Recession Report: March 2009 - Green jobs and recession

Number 5, March 2009

Headline statistics

The latest employment figures cover the three months to January 2009, and show:

• 29.38 million people in work, 2,000 more than in the previous 3 months and 75,000 fewer than the same period a year earlier.
• A working age employment rate of 74.1 per cent, down 0.1 percentage points on the previous quarter and 0.8 points on the same period in 2008.
• Unemployment at 2.03 million (0.8 million women and 1.2 million men), up 165,000 on the quarter and 421,000 on the year.
• An unemployment rate of 6.5 per cent, up 0.5 points on the previous quarter, 1.3 on the year.
• Figures to the end of February 2009 show:
• ·482,000 job vacancies, 74,000 down on the previous three months and 203,000 down on the year.
• ·1,391,100 people claiming JSA, an increase of 138,400 on the month and 596,600 on the year.
• There was an 11 per cent rise in the claimant count from Jan 09 - Feb 09, compared to rises of 8 per cent and 7 per cent respectively between the preceding months. Between Aug-Oct 08 and Nov 08-Jan 09 ILO unemployment increased by 8.9 per cent, a faster rate than the 7.9 per cent increase between May-July 08 to Aug - Oct 08. There is therefore no sign of a weakening in the rate at which unemployment is increasing, and continued steeper rises in unemployment are likely.
• Independent experts are also predicting that wider economic news will become worse. The Treasury's analysis of recent independent economic forecasts shows that the average of new forecasts is for the economy to shrink by 3.2 per cent in 2009, with very limited growth resuming in 2010.[1] This predicted average has fallen by 0.4 percentage points on the previous month.
• ONS have noted that it is particularly striking that that no sectors of the UK economy have escaped the downturn. In particular, they highlight that the last time the manufacturing sector contracted at such high rates was the height of the 1980s recession, and that the slump in the services sector over the last two quarters of 2008 is unprecedented in UK economic history.[2]

There is some slightly better news. While data show that in January wage growth including bonuses fell to 1.8 per cent (a 2.2 per cent annual fall), when bonuses are excluded actual wage growth is revealed as 3.5 per cent, a much smaller fall of 0.2 percentage points on the year.

In contrast to previous recessions, rates of economic inactivity, which could indicate that unemployed people are being moved onto disability benefits, have yet to show steep rises. This quarter economic inactivity levels fell by 64,000, and over the year inactivity levels have only increased by 51,000. This may reflect the current policy focus upon attempting to enable workers to remain economically active, gain skills and, where possible, find new jobs. However, with JSA at its lowest value relative to earnings for 30 years[3] unemployed people on benefit will be financially worse off than both those on either unemployment or disability benefits during previous recessions.

The employment rate

• The 1980s recession led to more claimants spending longer on unemployment benefits, which meant unemployment rates rose more than employment fell. Current trends suggest that the same may be true of this downturn. But although this quarter the employment rate recorded a small rise, there are also signs of weakness.
• The headline statistic hides a quarterly reduction of 48,000 full-time jobs and a rise of 50,000 part-time jobs (around about a third of which are self-employed posts). The part-time increase is split between men and women, with a 26,000 increase in men working part-time and 23,000 more female part-time workers. There has also been a large increase in the proportion of part-time workers who can't find full-time jobs, with 10.7 per cent of part-time employees in this position (0.8 percentage points up on the year). These statistics could indicate an increase in the use of short-term working as a response to the downturn.
• Since the previous quarter there has also been an increase of 35,000 temporary workers, accompanied by increases in the proportions of temporary workers who can't find permanent jobs. 28.1 per cent of temporary workers now saying that they find themselves in this position - this is the highest rate for this response since the same period in 2001.

Temporary workers who can't find permanent work, Mar-May 92 - Nov-Jan 09

• 
  
• There is therefore building evidence that increasing proportions of those who have jobs do not have enough work.

