How rosy was the picture before the pandemic broke?

The COVID-19 pandemic and its consequences are still unfolding, with considerable implications for the future competitiveness of places, their firms and their workers. Prior to the pandemic outbreak, the OECD area unemployment rate was at one of the lowest rates in decades.

However, the picture was not as rosy when considering different local labour markets. A decade after the 2008 Global Financial Crisis, only half of OECD regions had recovered to their pre-crisis unemployment levels. The employment impacts of today’s crisis are at a much higher scale, as seen by the massive unemployment increases in some countries and the significant drop in hours worked in recent months. (1)

What is accelerating the future of work?

The pandemic is accelerating several changes to local economies already in motion prior to the outbreak, including the transition to the future of work. The share of jobs at high risk of automation (i.e. jobs at risk of having 70% or more of their tasks automated) ranged almost ten-fold across OECD regions – from a low of 4% to a high of almost 40% of regional jobs (2). Prior to the crisis, OECD calculations showed that in the Basque Country, over 205 000 jobs (22%) are at high risk of automation, a share significantly higher than the OECD average.

While evidence suggests that automation accelerates during recessions in general (3), factors specific to this pandemic are further accelerating the automation of tasks or the replacement of workers entirely.

•  First, this particular pandemic is spurring innovations that address the need for social distancing, which implies greater use of automated means such as robots.
•  Second, once the immediate social distance requirements have passed, some consumer preferences and behaviours linked to today’s circumstances may continue, such as preferences for online shopping.
•  Third, the rapid development of online tools is changing the nature of some business models, which could also become permanent.
•  Fourth, the massive rise in the use of telework (which was used by two in five workers in several OECD countries in April 2020 (4)) may also change the nature of tasks and the geography of jobs. Indeed while some rural occupations may be less susceptible to social distancing costs than in cities, the share of city jobs that are amenable to remote working is much higher (5).

Regional and local actions will be managing the long-term pandemic consequences

While many of the immediate short-term measures, such as expanded short-time work schemes or increased unemployment benefits, are typically national in scope, regional and local efforts will be leading the charge for the long-term recovery. Local public employment offices, skills councils, VET providers, and firms will need to help workers adapt to the new realities in their local labour markets. They will also need to do so for many workers at the same time—putting significant pressure on local systems.

Local labour markets are experiencing a double or even triple “whammy”. All places will be working on the recovery due to the pandemic consequences. They will also be confronting the accelerated future of work, triggered by the pandemic. And finally, those places that were already struggling with the structural adjustment of their economies will continue to do so.

The resilience of local labour markets will depend on several factors, including their ability to help workers make transitions due to these concurrent trends. A recent OECD paper looking at experiences after the last crisis in the United States highlighted that local labour markets that were better able to help workers shift across occupations and sectors were more effective at creating jobs in the recovery (6).

Helping local workers and firms make the transitions to “build back better”

The pandemic has been a cause for reflection on local economic development models(7). Is large-scale tourism the only option for some places? How can the production of environmentally friendly goods and services be encouraged?

Any local strategy will need to address both sides of the coin: firm demand and worker skills. Many firms have started changing their business models in light of the new circumstances, but SMEs may further benefit from business development services to accompany them as they identify new business opportunities and adapt their operations. A transition and upgrading of how firms use skills is particularly needed in labour markets where many workers have qualifications that exceed the needs of the current job, a consideration for the Basque Country as noted in the The Basque Country Competitiveness Report 2019. Are skills the panacea?.

Of particular importance will be the ability for firms and their workers, along with public service providers, to leverage this accelerated digital transition. Some public programmes have been helping local firms with implementing systems that permit remote working for the crisis. This complements prior efforts for increased access to digital supports in general to catch up and seize opportunities that larger firms have.

Local education and training systems will also need to be more responsive to change to meet the high volume and more rapid transitions brought on by COVID-19. More flexible and short-term trainings will be required to address unemployment and facilitate more rapid worker transitions, including through a greater use of online tools. Strong relationships among firms, providers, and workers/students will also be essential to meet the massive increased demands for training and to orient public and private initiatives. Investment in more transversal skills will also open up opportunities for workers in a wider range of sectors to adapt to changes. And we shouldn’t forget new opportunities for entrepreneurship, a great way to capitalise on existing skills while promoting new horizons.

The crisis is bringing many opportunities for regions to take a hard look at their economies and see what was working and what was not even prior to the pandemic. Regions can define this new strategy to not only recover, but to “build back better” than before.

  • (1) OECD (2020), OECD Employment Outlook 2020: Worker Security and the COVID-19 Crisis, OECD Publications, Paris.
  • (2) OECD (2018), Job Creation and Local Economic Development 2018: Preparing for the Future of Work, OECD Publishing, Paris.
  • (3) aimovich, N. and H. Siu (2020), “Job polarization and jobless recoveries”, Review of Economics and Statistics, Vol. 102/1.
  • (4) OECD (2020), OECD Employment Outlook 2020: Worker Security and the COVID-19 Crisis, OECD Publications, Paris.
  • (5) OECD (2020), OECD Policy Responses to Coronavirus (COVID-19): Capacity for remote working can affect lockdown costs differently across places, OECD Publications, Paris.
  • (6) Partridge, M. and A. Tsvetkova (2020), “Local ability to rewire and socioeconomic performance: Evidence from US counties before and after the Great Recession”, Local Economic and Employment Development Papers, n° 2020/04, OECD Publishing, Paris.
  • (7) ECD (2020), OECD Policy Responses to Coronavirus (COVID-19): From pandemic to recovery: Local employment and economic development, OECD Publications, Paris.

Karen Maguire

Karen Maguire

Karen Maguire is Head of the Local Employment, Skills and Social Innovation Division of the OECD’s Centre for Entrepreneurship, SMEs, Regions and Cities. The Division provides data, policy analysis and capacity building to national and subnational governments in the areas of local economic development, local actions for employment and skills, entrepreneurship, the social economy and culture. For the last 15 years at the OECD, she has worked on a range of regional and local development issues, including regional innovation systems and clusters. Prior to joining the OECD, she worked as a public finance banker at UBS and a research analyst at the Urban Institute. She holds degrees from the University of Chicago and Harvard University’s Kennedy School of Government. Karen is also a member of the Advisory Board of Orkestra.