Job Creation and Local Economic Development 2020

While the economic impact of the COVID-19 shock has hit regions and cities differently, most of the large-scale emergency measures to date have been uniform and national in scope. In this initial phase, the focus was on securing lives and livelihoods, with policies that could be rolled out as quickly and broadly as possible. Accordingly, nationwide, uniform policies to support workers and firms made sense – they ensured equity across places so were easier to build a political case for, were more straightforward to implement, and aligned with nationwide containment measures that froze economic activity across territories. Even at this stage, however, local and regional actors played an important role in the policy response. They often implemented these policies on behalf of national governments, complemented them with local actions to fill gaps for specific sectors or populations, and helped local workers and firms navigate the often complex patchwork of schemes.

As emergency supports wind down and the recovery and rebuilding phase revs up, local actions will become increasingly important. As discussed in Chapter 1, the challenges facing local economies are becoming more differentiated, with the recovery likely to take hold more quickly in some places than others. New opportunities have also emerged for some places, as COVID-19 has opened a window to address unsustainable development models (e.g. a local overreliance on a single sector or large employer). As the policy response transitions from financial supports to helping workers and firms adapt to the new reality, the types of policies that subnational governments are often responsible for will become more important (e.g. active labour market, skills, and economic development policies). Likewise, local actors have an important role to play in shoring up safety nets as the risk of deprivation increases. Finally, past experience has shown that even as national economies turn around, some regions and cities could get stuck in a downward spiral, emphasising the importance of targeted local responses.

In the recovery and rebuilding phase, it will no longer be about just managing the impacts of largely frozen economies across territories. The challenges are more nuanced and differentiated. For example, large cities have many high-skilled workers whose jobs are relatively secure and can be done remotely, but also many low-skilled workers in face-to-face service jobs at risk. Tourism-dependent regions are grappling with visitor numbers that have slowed to a trickle and that are unlikely to rebound soon. Some second-tier cities are facing the closure of or layoffs at large local employers, and will have to manage the ripple effects that will have across the entire local economy. 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. As some places are moving towards the recovery phase, others may be moving back to resisting.

The opportunities will also differ, as COVID-19 has created a once in a generation opportunity to address risky local growth patterns. In “good” times, diversifying away from sectors such as large-scale tourism or carbon-intensive industries can be politically challenging, as they are important sources of local jobs and incomes. This crisis could create an opening to have these tough conversations, and take the steps needed to diversify local economies (see Box 3.1 for examples of places already rethinking their relationship with tourism). It has also sparked a new understanding of the interconnections between economic development and public health, potentially opening the door to more holistic approaches local development.

In general, subnational governments have taken on increasing responsibilities in OECD countries over the past several decades. In two-thirds of OECD countries, the share of public spending undertaken by subnational governments (measured both in terms of share of GDP and share of total public spending) grew between 1995 and 2016 (OECD, 2019[4]). Likewise, regional authority (as measured by the Regional Authority Index) increased in 52 out of 81 countries between 1950 and 2010, and only decreased in 9 (Hooghe et al., 2016[5]). In a number of countries, labour market and skills policies specifically have undergone important governance and decentralisation reforms (see Box 3.2). There has also been a general trend of decentralisation in education policies, with local authorities, school boards and schools having increasing independence (Burns and Köster, 2016[6]).

As a result, many local and regional governments are responsible for the types of policies that will be important for “rebuilding better”. In addition to general competences for local development, local or regional governments are fully or partially responsible for the management of active labour market policies (ALMP) in almost half of OECD countries (see Box 3.3). They also have an important role to play in adult skills policies in many countries (see Box 3.4).

Local actors are also best positioned to coordinate across related policies. For example, based on their understanding of local labour market dynamics, they can help identify and deliver the types of “top up” trainings needed to help displaced workers transition quickly from growing to shrinking local sectors. Partnerships between local economic development agencies and training institutions can help local SMEs to secure financial resources and expertise to integrate new technologies into production processes, and upgrade the complementary skills of their workforces.

Regardless of what level of government is responsible, being able to adapt policies and programmes to local conditions can help create the enabling conditions for local job creation (Froy and Giguère, 2010[14]). Some decentralised systems actually offer limited strategic flexibility to subnational governments, leaving little room for local decisions in designing policies and programmes, managing budgets, setting performance targets, deciding on eligibility, and outsourcing services in response to local conditions. On the other hand, local offices of national ministries or agencies can actually have considerable leeway to tailor programmes and target groups at the local level (Giguère and Froy, 2009[15]).3

Even policies that are nationally uniform in design can have different impacts across places. For example, standard national income support schemes will have differential impacts across places depending on local cost of living, while research suggests that rigid employment regulations have larger detrimental effects in lagging regions (D’Costa, Garcilazo and Oliveira Martins, 2019[16]). Other evidence suggests that national spending has a different “bang for buck” across places, and that national resources can more effectively reduce the share of adults not working in places with higher inactivity rates (Austin, Glaeser and Summers, 2018[17]). Over the medium and long term, fiscal strain will require even more strategic approaches to tailoring national investments to complement local approaches and promote recovery in all places.

