Skills and wage gaps in the low-carbon transition: comparing job vacancy data from the US and UK

What are low-carbon jobs and where are they emerging? What skills are needed to fill these roles and are they already present in the labour force in the right locations? Do low-carbon jobs pay a good wage? How can we ensure workers in jobs at risk from the low-carbon transition are not left behind?

This report provides a detailed characterisation of low-carbon jobs from the last decade in the United States and the United Kingdom. It brings new evidence to support policy discussions. The report draws out the characteristics of low-carbon jobs in general, and aspects that are driven by distinctive national patterns. It summarises findings from a recent Grantham Research Institute working paper by Saussay et al. (2022) that uses online job vacancy data to develop a novel methodology to precisely identify low-carbon jobs and characterise the skill requirements and other attributes of low-carbon jobs in the US between 2010 and 2019. It then presents and compares these findings with new results from a similar analysis on the UK carried out for the period 2012 to 2021.

The job advertisement data combined with methods developed in this research offer a powerful toolkit for understanding the changing demand for skills in the low-carbon transition and quantifying reallocation costs associated with reskilling.

Main messages

• Low-carbon jobs are systematically more skills-intensive than other jobs.
• Across the US and UK, low-carbon jobs have greater requirements for technical, managerial and social skills compared with other jobs. Low-carbon jobs require higher-level IT and cognitive skills too, which are also in high demand due to the ongoing digital transformation.
• The emerging skill gap resulting from the low-carbon transition is therefore larger and broader than previously considered.
• While high-carbon manual jobs are extremely spatially concentrated around centres of fossil fuel extraction, low-carbon vacancies are more dispersed in both the US and UK. This is true for both high- and low-skill occupations.
• In the UK, low-carbon jobs are concentrated in occupations that pay higher wages but exploring the wage gap within narrowly defined occupational groups reveals there has been a shift over the last decade. In the earlier half of the 2010s, low-carbon jobs paid a positive wage premium of up to 15% in most occupations but in the most recent data, a wage gap between low-carbon and similar generic jobs has largely eroded in both the US and UK.
• The lack of a positive wage premium in recent years despite these jobs having higher skill requirements is problematic for attracting workers into low-carbon jobs.
• Potentially high labour reallocation costs need to be factored into policy decisions and economic modelling.
• Policies are likely needed to support low-skill extraction workers who face limited alternative local employment.