🔋Dirty Jobs
The energy transition may not be dependent on science and technology, but the skilled labor required to make it happen.
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There are many hot topics as it relates to challenges that the energy transition will face as it becomes more widely adopted across the globe. From intermittency and grid support to critical materials challenges in rare earths and battery metals, there is seemingly no shortage in topics that captivate the public attention. One slightly under the radar challenge is not the source of the materials themselves, but of the labor that will make it all happen.
While you can hear almost any business these days stressing over finding workers, I dare to say no one has felt this as much as skilled workers, also known as trade or vocational careers. This is a wide ranging array of careers which includes drivers, heavy machinery operators, electricians, mechanics, wind/solar technicians, oil and gas workers, plumbers, welders, and many others. One large concern is whether the scarcity of these workers will be a bottleneck for the energy transition and the growth in some of these industries that will be needed to reach the goals set out by governments around the world.
Electricians are one key wrench in the climate agenda, as they are needed for everything from charging stations, solar panels, wind turbines, energy storage, heat pumps, grid connections, as well as ongoing maintenance and upgrading current systems. It is estimated by once source that as many as 1 million new electricians will be needed for the energy transition goals to be met, made worse by a staggering 25% of current electricians being over the age of 55. Why aren’t people becoming electricians like they were in the past?
Mining is another one of those areas that has been feeling the squeeze to find employees. The sector has seen a 39% decrease in mining engineering graduates along with the majority of young people unattracted to not only mining but, oil and gas, construction, and manufacturing. The chart below clearly shows the trends in employment preference.
My personal view is many things can be related back to easy money. Increasing levels of capital floating around financial institutions ready to lend to business and then with businesses being propped up through low interest rates and bailouts over the years have led to many companies around today that otherwise may not have been. In the same time, relatively meager energy prices and mostly high levels of growth throughout the economy have led to a situation of prosperity. This is a large factor in the broad commodity complex being neglected which I have spoke about. In addition to the commodities are the related jobs and even other trade jobs being neglected, all while financial and tech jobs take most of the attention.
This has been a trend I have experienced going through school where trades were more or less looked down upon by many and widely unpopular in terms of career prospects. Admittingly many of them are dirty, hard, and aren’t today’s pedestal of 100k+/yr work from home jobs. This in the grand scheme is of course a narrowminded view as many skilled professions make great money and are satisfying, but this view has captivated the majority who think college is better prospect financially and status wise. One expert on these labor market shifts is Dirty Jobs host Mike Rowe. He has been on a campaign to increase awareness of these trends and to help people get into these professions. He has seen this cultural shift and has said,
There is a culture belief that is making recruiting for skilled labor harder than it needs to be. Those beliefs need to be challenged on the job, in households, in schools.
While there seems to be a labor shortage everywhere, he talks about how he has seen this shortage in skilled labor through every type of economic environment we have been in since pre and post 2008 financial crisis, even when you would expect shortages to subside. The same cannot be said for other more cyclical types of employment.
Though brief dips in 2018 and 2020, the stock market has been a good proxy for financial conditions. Overall demand has been super high and the economy booming since 2008. However, recession in the US looms based on a variety of leading indicators regardless what the mainstream media narratives are. Federal Reserve chair Jerome Powell has even discussed pain being a necessary step in their plans to reign inflation and get the economy back on track. I wrote about this in Year Of Pain last December for more context. My point is that without the pandemic excuse to cancel the recession with excessive stimulus packages, demand in the economy will have to slow. The natural consequence of this is layoffs, fewer jobs, and less employee leverage. People will be forced to find jobs that make money in what’s available, and if those tech/financial companies are not hiring, this could stimulate a shift back towards these neglected professions.
If we look at the unemployment rate (UR - teal) vs labor participation rate (LPR - blue) we can dissect multiple important trends. The blue LPR tracks demographics most of all. The 60s to 90s were known as the “golden era” where the baby boomer generation was in peak working age and women entered the workforce in significant proportion. You will notice that since 2000 that trend has reversed quite significantly. The teal UR on the other hand is more cyclical tracker of the business cycle where each major recession marks a noticeable increase in the unemployment rate. While it is a flawed metric in some aspects by looking at quantity of jobs instead of quality and having multiple arbitrary adjustments for example, it gives a broad look at the employment history quite well. In real time we see payroll taxes going down, layoffs across the news, people taking multiple jobs, job hours declining, and jobless claims beginning to rise leading me to believe that it will soon begin to go higher.
Many people were able to work “easy” jobs at companies with exaggerated future outlooks while many others retired early due to the boost in their stock and real estate portfolio which are at historic overvaluations currently. These factors along with cultural shifts have made skilled labor unpopular and soon to be a hot commodity. Electricians, mining equipment operators, and solar/wind technicians are among the professions that will be critical for the energy transition and are mostly neglected and undesirable. While a broad scale labor shortage may be due to economic factors, shortages will continue effect the energy industry due to more structural/cultural factors I have mentioned. Someone has to do the “dirty work” it takes to bring these climate goals to fruition. Until next week,
-Grayson
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