The regional picture

Below the headline national statistics there is much regional variation (although it is important to remember that differences within regions are greater than differences between them[4]). Several regions with high rises in unemployment had high unemployment before the recession began to impact on jobs, with the North East, North West and West Midlands (areas of previously high unemployment) all experiencing some of the largest increases. But there are also areas of previously low unemployment which have seen above average increases, for example Wales, Northern Ireland and the South West had average or low rates of unemployment before the downturn, but have experienced above average increases since it started to affect jobs. While there has been much discussion about job losses in London and the South East, both areas have seen below average rises in unemployment (although unemployment in London was above average to start with).

Regional variations in unemployment rates and percentage point increases between May-July 08 and Nov 08 - Jan 09

Region	May -July 08	Nov 08 - Jan 09	Percentage point increase
North East	7.2	8.6	1.4
West Midlands	6.3	7.9	1.6
North West	6.5	7.7	1.2
Wales	5.6	7.6	2
London	6.8	7.5	0.7
Yorkshire and Humber	6.2	7.1	0.9
East Midlands	6	6.4	0.4
Northern Ireland	4.4	5.7	1.3
East	5	5.5	0.5
South West	4	5.1	1.1
Scotland	4.2	5.1	0.9
South East	4.4	4.8	0.4
UK	5.5	6.5	1

There are also regional variations in unemployment rates by gender. Nationally the male unemployment rate is higher than the female rate (7.1 per cent compared to 5.6 per cent). But while male unemployment rates are also above female unemployment rates in all regions apart from London (where the female rate is 8.1 per cent compared to a male rate of 7 per cent), there is much regional variation in the rates at which unemployment for women and men have increased since the recession began. Between May-July 08 and Nov 08-Jan 09 unemployment rates have increased faster for women than for men in the East Midlands and the North West as well as in London. In contrast, in Northern Ireland, Scotland, Wales and the North East the speed at which the male unemployment rate has increased has been far greater than the speed at which the female rate has risen. The highest increases overall have been for men in Wales (3.2 percentage points), Northern Ireland (2.5 percentage points) and the North East (2.2. percentage points).

Regional variations in unemployment rates and percentage point increases for women between May-July 08 and Nov 08 - Jan 09

Region	May-July 08	Nov 08 - Jan 09	Percentage point increase
East	4.9	4.7	-0.2
East Midlands	5.2	6.2	1
London	6.6	8.1	1.5
North East	6.6	7	0.4
Northern Ireland	3	3.1	0.1
North West	5	6.3	1.3
Scotland	4.2	4	-0.2
South East	4.1	4.4	0.3
South West	3.8	4.1	0.3
Wales	5.2	5.8	0.6
West Midlands	5	6.4	1.4
Yorkshire and Humber	5.6	6.3	0.7
UK	5.0	5.6	0.6

Regional variations in unemployment rates and percentage point increases for men between May-July 08 and Nov 08 - Jan 09

Region	May-July 08	Nov 08 - Jan 09	Percentage point increase
East	5.1	6.1	1
East Midlands	6.6	6.6	0
London	7	7	0
North East	7.7	9.9	2.2
Northern Ireland	5.3	7.8	2.5
North West	7.8	8.8	1
Scotland	4.3	6	1.7
South East	4.6	5.2	0.6
South West	4.1	6	1.9
Wales	6	9.2	3.2
West Midlands	7.3	9.2	1.9
Yorkshire and Humber	6.7	7.8	1.1
UK	6.0	7.1	1.1

Green jobs and the recession

Introduction

Moving to a low-carbon economy will be essential to enable the UK to meet our climate change targets and build a sustainable economy for the long term. There is currently a great deal of public debate about the way the shift to a low carbon economy could help restart economic growth and create jobs in the UK. On paper the figures look promising.

The UK's low carbon environmental goods and services (LCEGS) industries together employ some 880,000 people.[5] These industries include services like pollution control, renewable energy (e.g. wind and tidal power) and new low carbon products such as biofuels. The Government has recently stated[6] that LCEGS industries have the potential to grow at 5 per cent a year, despite the economic crisis, adding almost 400,000 jobs by 2014.

