Generative Artificial Intelligence (AI) : impact on regional local jobs markets ?

Generative Artificial Intelligence (AI) will impact regional local job markets differently across OECD countries, exacerbating existing urban-rural income and productivity gaps as well as the digital divides between regions, according to a new OECD report.

Job Creation and Local Economic Development 2024 finds that, following a decade of employment growth, over half of OECD regions had reached employment rates above 70% by 2023, with more women joining the workforce, narrowing the gender gap in labour force participation in 84% of OECD regions.

​OECD (2024), Job Creation and Local Economic Development 2024: The Geography of Generative AI, OECD Publishing, Paris, https://doi.org/10.1787/83325127-en.​

The employment boom has also led to regional labour shortages and gaps, particularly in densely populated urban regions such as Lombardy (Italy) and Hamburg (Germany), as well as in regions struggling with population decline and ageing.

Against this backdrop, Generative AI has the potential to help tackle labour shortages and boost productivity. However, the report highlights significant regional disparities in the extent to which jobs are affected by Generative AI, with the share of workers with jobs exposed to AI ranging from 45% in urban regions such as Stockholm (Sweden) and Prague (Czechia), to 13% in rural regions such as Cauca (Colombia).

Urban workers are more likely to be affected, with an average of 32% already exposed to Generative AI, compared to just 21% of rural workers. This trend could risk worsening existing urban-rural income and productivity gaps, as well as digital divides between regions.

Regions previously considered to be at comparatively low risk of automation are now among the most exposed to Generative AI, according to the report. While technology-led automation has historically affected non-metropolitan and manufacturing regions, now metropolitan areas, high-skilled workers and women face greater exposure as Generative AI excels in performing cognitive and non-routine tasks.

“The rapid adoption of Generative AI is reshaping local job markets, offering solutions to labour shortages and boosting productivity,” OECD Secretary-General Mathias Cormann said. “But it also risks widening the digital divide between urban and rural areas. To harness its potential for all, policymakers must prioritise digital infrastructure, boost digital literacy, and support SMEs to ensure AI's benefits reach everyone and help tackle local skills bottlenecks."