While Generative AI offers opportunities to address labor shortages and improve productivity, it also exacerbates existing urban-rural income disparities. It also widens digital divides. A new OECD report, Job Creation and Local Economic Development 2024, highlights this uneven impact of Generative Artificial Intelligence (AI) on regional job markets within OECD countries.
Over the past decade, many OECD regions have experienced a steady increase in employment. More than half of the regions achieved employment rates above 70% by 2023. This growth has been notable for women. In 84% of OECD regions, there has been progress in narrowing the gender gap in labor force participation. Despite this positive trend, certain regions are still dealing with labor shortages. This is particularly true in urban areas like Lombardy (Italy) and Hamburg (Germany). Some regions face population decline and aging.
GENERATIVE AI’S POTENTIAL TO TACKLE LABOR SHORTAGES
Generative AI holds the promise of addressing some of these labor shortages and boosting productivity. Yet, the report underscores that the effects of AI adoption will not be uniform across regions. The share of workers exposed to Generative Artificial Intelligence varies dramatically. Urban areas like Stockholm (Sweden) and Prague (Czechia) see 45% of workers affected. In contrast, only 13% are affected in rural regions like Cauca (Colombia).
URBAN-RURAL DIVIDE AND EXPOSURE TO AI
On average, urban workers are more likely to be affected by AI adoption. Already, 32% of urban workers are exposed to Generative AI. This is in comparison to 21% of rural workers. This disparity could risk widening the already existing gaps in income, productivity, and digital access between urban and rural areas. The report suggests that while metropolitan areas and highly skilled workers are at greater risk, rural areas and lower-skilled workers might face challenges in accessing AI-related opportunities.
NEW VULNERABILITIES IN METROPOLITAN REGIONS
Interestingly, regions that were previously considered less vulnerable to automation are now seeing higher exposure to Generative AI. These regions are mainly non-metropolitan and manufacturing-based. This shift occurs because AI can perform complex cognitive tasks. These tasks were once considered the domain of high-skilled professionals. As a result, metropolitan areas are increasingly susceptible to job displacement. High-skilled workers concentrate in these areas. AI technologies excel at non-routine cognitive tasks.
THE RISK OF WIDENING THE DIGITAL DIVIDE
OECD Secretary-General Mathias Cormann noted that Generative AI presents opportunities for addressing labor shortages. It can also improve productivity. Nonetheless, it poses a significant risk of deepening the digital divide between urban and rural areas. “To harness AI’s potential for all, policymakers must prioritize digital infrastructure. They should also boost digital literacy and support SMEs. This approach ensures AI’s benefits are accessible to everyone,” Cormann emphasized.
POLICY RECOMMENDATIONS FOR INCLUSIVE AI ADOPTION
To ensure that Generative AI benefits all regions, the OECD report advocates for several key policy measures:
- Investing in digital infrastructure to ensure rural and underserved regions have access to the necessary technology.
- Enhancing digital literacy across all communities, enabling workers to adapt to the changing nature of work.
- Supporting small and medium-sized enterprises (SMEs) to integrate AI technologies and maintain competitiveness in the digital economy.
- Addressing skills bottlenecks in areas where AI adoption is expected to have the greatest impact, ensuring workers are equipped with the skills required for the AI-driven future.