However, the recession is having an impact on the prospects for green jobs. For example, work on the UK's largest offshore wind farm, the London Array, situated in the Thames estuary, is held up because of difficulties in securing adequate finance. [7] These difficulties in raising capital have been exacerbated by the collapse in the price of CO2 allowances on the carbon market,[8] from 30 Euros in mid-2008 to around 11 Euros per tonne currently.

If green growth really is to lead the recovery, then the recession in the green sector itself will need to be addressed and the right policy framework will have to be created to promote green growth. In this section of the recession report, we therefore start with a brief survey of some of the areas of potential green growth.

Areas of potential green growth

Home insulation - a green win-win

Heating is the biggest single user of energy at home. So the single most important thing we can do at home to save energy is to insulate property properly. Through improved insulation - lagging the loft and insulating cavity - and by installing more efficient boilers, we can cut energy bills, reduce our carbon footprints and create thousands of jobs in the process.

According to the Local Government Association (LGA), a national insulation programme, [9] providing basic insulation to the 10 million homes that do not have these measures installed would cost £5bn - rolling it out at £500m a year would create an additional 20,000 jobs.

Seven million homes require solid wall insulation. For the LGA, a modest national energy loan fund, reaching £1bn over seven years, could provide interest free loans to householders, repayable when the home is sold. This would enable 300,000 householders to install solid wall insulation, creating another 5,000 jobs a year.

Green vehicles

Building cars of the future is essential for the long-term viability of the UK motor industry. In one sense, innovation has always driven the car industry, providing the means to attract buyers in a highly competitive market. But now, with new regulations coming in 2012 that will require car makers to cut the carbon emissions of new vehicles, plus worries about the price of fuel, the industry is gearing up to invest in new, greener vehicles - cars, vans and buses.

The Government's green grant for Jaguar Land Rover to build a green Range Rover is just one example of Government support to help safeguard skills and technology development at Halewood. It offers the prospect of long-term manufacture of the smallest, lightest and most energy efficient vehicle of its type. Looking further ahead, a recent Government study showed that there could be some 1.2 million electric vehicles (EVs) on the roads by 2020,[10] subject to a 'high level' of Government commitment.

The key green technology developments needed in road transport to forge a new low carbon industry and provide the R&D basis for growth are:

• Immediate advances in petrol engines. A recent example is Ford's announcement of an £70m investment in its EcoBoost engine (£13m from the Welsh Assembly), around 20 per cent more fuel efficient and likely to help secure 2,000 jobs at the Bridgend plant. A full hybrid petrol engine will have around 50g/km fewer emissions.
• Electric vehicles. The main hold-up is battery capacity, weight and cost. A major role for plug-in electric cars in the new car market is highly feasible by 2020, or sooner with sufficient investment. These technologies are also applicable to the electric van market.

Renewable energy

The UK is set to revolutionise its power generation from wind, solar, tidal and other renewable sources. By 2020, the amount of electricity we generate from renewables will increase sevenfold, from about 4 per cent now to 30 per cent by 2020.

To meet these targets, jobs in renewable energy will need to grow from 16,000 at present to around 150,000 by 2020, to manufacture, construct and operate these new technologies.

The lion's share of employment growth will come from wind farms, both on and offshore. They are likely to generate over 80 per cent of the 38.5 gigawatts (GW) of renewable electricity capacity needed. 36,000 direct new UK jobs could be created in the wind energy sector alone.[11] In support of this goal, a world class wind technology test centre is in development by the New and Renewable Energy Centre (NaREC) in North East England (Blyth Harbour) and due to become operational in 2010. The investment in the test centre, led by One North East and the Energy Technologies Institute, is expected to be in the order of £50m. This could lead to the manufacture of thousands of very large scale wind turbines suitable for installation in remote offshore sites.

Small-scale micro-generation (wind and solar devices for households, schools, small businesses and community users) will contribute a smaller proportion of renewable energy. But there is potential to create thousands of new jobs in making, installing and servicing these smaller scale renewable technologies.

