Generative AI could worsen regional divides, OECD warns
Generative AI could widen productivity and income gaps between cities and rural areas across a host of developed countries, the Organisation for Economic Co-operation and Development (OECD) said in a new report.
The Job Creation and Local Economic Development 2024 report said that labour and skills shortages have become “one of the most pressing policy concerns in most OECD regions, not only dynamic urban labour markets”.
It added that while greater opportunities for women to enter the workforce have narrowed the gender employment gap and increased overall employment levels to 70% in 2023, labour shortages now pose a problem in certain regions of OECD countries.
Urban regions with high population densities, such as Lombardy in Italy and Hamburg in Germany, are among those facing labour shortfalls as well as ageing populations.
Read more: OECD launches G7 toolkit for ‘safe, secure and trustworthy’ AI in the public sector
Harnessing AI’s potential
The OECD said that generative AI poses both opportunities and risks.
“The rapid adoption of generative AI is reshaping local job markets, offering solutions to labour shortages and boosting productivity,” said Mathias Cormann, secretary-general of the OECD.
“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.”
The report said that AI technologies could be “leveraged to directly supplement workers where feasible, helping to ease labour shortages and the effects of an ageing workforce”.
Yet it warned that for AI to “support rather than undermine productivity growth”, policymakers would need to judge carefully “the pace and nature of AI adoption” as well as “the ability of workers to adapt, and the need for transitional support policies”.
Read more: Australian government workers save an hour a day in large generative AI trial
Automation coming to town
While automation has historically threatened jobs in non-metropolitan and manufacturing regions, the report found that generative AI has begun to encroach on job security in urban areas too.
For example, the share of workers whose jobs were found to be exposed to AI-powered automation ranged from 45% in urban OECD regions, such as Stockholm in Sweden and Prague in the Czech Republic, compared to just 13% in rural regions, such as Cauca in Colombia.
In general, urban workers’ jobs were found to be at greater risk from generative AI, with an average of 32% of workers already exposed, compared to only 21% of rural workers.
“This trend could risk worsening existing urban-rural income and productivity gaps, as well as digital divides between regions,” the report said.
The OECD added that cases of skill mismatches – where workers were either under or overqualified for their jobs – are prevalent across OECD regions. Around a third of OECD countries exhibited regional differences in skills mismatch of more than 10 percentage points between regions with the highest and lowest skills mismatches.
The report also highlighted a rise in self-employment in regions where traditional jobs are more scarce. It urged governments to manage the transition to less traditional forms of work by encouraging “flexibility and [integrating] regional labour market demands to establish realistic career pathways across different regions are needed”.
“Providing access to AI tools and training can help regions to access untapped talent in low-skilled workers or workers with disabilities for whom many jobs were previously out of reach,” the report said.
About Jack Aldane
Jack is a British journalist, cartoonist and podcaster. He graduated from Heythrop College London in 2009 with a BA in philosophy, before living and working in China for three years as a freelance reporter. After training in financial journalism at City University from 2013 to 2014, Jack worked at Bloomberg and Thomson Reuters before moving into editing magazines on global trade and development finance. Shortly after editing opinion writing for UnHerd, he joined the independent think tank ResPublica, where he led a media campaign to change the health and safety requirements around asbestos in UK public buildings. As host and producer of The Booking Club podcast – a conversation series featuring prominent authors and commentators at their favourite restaurants – Jack continues to engage today’s most distinguished thinkers on the biggest problems pertaining to ideology and power in the 21st century. He joined Global Government Forum as its Senior Staff Writer and Community Co-ordinator in 2021.
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