projected to be created in the production of EV powertrains — a net loss of 275,000 jobs.

“Not a single engine of Audi is produced in Germany. They are all produced in Hungary or Slovakia, so they have real problems,” said Falck.

Changing skill-set

To keep Europe from bleeding jobs as a result of decarbonization, retraining workers is the obvious answer — but a costly one.

“The biggest point is how can we retrain the employees? I think this is for us the most important topic,” said Manuel Kallweit, head of the economic intelligence department at Germany’s automotive industry body VDA.

Studies show “digital” and “green” skills are in high demand. “We already have a shortage in different high skilled sectors, software development is a big one and then battery chemistry,” said Stefan Bratzel, founder and director of the Center of Automotive Management near Cologne. “But it’s quite difficult to bring the people who lose their jobs in factories into software development,” he added.

Many carmakers launched programs to retrain their workforces, but smaller suppliers don’t have the capacity to do this in-house, especially at the potential risk of employees leaving — and industry flinches at shouldering the cost.

“We need more solutions. And this is not just the topic for the companies. This is a topic for politics and for social partners and for society as a whole,” said Kallweit.

But at a political level, there’s little awareness of the scale of retraining and type of skills needed, said Mandl, at the European Labour Authority.

“It is somewhat a striking phenomenon that although labor market developments and now also climate change, greening, environmental degradation, are so high on the policy agenda, we have not yet closely brought them together,” she said.

The risk is to repeat the mistakes of the past, when Europe largely got out of coal without managing the transition, creating mass unemployment and strife — or simply hoping that “green” jobs will somehow make up for the ones that have been given a due date.

“The Commission’s earlier forecasts on employment growth linked to decarbonization, like in renewable energy generation, didn’t materialize,” said Béla Galgóczi, senior research officer of the European Trade Union Institute.

“Workers genuinely are afraid of change, because their learning in the past was that if something is changing, they will lose out,” he said.

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