Employment and earnings losses in a green transition: Lessons from the oil industry
Presenter: Elisabeth Isaksen, Senior Research Fellow, The Frisch Center
Moderator: Elena Verdolini, CMCC
Abstract: This paper investigates the employment and earnings impacts of a green transition, leveraging the 2014 oil price shock as a natural experiment to examine labor market consequences from a contraction of Norway’s fossil fuel industry. Using matched employer-employee data and a difference-in-differences design, we find that oil workers experienced notable declines in both annual earnings and employment in the years following the shock, with the largest earnings losses among senior, highly educated, and male workers. An event study focusing on displaced oil workers reveals substantially larger declines in earnings and employment relative to comparable non-oil workers. Notably, earnings losses are highest among those with the lowest educational attainment, suggesting that the distributional impacts of the oil price shock itself differ from those of oil job displacement.
Although relatively few oil workers transitioned into green jobs, those who did represented a comparable share of the destination workforce as those moving into brown (non-oil) sectors. Workers entering green sectors faced larger earnings losses than those moving into brown jobs, but smaller losses than those shifting into other jobs. Analyzing earnings differentials, we find that lower establishment wage premiums, rather than skill distance or worker sorting, primarily drive these disparities. Our findings highlight the significant transitional costs for fossil fuel workers and suggest that, while targeted policies aimed at skill development alone may not fully restore prior earnings levels, expanding opportunities in green sectors could help offset earnings losses and support labor market adjustment during the green transition.