Pressure on social safety nets will likely increase, as COVID-19, the general downturn, and an accelerated digital transition could further entrench disadvantage. In addition to the 12% of people in the OECD on average already living in relative income poverty (OECD, 2020[21]), more than one in three people do not have enough financial assets to keep their family above the poverty line for more than three months, should their income suddenly stop (Balestra and Tonkin, 2018[22]). Evidence also suggests that COVID-19 has exacerbated other social challenges, such as mental health problems and domestic violence, homelessness or other housing challenges could increase as temporary support measures are phased out.

Subnational governments, along with other local stakeholders such as social economy organisations, make up an important part of the social safety net. In a number of countries, local or regional authorities or institutions are fully or partially responsible for unemployment assistance or other social assistance benefits, such as benefits for the long-term unemployed or those who do not qualify for contributory schemes. This is the case, for example, in Belgium, Denmark, Germany, Hungary, Latvia, Sweden, and Switzerland4 for different types of benefits. On average across the OECD, subnational governments are responsible for 14% of spending on social protection, with considerable variation across countries (OECD, 2020[23]).

Even in countries where subnational governments are not responsible for large parts of social benefits directly, it often falls on the shoulders of local actors to support those in the most precarious situations via emergency housing, material assistance such as food banks, health and mental health support, etc. Subnational governments are responsible for 76% of public spending in housing and community affairs, and 25% of health spending on average across the OECD (OECD, 2020[23]). Accordingly, as the economic crisis persists, the demands – and budgetary pressures – on many subnational governments could grow.

Even when national economies start to bounce back, there is no guarantee that the recovery will reach all places. Research in the United States over the past five recessions suggests that employment and wages have stayed depressed for over a decade in the hardest hit places (Hershbein and Stuart, 2020[24]).

Budget challenges at the subnational level could contribute to these divergence. Indeed, a looming budget crisis is on the horizon for many subnational governments (OECD, 2020[23]). The situation could be especially problematic in countries where subnational governments are highly dependent on more cyclical revenue sources, such as taxes, user charges, fees and income from assets (see Figure 3.1). In almost half of OECD countries with available data, half of subnational revenues comes from these sources, and in three countries (United States, Switzerland and Iceland), more than three-quarters does. This could mirror the situation following the 2008 crisis, when the combination of higher expenditures and reduced revenues resulted in subnational government deficits in many countries. Eventually, even subnational governments reliant on transfers from central governments may see reductions, as public revenues shrink more generally. Additionally, shrinking subnational budgets could lead to reduced public sector employment, an important source of jobs for many local economies.

A vicious cycle could open up in the places where both revenues and spending are deeply impacted. Should subnational governments seek to balance budgets by cutting spending in other areas – such as infrastructure and public services – the degradation in the local quality of life could make it hard to attract new residents and businesses in the short term. Over the longer-term, it could also affect intergenerational education and labour market outcomes.

All levels of government, as well as the social economy and private sector, mobilised to protect lives and livelihoods during the initial outbreak of COVID-19. The first order priority was containing the spread of the virus, which required essentially freezing large parts of the economy. Accordingly, the focus of most economic and labour market policies was avoiding potentially devastating financial consequences for firms, including SMEs, and workers (see Box 3.5 for an overview of the types of national emergency policy responses that countries put in place).

Most of the large-scale economic and labour market policy responses were national, but local and regional actors also played an important role (OECD, 2020[23]). Notably, where they had relevant competences, they

• Implemented schemes to support workers and firms on behalf of national governments;

• Complemented these schemes with specific supports for locally important sectors or for firms and workers not well covered by other schemes;

• Helped workers and firms navigate the often complex patchwork of supports available via online and telephone support;

• Connected people with jobs and training opportunities that were available (even if limited); and

• Helped ensure the continuity of essential services and supports for the most vulnerable, often in cooperation with the social economy.5

At the time of this publication, we are still learning about what local and national actions were most effective in both the public health and economic response during this initial stage. As a number of countries, particularly in Europe, are re-introducing strict nationwide containment measures in the face of a second wave of the virus, integrating learnings from this first wave of the policy response will be important. There is an opportunity to exploit the variations in containment measures across cities, regions and communities at different stages of fighting the virus to learn about what types of policies were most effective.

