Will the circular economy create or destroy jobs?

The transition towards a circular economy has been set in motion. National policy frameworks are being developed and the European Commission adopted the Circular Economy Package in December 2015. By 2018, several actions mentioned in this package have been adopted or initiated. Policymakers, industry and – increasingly – citizens understand the potential that the circular economy could bring to Europe. The circular economy is a comprehensive proposition, of which mainly the economic and environmental benefits have been highlighted. However, what implications does the circular economy have on the labour market? To what extent and what type of jobs will be created and lost? What is the net effect on the total number and type of jobs? And what does that mean for all of us in terms of job reallocation or changes in skill requirements? Despite some anecdotal evidence at macroeconomic level, there is relatively little known about the implications of the circular economy on the labour market in the EU. In this project, Trinomics together with Cambridge Econometrics (lead) and ICF, performed a comprehensive analysis of the impacts of a transition towards a more circular and resource-efficient economy on the EU labour market.

The study used a bottom-up approach, translating concrete circular economy actions in five sectors into scenarios that were used for macro-economic modelling. The macro-economic modelling shed light on the quantitative changes in the amount of employment across all sectors in the EU economy. The modelling was complemented by a qualitative analysis on the implications of the transition to a circular economy on the skill requirements for the European workforce.

Our study concludes that the shift to a circular economy can have a positive impact on employment in the EU, but it will not act as a major source of job creation. Furthermore, the changes in skill requirements brought about by the circular economy transition are in line with other trends, pushing for more medium and higher-skilled workers, transferable skills and digital skills.

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The key messages from our study are:

  • The overall net impact on EU employment (# of jobs) across all sectors is positive (+0.3%) and driven by increased employment in the waste sector,
  • The positive effect on overall employment will only occur if increased disassembly of products into components and increased recycling are stimulated and realised without far-reaching automation,
  • In many sectors, the circular economy actions per se lead to net decreases in employment, but these are to a large extent compensated by increased consumption in other sectors (‘the rebound effect’),
  • Generally, net employment impacts are very small compared to other ongoing trends in the labour market (automation, virtualisation, shift from production to services, etc.),
  • Skill requirements are mostly in line with broader trends in skill requirements, e.g. digital skills, transferable skills etc.,
  • The implementation of the circular economy agenda has as small positive impact on the EU GDP.