Labor Markets and Climate Change: How to Adapt Labor Market Policies and Improve Employment Opportunities?

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Sandoval Ayala, Juan Manuel;
Noh, Heewan;
Apr 2024
In the wake of a robust economic recovery from the COVID-19 pandemic in 2021 and 2022, Latin America and the Caribbean (LAC) now face a less promising growth outlook for 2024, with slowing employment growth and rising concerns over inflation. In this context, climate change is increasingly affecting labor markets. As global temperatures continue to rise due to human-induced greenhouse gas emissions, the negative effects on employment, labor conditions, and productivity pose significant threats to the region's workforce. However, amidst these challenges lies an opportunity for strategic intervention through effective labor market policies. By embracing adaptation and mitigation strategies, such policies can not only mitigate the adverse impacts of climate change on employment but also catalyze job creation, skills development, and economic resilience. Decarbonization policies, while potentially disrupting traditional employment sectors, present avenues for transitioning to a green economy with sustainable job opportunities. Central to this endeavor is ensuring a just transition that protects vulnerable populations and fosters social cohesion. This paper proposes an analytical framework to understand the mechanisms through which climate change affects labor markets and identifies policy options to address these challenges. By integrating environmental goals into labor market policies, countries in the Latin America and the Caribbean region can simultaneously pursue adaptation, mitigation, and socioeconomic development agendas contributing to a more sustainable and equitable future.