Once the largest outbreaks are under control, governments will need to remain vigilant in slowing the spread of the virus while mitigating the impacts on jobs, workers and firms. Public budgets cannot absorb the widespread generalised support schemes that were necessary during the resistance phase over the long term. While such schemes were important to preserve jobs and businesses that are viable beyond the pandemic, they will need to be gradually phased out and complemented by supports to help other firms and workers adapt to the “new normal”.

Local employment and skills systems will face considerable stresses, particularly in the places hardest hit. Unemployment already skyrocketed in the spring of 2020 in a number of countries, particularly those without extensive job retention schemes. Even those countries that have managed to stave off these peaks in the short term may see increases in unemployment during the recovery phase, as more businesses close or lay off workers as a result of more prolonged drops in demand and as emergency support measures are phased out. Upgrading public employment service (PES) and training capacities will be critical to meeting these growing demands, but there are constraints. For example, training institutions and employers may be able to take on fewer trainees in light of social distancing requirements.

Disadvantage could also become more entrenched for young people, the low-skilled, and women, as they are more likely to face job losses as a result of COVID-19. Depending on national contexts, other populations may also face considerable challenges, including immigrants, ethnic minorities, and people with disabilities. Beyond providing immediate financial assistance to help bridge employment gaps, targeted actions will be needed to prevent people from dropping out of the labour force entirely and minimise the longer-term scarring effects. Local and regional actors have an important role to play in supporting these populations. They are often better positioned to identify people disconnected from mainstream service providers, and coordinate the wraparound services needed to help them successfully re-enter the workforce. Many of the lessons from the local implementation of youth guarantees in Europe during the last crisis will be relevant, particularly as policy efforts to support youth ramp up (see Box 3.6).

Finally, some sectors and firms will face ongoing challenges at this phase, including prolonged drop in demand and the need to adapt to ongoing social distancing requirements. For sectors that are highly regionally concentrated, such as tourism, there could be significant negative spillovers for local economies more generally. This implies a need for a combination of sector-specific and place-based actions. Other sectors and firms may need additional support in adapting to longer-term social distancing requirements, including actions beyond what any single firm can take, such as adapting the built environment. As described further below, local and regional actors can take important actions to help overcome these challenges.

Public employment services in many countries have already increased and/or re-allocated staff to manage the influx of claims and clients. In countries where large regional differences in the number of unemployed are expected, or where public employment services are managed by regional or local governments, there could be differences in the capacity to meet these needs across places. Both human and IT capacities will need to be reinforced, particularly in places facing the largest job losses.

Local job centres and employment services have already upgraded and pivoted to online, phone-based, and virtual services in many places. This enables them to help workers and firms navigate national and local programmes, such as unemployment benefits, wage subsidy schemes, as well as emergency income support measures, while still protecting staff and clients (OECD, 2020[29]). For many, this represents a whole new way of working and interacting with clients. Going forward, finding the right balance of virtual and face-to-face services will be important to manage high caseloads while still providing more intensive, face-to-face support to those who need it.

The places facing the greatest pressures may shift over the course of the pandemic and recovery, and PES will need to adjust accordingly. Emerging evidence suggests that cities have taken the hardest hits in the short term, but patterns from previous recessions suggest they may also bounce back more quickly. Other places may have taken smaller initial hits, but may face more prolonged employment challenges, including the need to support local workers and firms through broader, local economic transitions.

Given an anticipated increase in caseloads, public employment services will need to strategically target services, triaging the types and levels of support different clients receive. Client profiling as well as the use of evaluation evidence on the effectiveness of different types of ALMPs in different economic and geographic contexts can both inform this targeting. A strong grasp of local labour market conditions is particularly important: which local jobs are under stress in the short term but are likely to recover, where longer-term job losses are expected, and where there may be immediate hiring needs that align with client experience.

Accordingly, it is critical for local PES centres to have access to real-time, local demographic, industry, and occupational data. This can help them better understand how local labour markets have been hit by COVID-19, the impacts on the wider economy, as well as the composition of the unemployed themselves. Likewise, this type of data should be taken into account in designing performance management systems to ensure that accountability mechanisms are well-tailored to local conditions.

However, the degree to which local conditions are taken into account in targeting and evaluating ALMPs varies. For example, many countries use statistical profiling tools to target services to clients, but only some consider regional labour market opportunities as one of the inputs into their model (e.g. Austria, Ireland, Italy, Latvia, Sweden and the United States) (Desiere, Langenbucher and Struyven, 2019[30]). This suggests there is further room to take local economic conditions into account.

Local training systems will likely face considerable short-term stresses. There may be a spike in demand for training from unemployed workers or from young people struggling to find an initial foothold in the labour market. On the other hand, both classroom and work-based training will have to be adapted in light of social distancing, which may require decreases in enrolment numbers. Employers also tend to take on fewer trainees during downturns (Karmel and Oliver, 2011[31]), which could further decrease places available.