The national grid for electricity also has to be hugely expanded. Ofgem estimates that £12bn of new investment is needed to extend power lines out to sea. Rather than waiting for each individual power line extension to be approved, some are arguing for the first phases of grid extensions to be brought forward and supported directly by the Government[12] - again creating major employment opportunities across the UK.

Clean coal

The UK hasn't built a new coal-fired or nuclear power station for over 30 years. At least one-third of our ageing fleet of power stations will have to be replaced between now and 2015. But almost 40 per cent of our CO2 emissions come from coal and gas-fired power stations. So the next generation of power stations will have to be both clean and green, with new technology to capture their carbon emissions.

'Carbon capture', as it is called, is essential to the approval of the proposed coal-fired power station at Kingsnorth, North Kent. The plant itself involves £2.5 billion of private investment. It is would create 1,000 high quality UK manufacturing, engineering and construction jobs, peaking at 2,500, and a permanent staff of several hundred workers. Hundreds of other jobs are involved in developing the clean coal technology on site.

On a regional scale, in Yorkshire the Regional Development Agency is drawing up plans with National Grid for a pipeline around the Humber estuary, to capture, transport and store CO2 emissions from a dozen separate coal and gas-fired power stations, steel works and other major sites in the region. The aim is to capture CO2 emissions and liquefy the gases under pressure for transport by pipeline and storage in geological formations beneath the North Sea. This £2 billion project will create 55,000 jobs in the construction phase, and 2,400 jobs for the long term, in management, maintenance and other activities. National Grid has stated its intention to be ready to operate its first carbon pipeline system within three years.

The existing policy framework

Last November, the Chancellor announced the Government's first green stimulus,[13] supporting low carbon growth and jobs by 'accelerating' £535 million of capital spending on energy, efficiency, rail transport and adaptation measures:

• £100m new funding for Warm Front, helping 60,000 households.
• £60m for 16,000 social houses with energy efficiency.
• £300m to accelerate delivery of 200 new carriages.
• £20m for flood defences.
• £5m for British Waterways Board infrastructure.

Many countries have now announced similar plans to boost demand,[14] averaging about 3.25 per cent over the period 2008 to 2010. Many include green elements but they are not entirely 'green' packages, and fall short of the proposal in the Stern Review[15] for Governments to invest 1 per cent of GDP annually to tackle climate change.

In early March 2009, the Government launched its Low Carbon Industrial Strategy.[16] The Prime Minister spoke of the massive opportunities provided by the low carbon economy. He referred to new research, 'which shows that in Britain, as a result of the frameworks we have put in place, we can expect 400,000 new environmental sector jobs over the next eight years - with a total of 1.3 million people employed in these sectors by 2017'.

Even with today's economic difficulties, these forecasts suggest an annual growth rate of 5 per cent in these new industries, 'underlining the tremendous economic opportunities the low carbon economy provides for jobs and for our future prosperity as a nation'.[17]

As Lord Mandelson put it, 'Low carbon is not a sector of an economy - it is an economy'.[18]

Possible policy development

To ensure both continued green growth, and to help promote economic recovery, Government action will be needed now to protect existing jobs. This means support for existing industries, in green car manufacture or renewable energy projects. Second, looking ahead, the Government's major challenge lies in creating additional green jobs through large-scale action to help the UK pull its way out of recession more quickly, and more sustainably for the long-term.

The key tests for the next big green push from the Government will be:

• Can they deliver jobs quickly?
• Can these jobs be created locally, in hard-pressed areas?
• Will they prevent unemployment?
• Will they help build a low carbon economy?

The TUC's recent report, Unlocking Green Enterprise, [19] highlights three key barriers to the growth of a low carbon economy:

• The low price of 'environmental impacts', especially the weak price of carbon.
• Weak investment and demand for green goods and services. The most straightforward option for local and central Government is to boost demand by public sector procurement so that manufacturers invest in full-scale production. Electric-powered cars and buses; small-scale renewable energy systems, e.g. on school roofs; and a major boost to homes insulation - saving energy, cutting our fuel bills, and creating work.
• 'System failures' in areas like planning permissions that slow green transformation. For example, the uptake of small-scale renewable energy has been slowed by backward-looking planning regulations. One barrier to investing in an electric car is the lack of re-fuelling and maintenance infrastructure in towns and cities.

