Many countries are struggling to overcome gaps of all shapes and sizes between places. North versus south, east versus west, and urban versus rural divides are all too common. This has produced unequal opportunities and a deep-seated geography of discontent in places that lag behind. Frictions have shaped electoral campaigns and results, making them a political priority. As city workers disperse in a new race for space, how can these places benefit?
Support to lagging regions is not new. It has been a strong component of national policies for decades. It also plays an important role in the EU architecture, whose Cohesion Policy accounts for a large share of the common budget: EUR 392 billion out of EUR 1 074.3 billion (2021-27).
Evidence suggests that place-based policies can be successful in reducing regional disparities. The poorest regions of the EU are benefitting the most, but newer evidence shows that those countries that are net contributors also benefit through enhanced trade and innovation.
A new space race…
The pandemic has changed how we live and work. An OECD survey in 25 countries shows that about 63% of managers and 74% of workers had an overall positive assessment of their teleworking experience during COVID-19, and most of them would like to continue working remotely in the future. The time saved from commuting and the shift to more flexible working schedules may promote well-being, if safeguards prevent isolation and blurring work-life borders. Higher levels of voluntary teleworking could also benefit productivity, as long as they do not exceed 2-3 days per week. Going beyond that threshold might harm teamwork and creativity, although new research suggests this can be avoided by using remote-working tools.
Policy makers have been focusing their efforts on redefining rights and duties in a new normal of remote work. They are now looking carefully at how they can capitalise on these trends to narrow the gap between places. Recent OECD analysis has shown how the rapid rise of working from home practices is prompting many people to seek out more affordable, greener places further away from large city centres as commuting requirements are reduced. Greater New York provides an example of a metropolitan area where as of the COVID-19 pandemic there is an increased interest by workers, measured as variation in house prices, to relocate from dense central business districts towards lower density suburban areas – a spatial trend known as donut effect.
A “donut effect” unfolding in Greater New York?
…with major implications for our towns and cities
At the macro level, new settlement patterns may help to ease urban congestion and promote growth in less dense areas. But local conditions such as internet infrastructure and housing must be considered. Remote work may expand the talent pool for firms, providing scope for better job matching within commuting distance and making a case for attraction policies that target remote workers.
In Trentino, Italy, expanding travel distances from 30 to 60 minutes from the city centre of the provincial capital would more than quadruple the size of the local labour market. And it may be possible to reduce emissions from business travel and commuting. Nevertheless, net effects remain hotly debated, as higher server traffic and decentralised heating may lift energy consumption.
Getting ahead of the game
Forward-thinking regions are getting ahead of the game. Think Vermont, a grant offered to remote workers who relocate in the region, proved its value for money in creating jobs and increasing local tax revenues. Just across the US border, the Live for the Moment New Brunswick campaign has been effective in attracting residents from urban to remote areas in Canada. Retaining local talent and boosting productivity are at the heart of remote work strategies in planning and enacted by the Wachstumsregion Ems Achse, Germany, and Trentino.
In other cases, the focus is on addressing countrywide spatial divides. The Our Rural Future plan aims to revitalise community life and foster job creation in Ireland’s rural areas by, amongst other, setting up a large network of co-working spaces and enhancing broadband and public services in towns. Since March 2020, Portugal has been providing grants to workers and entrepreneurs, prominently including remote workers, who relocate to selected inner areas.
The way forward
When the platform economy came to the fore about a decade ago, a great deal of effort went to competition and other regulatory issues. However, little care was paid to steer towards achieving societal goals. Only with time did it become clearer how SMEs could capitalise on digital platforms to overcome their size constraints. They created employment opportunities by reaching out to new markets and tapping remote places, for which distance had become a less binding factor.
Today, we stand at a crossroads which looks quite similar. Large-scale remote work poses a number of regulatory challenges, but also opportunities for local development and territorial cohesion – and policy makers should seize them.
The OECD encourages countries and regions to explore the local development opportunities inherent in remote work, offering place-based analysis and tailor-made support to policy design and assessment.
For more information on the OECD work, click here.
Mattia Corbetta is a Policy Analyst at the OECD Trento Centre for Local Development. Since joining the OECD, he has been investigating multiple employment and economic development issues through a spatial lens, such as start-up ecosystems, the rise of remote working as well as the societal and economic repercussions of major crises and related policy responses. Between 2012 and 2019, he worked as a Policy Adviser at the Italian Ministry of Economic Development, where he contributed to designing and implementing the Italian Start-up Act, the National Plan on Industry 4.0 and other policies in the field of innovation, entrepreneurship and digital. He holds a MA in International Relations, a MA in Contemporary History and a postgraduate MA in Business and Trade in MENA.