A number of strategies can help meet these demands. Skills profiling can help identify the types of short top-up trainings to help unemployed people rapidly transition into new jobs. Broader efforts could be taken to identity the types of transferrable skills workers from sectors heavily impacted by COVID-19 could use in other sectors, such as people from the tourism and hospitality sectors. Likewise, digital talent exchanges can help connect companies that are hiring and workers with relevant skills but who may need additional training to enter these jobs.

Many such efforts are already underway. For example, in Sweden, cabin staff from Scandinavian Airlines who were furloughed as a result of COVID-19 and who had already undergone medical training and were accustomed to dealing with high stress situations were offered a 3.5 day training to help them support nurses and doctors (Enders, Haggstrom and Lalive, 2020[32]). In Australia, the Government has announced an AUD 62.8 million Local Jobs Program to support Australia’s economic recovery from the COVID-19 pandemic. The Program will bring together expertise, resources and access to funding at the local level to focus on reskilling, upskilling and employment pathways for people across 25 regions throughout Australia.

Increasing online learning can also help education and training providers reach new economies of scale and expand the types of courses on offer, particularly in remote or rural areas. Education and training providers have already rapidly adapted in the face of COVID-19 – from moving to online and virtual trainings where possible to adjusting work-based learning and assessment regimes (OECD, 2020[33]). However, attention will still be needed to ensure that learners are steered towards courses and curriculum that are relevant to local demands, such as through career guidance or financial incentives to undertake training in locally in-demand fields. Some parts of the population, such as low-wage or older workers, may lack the digital skills to access these trainings, and may need more face-to-face support to successfully complete trainings (OECD, 2020[34]). New forms of learning, such as augmented or virtual reality, can also offer potential as a middle ground between virtual and face-to-face delivery. Ongoing professional development for teachers and trainers, as well as upgrades to IT systems, will also be needed to ensure that online learning offers the same quality of instruction as traditional settings.

One of the lessons from the global financial crisis was that apprenticeships are often effective in smoothing the transition to work. Those countries that maintained a lower youth unemployment rate in the years following the crisis were countries with a strong tradition of apprenticeship training, such as Austria, Germany, and Switzerland. However, COVID-19 restricts the ability of apprentices to be physically at work and complete the hands-on portion of their training. Furthermore, as job losses have mounted, many firms are cutting their apprentices numbers.

Finding alternatives for young people who would have traditionally pursued work-based learning or finding new ways to incentivise employers to take on trainees will be important. Many countries have already started adapting, including wage support to firms to retain apprentices, or adjusting programme curriculum to reflect on-going realities. For example, in the United Kingdom, employers are being offered GBP 2 000 for each new apprentice they hire aged under 25, and GBP 1 500 for each new apprentice aged 25 and over.6 This includes taking on an apprentice who has been made redundant. Employers who want to take advantage of the offer can apply through a digital apprenticeship service. In the state of Victoria, Australia, the government has recently established a register of retrenched apprentices and trainees and is actively working with affected apprentices and trainees to sign them up for training, as well as place them with appropriate employers.7

Proactive outreach, including partnering with other local organisations with well-established connections in such communities, will be needed to reach the most disconnected. While some members of these groups will already be on the radar of local employment service providers, more active outreach may be needed to reach other members of these groups. For example, young people that lost their jobs as a result of COVID-19 and who are registered as unemployed may be easier to reach, but young people who are not registered as unemployed, nor enrolled in education and training, may be less easily identifiable. Likewise, people in informal employment pre-COVID-19 may not be on the radar of any employment or social service provider. As discussed in Box 3.6, local partnerships with organisations that have access to such communities, including schools in the case of young people, has been important in the success of many youth guarantee programmes in Europe. For example, in Denmark, municipal Youth Guidance Centres (UUs) follow young people until they reach the age of 25 and schools must inform them about young people dropping out of schools. Social economy organisations can also play a role, as they are often well known and trusted organisations in disadvantaged communities.

Intervening early in an unemployment spell is crucial, as the longer someone is unemployed or out of the labour force, the harder it is to re-engage them. Employment services can work closely with local employers to be proactive in supporting jobseekers when business closures or large lay-offs are expected, an approach that practitioners have found particularly effective for supporting dislocated workers (OECD, 2018[35]). For young people, partnerships across local organisations can support a “pathways” approach, where young people are followed from education and training through finding a job, to sustaining employment. Particularly in communities experiencing significant job losses, finding means to keep the unemployed engaged when prospects for immediate re-employment are slim will be important, such as supported employment programmes or training.

