Understanding the future labour market: a microsimulation and distributive analysis

Abstract

This report examines how South Africa’s energy transition toward a low-carbon economy could reshape the labour market and inequality dynamics. Using an integrated macro–micro simulation approach, it links employment projections from the SATIM computable general equilibrium (CGE) model to household-level data through a microsimulation model. This allows the analysis to move beyond aggregate employment trends to explore who gains and who loses from the transition — by skill, gender, race, and sector. The SATIMGE model simulates multiple emissions pathways (8, 9, and 10 gigatonnes (GT) CO₂ by 2050) under medium (1.5%) and high (3%) GDP growth assumptions. Across all scenarios, employment is projected to grow steadily from roughly 17 million in 2025 to between 24 and 36 million by 2050, with no evidence of net job losses. The results show that decarbonisation and net-zero pathways can coincide with positive labour market outcomes, although the magnitude of employment growth depends strongly on the assumed rate of economic growth. Microsimulation results suggest that inequality, measured by the Gini coefficient and 90/10 earnings ratios, declines across all scenarios. These reductions are driven primarily by employment expansion among unskilled workers and by improved labour absorption at the lower end of the earnings distribution. Employment growth is especially strong in the services sector, which accounts for most new jobs and is likely to benefit women disproportionately —suggesting that the transition could be gender-equalising. However, a significant skills bottleneck emerges: by 2041, the model “runs out” of skilled unemployed workers to meet projected demand, highlighting the need for targeted skills development policies. Transitions into unemployment are relatively small and concentrated in the first decade (2025–2035), particularly among African, female, youth, and agricultural workers — groups already vulnerable in the South African labour market. By contrast, transitions into employment outpace these losses throughout the period, with most new entrants coming from previously unemployed or economically inactive populations. Overall, the findings indicate that South Africa’s energy transition could be both employmentpositive and inequality-reducing if accompanied by strong economic growth, proactive skills investment and social protection measures. The report concludes that achieving a just transition requires not only green growth but also attention to who participates in, and benefits from, the emerging green economy.