Transcript - Episode 24 - The global green skills agenda: How to make the green transition work for all

Transcript

Hannah Audino:

Hello and welcome to PwC’s Economics and Business Podcast. I am Hannah Audino, an economist here at PwC, and I am really very excited about this episode today. We are going to be talking all about the green jobs agenda, but focusing on what this means for developing countries. We all know that building back greener is now absolutely imperative, but key questions remain about how to make this transition work for all countries and all people. In this podcast, we will be discussing how the green agenda could widen global inequalities and crucially what policymakers can do to intervene to plug skills gaps, and to maximise the rewards globally. To answer these questions, I am joined today by Zlatina Loudjeva and Jack Steenson from PwC UK’s international development team. Hi both, thanks for joining me today.

Zlatina Loudjeva:

Hi Hannah, thanks for having us.

Jack Steenson:

Hello Hannah.

Hannah:

Hi, to kick things off, Zlatina, please start by talking little bit about the current global skills landscape, and what's disrupting it?

Zlatina:

Thank you, Hannah and thanks for having us again. Well, since 2020 the economy and labour market worldwide have experienced unprecedented disruption. It's important that we don't confuse this with just the COVID pandemic, because in fact it has been a perfect storm of three disruptive forces coming together. It's COVID, automation, and the transition to a greener economy. Jobs are going down, because of COVID, but they won't return because of automation. In the medium term, in particular, the transition to a green economy is going to reshape the jobs available, and the skills needed for those jobs. The reality is, we don't have a choice, we have to deal with this. We didn't choose for COVID to come, but it's here, and we are facing a climate emergency, and therefore, our only option as humanity is to move to a greener economy. However, we have to be conscious that, whereas the move to a greener economy is very positive, it is happening at the time of a major disruption of livelihoods in business. Therefore, we are seeing re-emergence of gender inequality, and socioeconomic inequalities, and poverty are deepening at the speed unprecedented and unseen for some time. For example, the UN estimates that 71 million people were pushed back into extreme poverty in 2020 alone. This is the first rise in global poverty since 1998. This is just the beginning, of course, this is the first year we had data for, it's the first year of impact.

These arbitrate has led to a labour market paradox. We have a situation where millions of people are losing their livelihoods and at the same time there is a shortage of skills for the new green jobs that are emerging. The PwC 2021 CEO survey shows very clearly that 73% of CEOs see availability of key skills as a top concern. Business leaders repeatedly highlight that the skills available to them don't keep up with the demand for green jobs. Now, this mix of skill shortages and increasing poverty can create a very dangerous downward socioeconomic spiral. The poorer people are, the less likely they are to be able to focus on or invest in upskilling or reskilling. When you are poor, when you are struggling to make ends meet, you focus on that. Without the right skills, and at the right place, at the right time, businesses that are already stressed by COVID cannot grow. We know that without business growth, there is no growth, and without growth there is more poverty, and then more inequality. This combination can be lethal and have a very significant lasting impact on the already fragile equilibrium we have achieved in our societies. This is why targeted global and national level interventions focused on skills are an immediate priority. There are two major global events coming up this year, where skills need to be a focus, the G7 and COP26. It so happens that the UK is leading both, and as such it has a major role to play in setting the agenda.

Hannah:

Thanks for that great summary, Zlatina. Turning to you now Jack, with so many priorities post COVID, what benefits can be realised through investing in skills?

Jack:

Thanks Hannah and building on what Zlatina just shared, even before the pandemic struck, experts have long identified upskilling and reskilling as key drivers of economic growth. The World Economic Forum's future of jobs report in 2020 shows that half of all employees around the world will need upskilling by 2025, and that number doesn't even include all of the people who are currently not in employment. The incentive for global governments is clear, wide skill investment in upskilling has the potential to boost global GDP by 6.5 trillion US dollars and create 5.3 million new jobs by 2030. Sectors that have long suffered from low wage growth and output for decades, could reap significant benefits, which can help reduce inequality and polarisation. If we take the health and social care sector, for example, it could add 380 billion US dollars additional GDP through upskilling by 2030.