These populations may face additional barriers that impede employment, requiring interventions outside of traditional employment and skills policies. For example, women are not only disproportionately represented in the sectors most impacted by COVID-19, but also bare more of the burden for balancing work and childcare (OECD, 2020[36]). Expanding the availability of safe and accessible childcare will be an important component of ensuring that COVID-19 does not deepen gender divides in employment. COVID-19 has also exacerbated mental health problems for many, which can affect employment prospects (United Nations, 2020[37]). Already, pre-COVID-19, people with mild-to-moderate mental illness were twice as likely to be unemployed, while people with severe disorders were, in many countries, four or five times as likely to be jobless (OECD, 2015[38]). Therefore, integrating mental health supports into re-employment supports may be important. Other social issues are also becoming more prevalent: evidence suggests that domestic violence has also increased as a result of COVID-19, while homelessness may also spike when eviction moratoriums are lifted.

Providing wrap around support can often best be done locally. Many of the supportive services needed to address these barriers are the responsibility of local governments, from housing to health to public safety. Additionally, the delivery and timing of these services will need to be coordinated, e.g. ensuring women have access to childcare during training hours, or providing substance abuse counselling before starting re-employment supports. Effective coordination is often dependant on local relationships between different local providers, including personal connections.

As national governments roll back broad emergency supports, such as universal short-time work schemes, more differentiated supports will be needed (see OECD (2020[41]) for further discussion of the transition from emergency to medium-term supports).8 While there has already been much discussion about how this roll back should be tailored to different sectors, less attention has been paid to how these roll backs could impact regions differently. Specific consideration is needed for how to support places that have particularly high concentrations of jobs and sectors that have been hard hit. For example, complementary measures may be needed for tourism destinations, in places where stricter social distancing or lock down measures are needed because of localised outbreaks, or places where the closure of a large employer could have important local spillovers. At the same time, attention will also be needed to ensure that these complementary measures are not designed in a way that props up jobs that are not viable over the long term, but rather act as short-term bridging measures that support the transition to growing occupations and sectors.

There is already some precedent for such actions, as some countries allow for regional tailoring of their general unemployment insurance or assistance. For example, in Canada, unemployment rates for each of the 62 economic regions determine the qualifications, rate and length of unemployment insurance benefits. In Australia, some income support recipients living in a remote area may be eligible for the Remote Area Allowance, a fortnightly supplementary amount paid on top of their income support payment. In Germany, the reimbursement ceiling for unemployment insurance and short-time work varies slightly between eastern and western Germany due to cost of living differences.

A number of countries also have specific labour market policies targeted towards places undergoing structural transitions. In the Netherlands, for example, following the decision to phase out gas production in northern Netherlands by 2022, special labour market programmes have been put in place to support workers through this transition. In other countries, targeted programmes are initiated upon notification of large layoffs or employer restructuring, such as Job Security Councils in Sweden or the Trade Adjustment Assistance (TAA) programme in the US. Unfortunately, rigorous evaluation evidence on the impacts of such programme is sparse (OECD, 2018[35]).

Local governments, chambers of commerce, and business development organisations, can support firms, particularly SMEs, in adapting business models, physical infrastructure, and work organisation to social distancing. This can include some combination of financial support (e.g. grants or loans), as well as technical support and advice (e.g. to digitalise services or commerce, implement teleworking, or adapt physical workplaces ). Some places have also developed new platforms to help small businesses upscale online commerce and deliveries. Such support is important both for adapting to current social distancing requirements, and in some cases, can help prepare firms for the broader digital transition.

In cases where firms cannot take unilateral actions to implement social distancing, local governments may need to adapt the built environment or planning codes to create more space for social distancing. Many cities have already done so by allowing restaurants and cafes to expand outdoor spaces on sidewalks and streets. Important efforts are also underway to expand bike paths and reconfigure public transportation to ensure that workers can commute safely (OECD, 2020[3]). In the short term, these adaptations have focused on repurposing existing infrastructure, i.e. turning parking spots into patios, closing streets to car traffic. As new investments in urban infrastructure are made, such adaptations may become more permanent design features.

Generalised support schemes were not always well adapted for some of the sectors and related supply chains particularly hard hit by COVID-19, such as culture and creative sectors. For example, many artists and artisans pair standard employment with part-time gigs and contracts, but many self-employment schemes do not cover self-employed income that comprises less than 50% of income. Lending institutions may also be more reluctant to lend to SMEs in this sector, as they struggle to value intangible assets such as specialised skills and expertise, or reputation in specific creative communities (OECD, 2020[42]). Going forward, further attention will be needed to understand how to better reach and adapt policies to these sectors. Box 3.7 looks more in-depth at culture and creative sectors as one such example. Some cities and regions are already taking action to close these gaps. For example, the city of Seoul has created three different Emergency Support for the Arts funds, targeting artists, arts companies, planners, art educators and freelancers.

