The report Job Creation and Local Economic Development 2024: The Geography of Generative AI examines the health of regional labour markets and provides new estimates on regional labour shortages. In addition, it provides new findings on the impact of Generative AI on different regions and workers. It examines how AI technologies can be leveraged to address critical labour market challenges and boost productivity growth.
Job Creation and Local Economic Development 2024 - Country Notes: Iceland
(a) Employment rate for the working age population (15-64 year-olds), 2023
Note: The figure shows the regional values and the national and OECD regional average in the working-age employment rate in 2023. The employment rate is defined as the number of working-age employed persons out of the working-age population, where the working-age is defined as 15-64 year-olds.
Source: OECD calculations based on the OECD Regional databases.
In Iceland the employment rate in 2023 varies across regions, ranging from a low of 83.4% in Capital Region to 84.2% in Other Regions. This represents a difference of 0.8 percentage points, below the average OECD regional dispersion of 10 percentage points. The national employment rate in Iceland stands at 83.8%, above the OECD benchmark of 69.4%.
(a) Change in the employment rate, 2019 to 2023
Note: The figure shows the difference between 2019 and 2023 for the employment rate for regions in Iceland, as well as the national and OECD regional average. The employment rate is defined as the number of working-age employed persons out of the working-age population, where the working-age is defined as 15-64 year-olds.
Source: OECD calculations based on the OECD Regional databases.
By 2023, all of (2 out of 2) of Islandic regions saw their employment recover to at least pre-pandemic levels. Other Regions experienced the greatest recovery for employment rates, surpassing the pre-pandemic level by 2.4 percentage points. Overall, employment rates are 2.2 percentage points above pre-crisis levels, a stronger recovery than the regional OECD average of 1.5 percentage points.
(a) Change in the gap in the participation rate by age (between 25-64 year-olds and 15-24 year-olds) and gender (between men and women), 2013 to 2023
Note: The figure shows regional values and the national and OECD regional average in the change in the age gap (difference between the prime-age working population (25-64 year-olds) and youth (15-24 year-olds) and the gender gap (difference between men and women) in the participation rate in 2013 and that in 2023. A negative value implies that disparities decreased. The participation rate is defined as the number of employed persons and those looking for work as a share of the population in that subgroup. For gender disparities, it is defined using the working age population of 15-64 year-olds.
Source: OECD calculations based on the OECD Regional databases.
Over the past ten years, the gap in participation rates between prime-age and younger workers (age inclusion gap) fell in 1 out of 2 regions in Iceland, on average by 0.3 percentage points. The age inclusion gap grew by 1.3 percentage points across OECD regions. The biggest decrease in age disparities occurred in Other Regions at -3 percentage points, while the biggest increase was in Capital Region by 2.5 percentage points. Over the same period, the gap in participation rates between male and female workers (gender inclusion gap) fell in 1 out of 2 regions. The gender inclusion gap increased by, on average, 0.4 percentage points. The biggest increase in gender disparities was in Capital Region by 1.9 percentage points, while the biggest decrease was in Other Regions at -1.2 percentage points.
(a) Share of self-employed among all employed persons in the working-age population, 2022
Note: The figure shows the regional values and the national and OECD regional average in the share of self-employed among all working-age employed persons in 2022. The working-age population is defined as 15-64 year-olds.
Source: OECD calculations based on national labour force survey. For countries in the European Union, the survey is the EU-LFS.
In Iceland self-employment levels stand at 12.5%, below the OECD benchmark of 15.5%.
(a) Share of workers in low-, middle-, and high-skilled jobs, 2022
Note: The figure shows the share of workers in low-, middle- and high-skilled jobs for regions in Iceland as well as the national and OECD regional average in 2022. Job skill is defined using ISCO occupational categories. Low skill corresponds to jobs in sales and services and un-skilled occupations (ISCO 5 and 9), medium-skilled workers hold jobs as clerks, craft workers, plant and machine operators and assemblers (ISCO 4, 7 and 8), and high-skilled workers are those who have jobs in managerial, professional, technical and associated professional occupations (ISCO 1, 2 and 3). The definition of skill is based on the educational level thought to be required of an occupation and does not consider skills not related to educational level.
Source: OECD calculations based on national labour force survey. For countries in the European Union, the survey is the EU-LFS.
In Iceland, jobs requiring high skill levels dominate as most jobs require this skill level.