Less developed economies could also realise greater gains as a percentage of GDP. The Sub Saharan Africa and Latin America regions could see over 7% additional GDP by 2030, if they start investing in upskilling now. In short, all of the trends, as Zlatina just mentioned, have accelerated. I personally recently spent a year working in Kinshasa in the DRC, and our team worked to create a better business environment for Congolese entrepreneurs. In just 5 years, the DRC moved up from the 184th to 54th easiest country for starting a business, according to the World Bank's indicators. That said, COVID-19 stalls a lot of this progress, shown by 55% year on year reduction in the number of business registrations. We also witnessed that the impact on these businesses greatly affected gender equity. Unfortunately, efforts to boost gender inequality have suffered the proportion of female business registries fell from 29% in quarter 1 of 2020 to 23% in quarter 2.

Hannah:

Yeah, that's quite a drop off. Let's dig into the green economy a bit more now, Zlatina you have a background in energy and infrastructure, can you take us through what could happen in these sectors as the world goes green?

Zlatina:

Energy, and construction, and infrastructure more broadly will definitely be very affected by the move to build back greener or to build back better as it is more popularly known. The jobs that exist today in the energy sector, for example, might not be around in 5 to 10 years’ time. Just as an example, the International Labour Organisation has done a review of the petroleum extraction and refinery sector, coal mining and production of electricity related to coal, and they predict that about 6 million jobs will be lost in those sectors alone. This is only the direct jobs, not to mention how there are many towns in developing countries that are built around mines, and the whole infrastructure with schools and hospitals and so on relies on the income from the mines and the communities that are there for the mines. Beyond these job losses, as the climate emergency affects natural resources, the International Labour Organisation predicts that 72 million full time jobs will be lost by 2030 due to the heat stress, temperature increases. For example, things like shorter agricultural hours, as the heat increases and becomes unbearable. This will affect the poorest the most, of course, because they tend to be the ones who are doing smallholder and subsistence agriculture.

What does this mean? This means we don't have another option but to move to a green economy. It also means that we have to make that transition work. For example, the green economy is estimated to create 24 million jobs by 2030, even more importantly to protect jobs that depend on the environmental balance, agriculture, we talked about, fisheries, tourism. An estimated 1.2 billion jobs globally at the moment depend on us preserving our ecosystems, and avoiding extreme weather. The problem is that this transition is happening in the context of COVID as we mentioned already, where we are seeing major pressures. Rich countries can afford furlough schemes, business support and welfare systems, and we've seen a lot of this.

These systems, the safety net gives people a chance to reskill, to find another job, or to go back to education if they would like to without falling into poverty. Poorer countries don't have that kind of safety net by much. The COVID restrictions hit day labourers, hairdressers, informal traders along the transport corridors, and they hit them within 24 hours of restrictions being implemented. If there were any savings, they're gone. Without savings and struggling to make ends meet, there is no time to invest in going back to education and people are just taking the jobs that are around. We also know that this trend has affected women even more, because women tend to be ones in the informal jobs. they also tend to be the carers. When people in the family are sick, it's the women who stay behind to cater, and therefore, they have had experienced even a more significant drop in income on average.

Women, in particular, have been very hard hit by the pandemic. We also know that when women are hit and when women focus on surviving and making ends meet, they also start deprioritising the education of their children, so this could have a generational impact. In addition to the individual impacts and the household impacts, businesses have been hit hard too. They cannot afford to take on the cost of reskilling and upskilling. Jack talked about what's happening in the Congolese businesses, this trend is very similar across Africa and Asia in low income countries. Governments supporting the poorest countries has been highly inadequate. Support total about 10% of GDP in rich countries, whereas in some of the poorest countries, it's been only 1% and of course it's 1% of a much smaller pot.

That can be a particular challenge for the green businesses that we need for the green economy. Like, for example, renewable energy. Renewable energy requires significant government incentives upfront to commercialise. Therefore, in the absence of these kinds of investments, the businesses are not able to take the cost of upskilling and training its workforce. To put it simply, due to COVID and its impact on the economy, there is less money to go around. We just have to be very cautious, when we are thinking about the transition to green jobs, and this is why government interventions are so important.

Hannah:

Jack, what are the implications for global inequality?

Jack:

Hannah, to put it very simply, unless there is some immediate intervention, we will see a sharp and rapid increase in global inequality. We will also see rising global poverty levels, and as we know, rising poverty means more migration, more conflict, and even further health crises. We cannot simply vaccinate our way out of this problem, as COVID-19 is not the only driver as Zlatina has alluded to. In developing countries, the people who lost their livelihoods the fastest, are the least likely to be able to reskill rapidly. In a global economy with global supply chains, this will lead to stunted growth in both importing and exporting countries.