Additionally, some entrepreneurs did not benefit to the same degree from generalised, emergency support measures, putting them on unequal footing. For example, relatively more women entrepreneurs may have fallen through the cracks with respect to eligibility and access to COVID-19 relief programmes. Emerging evidence suggests that women entrepreneurs have been less likely to use direct government grants and loan programmes and are also less likely to use bank loans, which can also reduce access to public support programmes since many measures rely on pre-existing relationships with commercial lenders for speed of delivery (Facebook, OECD and World Bank, 2020[43]). In addition, some entrepreneurs, including some women and new start-ups, are ineligible for emergency support measures due to revenue thresholds and requirements related to previous tax filings. The crisis has also reduced access to paid childcare, affecting many women entrepreneurs' time availability and business continuity (OECD, 2020[44]).

Even once the health emergency has been resolved, our economies will not return to the pre-COVID-19 status quo. While restoring jobs, income and demand will continue be a priority, local and regional actors will also need to be strategic in using COVID-19 stimulus and policy packages to ensure that their communities come out of the crisis more resilient, inclusive and sustainable than before.

COVID-19 has opened a window to rethink local development approaches. It has exposed underlying weaknesses of existing models, such as an overreliance on large-scale tourism, while creating new opportunities for cities and regions outside of high growth centres to attract new residents. Local actors can come together to learn from this experience, reflect on the strengths and weaknesses of different development models, and chart a new path for their community’s future. Innovations in how local employment and economic development data is collected and used can help set this broader vision, and serve as useful course corrections along the path to achieving it. The role of the social economy and social innovation during the emergency response has also shown that there is significant potential to better leverage these sectors for local growth and well-being more generally. Additionally, green stimulus packages and a push for more local production and consumption, as well as reduced commuting, could help further the green transition.

However, there is a risk that the imperative to create jobs in the short term could overshadow longer-term concerns around sustainability, inclusiveness, and resilience. To ensure that the large investments in job creation measures through stimulus packages contribute to both these goals, a broader range of economic, social and environmental criteria should be used to guide policy decisions. Targeted efforts will also be needed to upgrade the quality of existing jobs, particularly for essential workers.

Some of the biggest changes to jobs going forward will come as a result of accelerated automation and digitalisation. Past waves of technological change have contributed to a deepening geography of winners and losers, and there is a risk these divides could further deepen, as communities with a high share of jobs at risk struggle to adapt. As teleworking becomes a more permanent fixture of workplaces, local development strategies will also need to adapt in response. For example, in addition to providing incentives to attract firms, incentives to attract remote workers may become more common. Attention will also be needed for how to maintain the vibrancy of local main streets and business districts in light of increased teleworking and online commerce.

Local development or employment advisory boards are already commonplace in many countries. However, COVID-19 has made the work of such boards/councils more urgent, and made it even more important to include a range of stakeholders in such planning, from public sector representatives traditionally involved in such efforts (e.g. local authorities as well as economic development, education and training, and labour market professionals) to local employers, industry representatives, and unions, in addition to public health professionals. Such efforts are already underway in a number of places, but further research is needed to understand what makes efforts more or less effective.

COVID-19 has also emphasised the importance of strategic foresight and scenario planning in such efforts, as much remains uncertain about how the situation will evolve in the short and long term (e.g. when a vaccine will be available and widely disseminated, whether changes in consumer preferences and behaviours shift permanently – see OECD (2020[45]) for further discussion). Beyond this specific pandemic, COVID-19 highlighted the importance of planning for these types of large-scale events more generally as part of building local resilience. In other words, beyond planning for just the recovery and rebuilding from this shock, local economic strategies should better take into account new, other and perhaps different potential systemic shocks. Mapping out not just different scenarios, but also how these scenarios could impact different populations and businesses of different sizes and sectors will be important. Additionally, developing plans for local financial sustainability given likely subnational budget pressures will be essential.

Traditional sources of labour market information (e.g. labour force surveys, censuses) have been unable to capture the realities of the rapidly changing situation. And in many cases, social distancing measures made it difficult if not impossible to rely on traditional surveying tools, such as face-to-face data collection. Accordingly, there has been a flurry of activity to use new and innovative sources of employment and economic data to capture the evolving situation in real time, from analysis of web searches, online job postings, geographic mobility data captured on cell phones, to credit card spending data. Using such data effectively, however, will require upgrading local capacities to conduct and use this type of analysis.

Such data can be used over the longer-term to capture more accurate and real time snapshots of local economic health, as well as map potential development pathways. Of course, it will be important to reflect on privacy concerns as well as the reliability of such data compared to traditional data collection techniques. Integrating spatially-relevant evaluation into the policy cycle can also help to ensure policy responses take into account lessons from past crises, and that the impact of new policies can be assessed for different local conditions.