The clear message from industry commentators and experts interviewed for the study, and from the evidence from our more successful national competitors, is that greater ambition is needed.

The mindset in Government for the last 30 years has been to leave the market to deliver. As Unlocking Green Enterprise shows, this is emphatically not how Germany or Denmark have created world beating green businesses.

The three key policy directions needed from Government to overcome these barriers are:

• Strong commitment to deliver green policies. Business needs to be convinced that the current emphasis on low carbon industries is here to stay for the long term.
• An 'active' industrial policy. Government has to rediscover the real value in manufacturing. Our competitors recognise that the state has central role in stimulating the green economy - not so much about 'picking winners' as having conviction to set a clear direction, and providing incentives to kick start new sectors.
• Investment in technology. The UK lags behind levels sustained in other countries. We invest about 1.78 per cent of GDP in research and development (R&D), whereas the OECD average is 2.26 per cent of GDP. If the UK is to develop low carbon technologies, these investment levels will have to change.

Notes

Read TUC policy officers' comments on this report and the ongoing economic situation at the TUC public policy blog: www.touchstoneblog.org.uk

And follow the series of TUC recession reports as they are published at www.tuc.org.uk/recessionreport

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[1] HMT (2009) Forecasts for the UK economy: a comparison of independent forecasts London: HMT.

[2] Office for National Statistics (2009) Economic and Labour Market Review, Vol 3, No. 2, February 2009.

[3] The current policy of increasing benefits in line with inflation, not wages, introduced by Mrs Thatcher in 1980. If Jobseeker's Allowance had been increased in line with earnings over the last 30 years it would now stand for a single person over 25, not at £60.50, but at over £100 a week. If it had been increased in line with earnings just since 1997 it would now be worth £75 a week - £15 more.

[4] Office for National Statistics, ibid.

[5] BERR (2009) Low Carbon Environmental Goods and Services: an industry analysis London: BERR.

[6] Ibid.

[7] Funding Doubt for Giant UK Wind Farm, Financial Times, 26 January 2009.

[8] Further details are available at www.pointcarbon.com.

[9] LGA (2009) Creating Green Jobs, Developing Local Low-carbon Economies London: LGA.

[10] Cenex (2008) Investigation into the Scope for the Transport Sector to Switch to Electric Vehicles and Plug in Hybrid Vehicles London: DfT/BERR.

[11] Douglas Westwood(2008) Supply Chain Constraints on the Deployment of Renewable Electricity Technologies London: BERR.

[12] BEWA (2008) Actions to Facilitate the Delivery of Government's Offshore Wind Ambition of 33 GW London: BEWA.

[13] HMT (2008) Pre-Budget Report 2008: Facing global challenges: supporting people through difficult times London: HMT, p125.

[14] For example see Group of Twenty Communiqué, Meeting of Finance Ministers and Central Bank Governors, United Kingdom, 14 March 2009.

[15] HMT and Cabinet Office (2007) The Stern Review: The economics of climate change London: HMT and Cabinet Office, p xiii.

[16] BERR and DEC (2009) Low Carbon Industrial Strategy: A vision London: HMSO.

[17] Remarks by Prime Minister Gordon Brown to the Low Carbon Industrial Strategy Summit, 6 march 2009, available from: http://www.number10.gov.uk/Page18530.

[18] Building a successful low carbon economy, Rt. Hon. Lord Mandelson, Secretary of State for Business, Enterprise & Regulatory Reform, London, 06 March 2009, speech available from: http://www.berr.gov.uk/aboutus/ministerialteam/Speeches/page50378.html.

[19] TUC (2009) Unlocking Green Enterprise: A low-carbon strategy for the UK Economy London: TUC. The pamphlet is available to download from: http://www.tuc.org.uk/economy/tuc-16033-f0.cfm?theme=touchstone.