Hannah:

The challenges are pretty clear. But what can the green economy offer to the poorest to help address these inequalities going forward?

Zlatina:

Well, it's a good question Hannah, and thank you for it, because we need to be, of course, very cautious that the green economy offers a lot of opportunities. There are some immediate opportunities. There are some immediate jobs, like say counting trees for carbon offsetting that don't demand too much upskilling. There are also many opportunities in the construction sector, we mentioned, for example, refitting existing housing stock, replacing old boilers with new ones, insulation, building different types of housing that is more heat resistance, and so on. There is, as an example, in Kenya, Mobisol, where ENGIE started offering solar energy, off-grid solar energy on a pay as you go basis. Very quickly they have employed about 2000 staff and contractors in rural communities amongst the poorest. They have invested in upskilling them, and they have had a major social impact, both in terms of providing energy and providing employment.

There are definitely some low hanging fruit, immediate opportunities that will help the poorest; however, for most of the green economy jobs, or the jobs we expect to exist in 5 to 10 years will need more skills, and more training. For example, if you think the new generation of, again as I mentioned, the new generation of heat pumps or the new hydrogen batteries we expect to have, we would need people who have the skills to fix these, to install them, and then to maintain that. The experience even in developed countries as in the UK, say the experience of the green grand scheme shows that even with government support, it takes time to create the necessary skills in the supply chain to do the transition at scale and in speed.

To get to the scale and speed needed to replace those jobs, there is a need for numerous green businesses to step up their innovation, and they will need the labour skills to deliver it. In the UK, for example, the government have started very interesting schemes to support small and medium enterprises in the transition. We welcome this, because small and medium enterprises on average are the ones, who can least afford to be investing in upskilling and training the workforce. These kinds of schemes, these kinds of interventions will be needed in developing countries as well, especially the poorest. As businesses struggle policymakers need to intervene to support the transition to more sustainable jobs and investments. There could be targeted schemes to support green businesses as we discuss the renewable energy, and think what are the skills that they need, and plan ahead, and support the development of these skills.

Hannah:

Final question from me, Jack, what does this mean for policymakers and for leaders?

Jack:

Thanks, Hannah. Yeah, that's a very good question. This is a key linchpin of all of our analysis in PwC. We are very aware of the opportunities that come with the transition to green economy, but there also are a lot of parallels that we need to kind of avoid as well. To avoid this snowballing social crisis, we need a global focus on the skills needed for this green economy, but we also need rapid action at the national level. We need clearly defined sector allocation specific skills creation strategies and interventions. Many countries have already successfully designed and implemented such interventions, and in that way offer a blueprint for others. For example, the UK has established a cross-government, green jobs task force, with representatives from different departments and the private sector. In Europe, another example is in Luxembourg Skills Bridge, which is open to all companies and offers them a technical assistance to plan their future jobs and skills management. These employees benefit from skills assessment, and an advisor to support them throughout the entire process.

When it comes to funding, these national upskilling initiatives, they’re simply isn't a one size fits all approach, and in a lot of cases poor countries will rely on global backing from donors. If we take the Global Green Growth Institute, for instance, this is an intergovernmental global organisation that is currently helping 34 emerging markets transform and future proof their economies. They primarily achieve this by embedding environmentally friendly, and socially inclusive green growth practices. All of these kinds of examples that we just walked through are precisely the kind of cooperation and intervention needed in other countries, and they will be crucial for employability at the individual level, and to boost economic growth, but also for gender balance and inclusion. The UK has unique opportunity to focus global leaders’ attention on this issue through its leadership at the G7 and COP26 later in the year. Simply put, net zero will not happen unless leaders can articulate how we will transition to this greener economy, whilst creating jobs and opportunities.

Hannah:

Thanks both, this has been such an interesting and really important conversation, and one that I'm sure will increasingly rise up the global policy agenda. Thank you all for listening. For more information on PwC’s work in this area, head to the link in the episode description for our future work campaign, and also our work with the World Economic Forum. As always, please do subscribe for future Economics and Business podcasts.