Traditionally, the purpose of the social economy has been seen to “repair” social problems (such as homelessness, labour market exclusion and other forms of social exclusion). However, the social economy can play a much larger role going forward, inspiring transformation to a more inclusive and sustainable economy and society. For example, the social economy has already proven to be a pioneer in identifying and implementing social innovations and alternative ways of organising economic activities that were later more broadly adopted, such as fair trade, organic food or ethical finance. Social economy organisations have also played a longstanding role in overall regional development in some places, for example the Mondragon Corporation, in the Basque Country of Spain or the role of electricity and telecommunications co-operatives in transforming rural economies in the United States in the 1930s.

Policymakers can ensure that social economy organisations have a clear role in plans to “build back better” and support social innovation through funds to support experimentation and innovation as is done for technological innovation. Efforts to diversify the financial resources available to social economy organisations – through updates to legal frameworks and public programmes – and develop tools to document social impact can also be valuable; see OECD (2020[46]) for further discussion.

A shift in residential preferences away from cities towards less dense communities over the long term could open up new opportunities for all types of places. Small and medium cities, as well as rural areas, may be able to seize these changing preferences to attract new residents. For example, Mazamet, a town of 10 000 people in France, launched a social media campaign in June 2020, titled "Déconfinez vous pour toujours... à Mazamet" (Deconfine forever, in Mazamet), and Savannah, Georgia in the United States launched a grant programme to attract remote tech workers in May 2020. For large, urban areas, this could help to alleviate housing affordability challenges, and offer new opportunities to attract young people and creative workers who had previously been off put by high housing costs.

Specific attention will also be needed to maintain the vibrancy of local main or high streets. In many communities, these were already facing challenges even prior to COVID-19, due to local population decline and the rise of online shopping and big box retailers. There is a risk that COVID-19 could further accelerate the decline of main streets, as commerce rapidly moved online and SMEs, restaurants and cafes, and local cultural institutions, all important components of vibrant main streets, were hit particularly hard by the crisis. Beyond local vibrancy and identity, this also has implications for the quantity and quality of local jobs (store clerks versus delivery drivers) and their location (main streets versus warehouses).

In addition, should businesses downsize office spaces as a result of increased telecommuting, repurposing office spaces and revitalising business districts will become increasingly important. One alternative is to convert them to housing or creative spaces as has be done with declining industrial districts in many places. For example, in the United Kingdom, community ownership models are being used to revitalise such districts, including Baltic Creative in Liverpool which has helped bring over 250 local, social and community businesses to the Baltic Triangle (Brett and Alakeson, 2019[47]).

The policy response to COVID-19 will likely make use of a variety of direct job creation instruments, which each have their own relative strengths and weaknesses (see Table 3.1). For example, self-employment supports may only be appropriate for a small number of unemployed people, but can be an effective instrument when well-targeted (see Box 3.8).

In response to the scale of the jobs crisis at hand, there may be pressure to create jobs “at any cost”. This may provide short-term returns in terms of employment but not actually contribute to longer-term gains or effectively reach the populations most impacted. Using a broader set of objectives – social and environmental in addition to economic – in selection processes and evaluations can help to avoid such situations. Traditional criteria include the effectiveness of generating new jobs, the relative cost, and the timeframe for the expected returns, while expanded criteria could include issues such as greening local infrastructure or creating new opportunities for populations particularly impacted by COVID-19-related job losses.

In particular, there is a risk that “standard” public investment strategies may miss the mark post-COVID-19. For example, one study of the gender dimension of public investment has found that traditional public investment strategies often focus on physical infrastructure, which tends to create more jobs in male-dominated fields. Investment in social infrastructure (e.g. caring industries), would lead not only to significantly more job creation, but more jobs for women given gender differences in construction versus care employment (UK Women's Budget Group, 2016[54]). Likewise, investing in physical infrastructure projects not be the most efficient means for improving local employment outcomes. For example, one study of the 2009 American Recovery and Reinvestment Act (ARRA) found that while spending on “shovel-ready” road-construction projects increased local construction payrolls and wages, there was little discernible impact on local employment overall (Garin, 2019[55]).

Innovative approaches to preserving and creating local jobs are already emerging in a number of places. For example, a number of cities and regions have created health service corps, training jobseekers for jobs to help fight COVID-19, such as contact tracing. One such programme is the Chicago Contact Tracing Corps, which provides USD 56 million to community-based organisations to hire 600 contact tracers, with priority given to people living in neighbourhoods with high levels of economic hardship.9 In Lille (France), the Fonds Rebond scheme provides funding for micro-enterprises, artisans and merchants, with the requirement that recipients make a commitment to supporting the green transition.10

In addition to efforts to create new jobs, local development actors can also support employers in improving the quality of existing jobs. The question of job quality for essential workers in particular has received considerable attention, as they provided vital services during confinement periods, often at increased risk to their personal health. A number of places instituted hazard pay and other types of bonuses for these workers. These short-term initiatives could be an important first step in broader efforts to improve job quality over the long term, and address disparities in the share of quality jobs across local labour markets. Researchers have also noted that COVID-19 has created a window for employers to reorganise operational models and invest in frontline workers to help improve both job quality and competitiveness (Ton, 2020[58]).