(a) Share of workers in mismatched jobs by over- and under-skilled, 2022
Note: The figure shows the regional values and the national and OECD regional average in the share of workers in mismatched jobs in 2022. Skill mismatch is calculated following the methodology of the Skills for Jobs Indicators of the OECD’s Directorate for Employment, Labour and Social Affairs, whereby a worker is in a mismatched job when their educational skill level does not match the most common skill level of workers in that occupational group in that country. ‘Over-skilled’ means that the worker has an educational skill level above the most common educational skill level of their occupation. `Under-skilled’ means that the worker has an educational skill level below the most common educational skill level of their occupation.
Source: OECD calculations based on national labour force survey. For countries in the European Union, the survey is the EU-LFS.
Skill mismatches are less prevalent in Iceland than in the OECD overall: 40% of workers are in jobs that do not match their educational skill level, compared to 35% across OECD regions. This ranges from 40% mismatched workers in Iceland to 34% in OECD.
AI has the potential to transform local labour markets by boosting productivity, creating or destroying jobs, and changing the very nature of some jobs, including job quality. While the full extent of its impact is still uncertain, the effects on jobs or skills will likely be context- and place specific. This report explores both the observed and anticipated impacts of technologies, both AI and non-AI, as they mature and achieve widespread adoption.
Narrow-purposed technologies in local labour markets
Even before the emergence of Generative AI, the impact of automation technologies differed across local labour markets. This measure of risk of automation serves as a useful metric to examine the effects of narrow-purposed technologies, these are, technologies (digital or not) that are intended to help with or take over one or a few specific tasks. The metrics presented below explore the share of jobs at risk of automation given available technologies at the end of 2021.
In Iceland , on average around 4% of workers are considered at high risk of automation, meaning over 25% of its skills and abilities are highly automatable. This is 8 percentage points less than the OECD average of 12%.
(a) Share of employment at high risk of automation in OECD regions (2022)
Note: This figure shows the share of employment at high risk of automation in each region. Risk of automation is defined at the occupation level, where an occupation is considered exposed at high risk of automation if at least 25% of its skills and abilities are automatable. Averages represent the weighted regional average.
Source: OECD calculations based on Lassébie and Quintini, 2022[34], labour force survey and employment by occupation tables.
Regional employment exposed to Generative AI
(a) Share of employment exposed to Generative AI in TL-2 regions, 2022
Note: This figure shows the share of employment exposed to Generative AI in each region. Exposure is defined at the occupation level, where an occupation is considered exposed to Generative AI if at least 20% of its tasks can be done twice as fast with the help of Generative AI. OECD and country averages represent the weighted regional average.
Source: OECD calculations based on Eloundou et al., 2023[49], labour force survey and employment by occupation tables.
In Iceland, on average around 23.4% of workers are exposed to Generative AI, meaning 20% (or more) of their job tasks could be done in half the time with the help of Generative AI. This is -2.6 percentage points less than the OECD average of 26%.
The concentration of industries within or outside cities drives disparities in Generative AI exposure between urban and non-urban labour markets. Certain industries, such as financial services or technology development, often concentrate around metropolitan areas while non-metropolitan or rural areas tend to rely on industries with a different production structure, such as agriculture or manufacturing. Similarly, workers are also spatially concentrated with highly skilled workers often being more present in clusters in or around a few metropolitan areas.
(a) Share of employment exposed to Generative AI by area type in Iceland (2022)
Note: This figure shows the share of employment exposed to Generative AI in different types of areas. Exposure is defined at the occupation level, where an occupation is considered exposed to Generative AI if at least 20% of its tasks can be done twice as fast with the help of Generative AI.
Source: OECD calculations based on Eloundou et al., 2023[49], labour force survey and employment by occupation tables.
The share of workers exposed to Generative AI is larger in cities compared to rural areas by 15.4 percentage points, which makes cities 2.2 times more exposed than non-urban areas. This gap is larger than average as across OECD countries urban areas are 1.8 times more exposed than non-urban areas.
References
OECD (2024), Job Creation and Local Economic Development 2024: The Geography of Generative AI https://doi.org/10.1787/83325127-en
Source of administrative boundaries: © OECD, © EuroGeographics, National Statistical Offices, © UN-FAO Global Administrative Unit Layers (GAUL)
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Note by the Republic of Türkiye
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.
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