AI and automation are shifting skills and deepening regional labour shortages in certain sectors
Shifts in skill demands are changing labour markets in OECD regions. Although employment rates reached historically high levels during the post-COVID-19 recovery, skill shortages hinder economic and productivity growth. While higher-skilled workers increasingly feel the impact of technological change, lower-skilled occupations, with over one-quarter of essential skills replicable by technology, remain the most vulnerable to automation (Lassébie and Quintini, 2022). Changes following technological advancements will have uneven effects across regions, depending on each region’s industries and types of workers.
Automation risks – measured by how many skills in each occupation can be automated, considering recent developments in artificial intelligence (AI) and robotics – vary widely across regions within countries. In 2022, the gap between OECD regions facing the highest and lowest risks of automation within a country ranged from around 2 p.p. in Norway to 19 p.p. in Romania. With few exceptions, capital-city regions in OECD countries faced the lowest automation risk, with an average of 7% of employees at risk compared to 13% in other OECD regions (Figure 2.6).
Similarly, in European countries with available data, automation risk is lower for city workers than in towns, semi-dense and rural areas (Figure 2.7). On average, around 4% of city workers in Europe face high risk of automation, compared to 7.5% in towns and semi-dense areas and 9% in rural areas. The difference in automation risk between urban and rural areas is highest in Czechia, Hungary and the Slovak Republic, where the gap exceeds 10 p.p. and the smallest is in Luxembourg and the United Kingdom, where the gaps are less than 2 p.p. Most of these territorial differences are due to educational differences, as cities and capital-city regions have a lower share of lower-educated workers (i.e. without a university degree). However, these measures of the risks of automation do not take into account recent developments in generative artificial intelligence, such as Chat GPT, which are more likely to affect higher-educated workers living in cities (OECD, 2024).
Labour shortages in OECD regions have increased since the COVID-19 pandemic, especially in information and communication technology (ICT) and services. The ICT sector, driven by many factors including technological advancements (e.g. AI, cloud computing) and increased digitalisation across industries, tops the list of occupations suffering from the highest labour tightness, measured as vacancies per employed person, in one in four United States (US) regions and one in three European regions (Figure 2.8 and Figure 2.9). In European regions, after ICT, utilities – which include occupations at all educational levels – and financial activities rank as the sectors with the tightest labour market in 27% and 21% of regions respectively. After finance, in US regions, ICT and utilities are the sectors that face the tightest labour markets in 18% and 16% of regions respectively.
