The Green Transition in the Labor Market and its Political Consequences

Abstract

The green transition, designating the economic transition towards carbon neutrality, has started to and is predicted to further transform labor markets in advanced capitalist economies over the following decades. This transformation creates winners and losers in the labor market, with jobs in carbon-dependent industries particularly threatened. These distributional consequences are likely to matter for domestic politics. Yet, given the large disruptions accompanying the green transition, we know surprisingly little about the politico-economic consequences of this transition in the labor market. In this dissertation, I examine the implications of the green transition as a labor market risk for individual-level voting behavior and preferences for social and public spending policies across different advanced capitalist economies. My theoretical argument is two-fold: First, I posit that the green transition represents a distinct source of structural change in the labor market compared to other already well-studied labor market transformations in Comparative Political Economy. This is likely to amplify its politico-economic consequences. I argue that the green transition is characterized by a specific purpose, namely the avoidance of an existential threat posed by climate change. Relatedly, it is more driven by governmental policies than other rather market-driven sources of structural labor market change. In addition, its negative impact is concentrated in different ways: in specific carbon-dependent industries, where low-skilled workers are overrepresented and which tend to be clustered in more rural areas. Lastly, it is much more politicized and salient in the public debate. My second argument regarding the politico-economic consequences of the green transition is based on the dominant risk approach rooted in material self-interest to studying labor market risks in Comparative Political Economy. Unlike the majority of the existing risk-based literature, I argue that subjective perceptions of labor market risk matter more for political reactions than objective risk in the case of the green transition for the following reasons: It is unclear whether individuals can correctly assess their objective risk and formulate policy demands accordingly. Moreover, with the politicization, salience and concentration of the burden of the green transition, subjective concerns should be more pronounced than objective risk measures would predict. Additionally, current objective risk measures are not ideal for assessing which jobs are actually at risk in an encompassing way, also because some of the labor market effects of the green transition have not occurred yet. Therefore, subjective perceptions are arguably more accurate in capturing labor market risk due to the green transition. Lastly, I depart from the dominant risk-based approach focused on material self-interest by arguing that, in the case of the green transition, non-material considerations such as social status and disappointment with specific parties also play an important role in shaping electoral reactions to labor market risks. I test these arguments in three empirical research papers that constitute the core of this dissertation. In these papers, I use data on the closures of coal-fired power plants and coal mines, aggregate electoral records data and individual-level survey data for Germany. I also rely on data from a large novel cross-country survey including a vignette experiment on the green transition as a labor market risk and related policy preferences. In terms of methods, I (and my co-authors) employ state-of-the-art causal inference methods, Bayesian item response theory models and multivariate regression analyses. In Paper 1, I examine the electoral consequences of the coal phase-out in Germany after the adoption of a phase-out law in 2007. This context provides a least likely case to observe electoral backlash due to compensation for affected individuals and communities and the active involvement of labor unions in the policy-making process. I use data on the closures of coal-fired power plants and coal mines in North-Rhine Westphalia and municipality-level aggregate election data on regional, federal and local election results between 2007 and 2022. Employing staggered Difference-in-Differences models, I show that a coal closure caused an increase in abstention rates and decreased vote shares for the Social Democratic Party in affected municipalities. While it did not cause higher unemployment rates, I provide indicative evidence, using individual-level survey data, that this asymmetric backlash stems from perceptions of economic decline and disappointment with the adoption of the phase-out policy among affected individuals, especially those close to the Social Democratic Party. With Paper 2, which is joint work with Marius Busemeyer and Tobias Tober, we adopt a comparative perspective on the role of subjective labor market concerns due to the green transition and digitalization. We explore how individuals across six advanced capitalist economies perceive both labor market risks and whether their social policy demands differ. Analyzing both a split-sample and a vignette experiment, we find that even though individuals have more pronounced subjective labor market concerns due to the green transition compared to digitalization, they respond to both labor market challenges by favoring higher compensatory spending, such as more generous unemployment benefits, rather than social investment spending, such as more investment in higher education and life-long learning. In Paper 3, in collaboration with Sebastian Koos, we complement this cross-country perspective on these two labor market risk perceptions by analyzing how they affect preferences on public spending on the two transitions. More specifically, we investigate the role of perceived labor market single-pressuredness and cross-pressuredness, i.e., concern about losing one’s job due to both transformations simultaneously. Using data from the same large-scale cross-country survey as in Paper 2, our results show that subjective concern about the green transition in the labor market is associated with a preference for less relative spending on this transition. This holds in the same way for subjective perceptions of labor market risk due to digitalization. In addition, perceptions of cross-pressuredness move preferences towards a more equal spending allocation on the two transitions. Overall, I demonstrate that subjective perceptions of labor market risk due to the green transition matter for politics, thereby situating the green transition in the existing literature on structural change in the labor market. More specifically, individuals who perceive a negative impact due to the green transition in the labor market react with electoral backlash. They demand more compensatory social spending and generally less public spending on the green transition to maintain the status quo. These findings underscore the importance of subjective perceptions of labor market risk and economic hardship as well as non-material considerations. These results can serve as valuable insight for policymakers and other actors, including labor unions and civil society organizations, involved in the policy-making process of green transition policies.