The impact of circularity and circular strategies on firm employment.

In the past, research on a circular economy often focused on economic and ecological sustainability, while research on the social side of circularity has stepped up recently. The circular economy is often framed as a way to not only foster competitiveness and resource security, but also create opportunities to boost employment and provide high-quality, local jobs. This study aims to be the first to empirically interrogate this labor-enhancing assumption by using advanced Natural Language Processing in a unique combination with cross-sectional regression analysis for all private companies in Belgium in 2021. We show that companies applying circular strategies are more labor intensive than companies applying less circular strategies. However, we do find that the results differ between the type of circular strategy that is implemented: while companies involved in recycling strategies are more labor intensive than average, higher-ranking circular strategies seem to be less labor intensive. Furthermore, firms applying more circular strategies are employing a smaller share of low-skilled employees. These findings imply that the transition to a circular economy does not automatically entail social sustainability, but that what type of circularity is encouraged matters. It also calls attention to flanking policies that are needed to ensure that the potential benefits of the circular economy are not disadvantaging workers, particularly low-skilled and vulnerable groups. This research is therefore of importance for policy makers, educational institutions, and companies in Belgium, and is applicable to other small, open economies with a highly regulated labor market.