Local development actors can support these efforts in a number of ways, particularly for SMEs. Human resource consulting services or technical assistance to improve workplace organisation and skills can support firms in transitioning to high performance workplace practices. Manufacturing extension services or supporting knowledge exchange between firms through industry clusters that increase competiveness can also have knock-on effects for quality job creation (see OECD/ILO (2017[59]) for more information). Local actors can also support the development of cooperative platforms owned and managed by workers in health care, grocery, or retail. Such platforms can be built around the principles of inclusive governance, fair distribution of value, data ethics, production of commons, and cooperation between members in the spirit of the social and solidarity economy.

For local economies, accelerated automation and digitalisation presents a double-edged sword. In the short term, it has helped maintain economic inactivity under strict containment measures. Over the long term, it can help boost local productivity and competiveness and help some places manage a shrinking labour force. However, it can also result in significant job churn, and the new jobs created may not be in the same places where jobs are lost or require the same skillset. Accordingly, the challenge for local economic development actors is to both support the adoption of new technologies to promote the resilience and competitiveness of local industries and firms, while also supporting workers who may be displaced in the process.

In addition to steering new labour market entrants into growing occupations, many communities will also have to reskill and/or redeploy large parts of the existing workforce. Doing so in a way that contributes to longer-term local resiliency will require both investments in transversal skills relevant to a broad range of occupations and sectors, as well as specific skills that fill local demands. Close collaboration with employers in designing, steering and implementing these trainings can help to ensure their relevancy and effectiveness. At the level of local economies, identifying sectors with related skills and knowledge bases can help target the types of training, innovation, and business supports that can facilitate diversification into related activities.

Mapping the scale and scope of local jobs at risk, occupations projected to grow, skills linkages, and the types of training that can support these transitions can all help. This includes providing guidance and training for workers to transition between roles within firms as new technologies or processes are adopted; to supporting workers transitioning within similar roles across growing and shrinking sectors; and supporting workers transitioning between occupations that have a similar skills base (see Box 3.9 for one such example). For example, some research in Europe suggest that while demand for shop sales assistants is declining, with additional training, workers in these roles may be able to transition into growing occupations such as personal care assistants. Likewise, administrative assistants can transition into roles such as office managers, and eventually into positions in broader operations (Smit et al., 2020[60]). However, this same research found that there are more related skills between occupations that are both declining or both growing, highlighting some of the challenges of bringing this approach to scale.

Local SMEs may need particular support in adopting new technologies and diversifying activities. They tend to be less digitally fluent and make less use of new technologies on average. Manufacturing extension programmes and business advisory offer pathways for doing so.

While many efforts are already underway, continuing to support the uptake of teleworking and other digital tools will remain relevant for the foreseeable future. As teleworking becomes more commonplace, supportive policies may transition from short-term emergency responses, to part of a broader vision for local development. For example, local actors may make financial or technical assistance available over the longer term to help SMEs implement teleworking, move to cloud-based services, uptake other digital technologies, or improve cyber security.

Communities can also take advantage of increased teleworking to attract new types of local residents. This may entail reorienting relocation incentive packages to attract individuals, rather than firms. While already common in urban areas, small towns and rural areas may also invest in the creation of co-working spaces that can be attractive to teleworkers once social distancing requirements are relaxed (see Box 3.10).

Public investment or regulatory updates can help to ensure coverage of high-speed internet across geographies, including in rural areas that continue to struggle with digital connectivity. Public-private partnerships with specialised companies, such as satellite internet providers, can help reach residents of rural or suburban areas where cable or fibre internet connections are not available. Hybrid fixed-mobile technologies (FWA) are another option worth exploring, considering their higher performance: the goal in this case would be to bring 4G infrastructure (5G in the near future) to remote areas that private operators have few economic incentives to cover with full-fiber technologies (FTTH, “fiber-to-the-home”) OECD (forthcoming[65]).

Governments across the OECD have taken unprecedented measures to protect lives and livelihoods in the face of COVID-19, and the role of local actors will continue to grow going forward. While the bulk of the strictest national lockdown measures are hopefully behind us, we are just now starting on the path to recovery and rebuilding better. Local actors will play an increasingly large role moving forward, as the challenges across communities become more differentiated and the types of policies subnational government are often responsible for become a more central part of the policy response. Better tailoring national policies to local conditions, and ensuring that local actors have adequate capacities and flexibility, can help to ensure that no place gets left behind even as national economies turn around.

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