Job Creation and Local Economic Development 2020

The share of jobs in sectors most at risk from containment measures varies from less than 15% to more than 35% across regions. Large cities and tourist destinations typically have the highest share of jobs at risk. However, cities also have a higher share of jobs compatible with teleworking, which varies on average 15 percentage points across regions within countries. As the spread of the virus evolves, both precautionary measures taken by individuals and geographically targeted containment measures in “hot spots” will have differing impacts within countries.

While the OECD unemployment rate was at a 40-year low prior to COVID-19, this masked other issues such as stagnant wage growth and a shrinking middle class. National averages also hid that some places continued to struggle with the legacies of the last crisis: nearly half of regions had not recovered to 2008 unemployment rates by 2018, and an even higher share of regions – two-thirds – had higher long-term unemployment rates in 2018 than 2008.

Technological change, globalisation, the green transition, and demographic change were already reshaping the geography of jobs and labour forces prior to COVID-19. These transitions will both create and destroy jobs, but not necessarily in the same places or requiring the same skills. With COVID-19, many of these transitions could gather momentum and become abrupt changes.

In particular, digitalisation and automation could rapidly accelerate. The share of jobs at risk from automation ranges from around 4% to almost 40% across regions. While places facing higher risks tend to have a lower-educated workforce and are less urbanised, the rapid uptake of teleworking could expand job creation outside of traditional high-growth centres. The green transition could also receive new momentum as part of stimulus packages.

For some local labour markets, demographic changes could be as, if not more, disruptive than technological change. The labour force has already shrunk in almost 30% of OECD regions over the past decade, notably in many rural areas. As skilled workers have become more geographically concentrated, the most educated regions within countries had almost twice as many tertiary-educated adults as the least educated region on average. COVID-19 is unlikely to radically disrupt these trends, but could lead to more dynamism in places struggling with outflows of younger workers.

The challenges and opportunities facing local economies are becoming more differentiated. Large cities host both substantial shares of high-skilled workers with relatively secure jobs and teleworking options, but also have many low-skilled workers in face-to-face service positions that remain at risk. Tourism-intensive communities are facing unprecedented drops in visitors. Many manufacturing regions continue to struggle with drops in global trade, disruptions to supply chains, and accelerated automation. The good news is that COVID-19 has opened a window to reorient all types of local economies towards more sustainable, inclusive, and resilient futures. However, in places hardest hit, the imperative to create jobs in the short term could overshadow these longer-term concerns.

Local actors are often responsible for the types of policies that can help firms and workers make these transitions. In nearly half of OECD countries, local and regional governments have important responsibilities for active labour market policies. However, they will also be facing significant budgetary pressures. In almost half of OECD countries, 50% or more of subnational public budgets rely on more cyclical revenue sources, such as taxes and fees.

Strengthen local employment and training systems to manage the additional pressures

• Upgrade frontline public employment service capacities and virtual services, to help places hardest hit in the short term manage an influx of clients and support economic transitions in places facing longer-term challenges

• Target active labour market policies to both individual and community characteristics, and ensure accountability mechanisms consider local conditions

• Adapt local training provision in light of increased demands, system constraints, and local needs

Prevent entrenched disadvantage for young people, the low-skilled, and women

• Expand outreach to hard-to-reach populations, including through partnerships with local community organisations

• Intervene early to prevent longer-term labour market disengagement

• Address other barriers to employment (e.g. childcare, mental health challenges) through local coordination of wrap around services

Work with sectors facing prolonged drops in demand, and address the negative spillovers for local economies more generally

• Consider complementary measures for the hardest hit places as national schemes are rolled back

• Support firms in implementing social distancing, including through adaptations to the built environment

• Fill gaps for local sectors and populations not well-covered by national schemes

Seize the window of opportunity to rethink local development approaches

• Bring diverse stakeholders together to develop a shared vision for the future

• Use new sources of local employment and economic development data to set visions and make course corrections

• Recognise and develop the role of the social economy, and expand social innovation, to address local needs

• Re-evaluate local strengths and weaknesses in light of changing residential and consumer preferences

Look beyond short-term returns in terms of job creation

• Evaluate local job creation measures against economic, social and environmental criteria

• Support local firms in upgrading job quality and productivity, particularly SMEs

Support firms, people and places through an accelerated digital transition

• Identify and build skills that can help local economies continue to transition to the future of work

• Integrate the use of teleworking by firms into local development strategies

• Upgrade digital infrastructure, particularly in rural areas