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Davide Luca

Cem Özgüzel

Zhiwu Wei

May 14th, 2024

WFH favours successful core European urban areas – not towns or rural areas

0 comments

Estimated reading time: 12 minutes

Davide Luca

Cem Özgüzel

Zhiwu Wei

May 14th, 2024

WFH favours successful core European urban areas – not towns or rural areas

0 comments

Estimated reading time: 12 minutes

The COVID-19 pandemic sparked speculation of a ‘big city’ exodus. But what actually happened? Davide Luca, Cem Özgüzel and Zhiwu Wei investigate the geographical spread of working-from-home across Europe since the pandemic to understand where (and why) workers shifted to remote and hybrid working – and what this means for regional inequalities.


The COVID-19 pandemic prompted a seismic shift in how work is conducted. As a consequence, we have seen an increase in the number of digital nomads abandoning the hustle and bustle of the city commute in order to work from postcard spots around the world. Despite this growing phenomenon, is working from home, by which we mean both fully-remote and hybrid jobs, going to significantly alter the economic geography of the global-city system and lead to a ‘big city exodus’?

Understanding these shifts in the work landscape matters because it has a direct bearing on future trends around regional inequalities and development. In recent decades, many rural regions across OECD countries have faced higher rates of population decline and aging than cities, as well as lower growth in living standards. The possibility to work remotely has been touted as a new opportunity for areas outside of large urban agglomerations to mitigate/reverse these structural trends. In reality, research from the US suggests that this has not, in fact, been the case. But what are the trends in Europe?

In a recent paper we investigate the geographical spread of working-from-home across 30 European countries during the COVID-19 pandemic, to understand where and why workers have shifted to fully-remote or hybrid work. Our analysis shows that remote work uptake across Europe was marginally lower than in the US and highly uneven across and within countries.

Before the pandemic, remote work was a balanced phenomenon, with similar proportions of remote workers in both urban and rural settings. As Figure 1 shows, the COVID-19 pandemic ushered in a dramatic acceleration of remote work. Notably, the start of the pandemic, between February and March 2020, witnessed a substantial increase in the share of remote work (ie, those “mainly” working from home), combined with a slight decrease in hybrid work, likely because of people shifting to working fully remotely.

Figure 1. The evolution of hybrid and fully remote work across Europe

 

 

WFH in Europe 2019-22
Source: European Union Labour Force Survey (EU-LFS).

 

However, the uptake speed varied significantly across and within European countries. For example, in Ireland up to one third of employees switched to fully-remote work in 2021 whereas in countries such as Hungary, Romania and Bulgaria, less than 5% of workers switched to remote working.

Notably, most remote jobs have been concentrated in core cities and capital regions, rather than leading to a redistribution of high-skill jobs to peripheral or rural areas (Figure 2). With a few exceptions – eg, Southern France, Northern Sweden, and parts of Western Germany – most regions with the highest incidence of remote work in 2021 were clustered around capital cities, or in regions hosting large urban centres. Overall, cities experienced a profound transformation, with the proportion of remote workers tripling during the pandemic. By contrast, rural areas saw a more moderate increase of approximately 70%.

Figure 2. Percentage points change in the share of remote workers between 2019-2021

Davide Luca et al - Change in the share of remote workers in Europe between 2019-2021
Source: European Union Labour Force Survey (EU-LFS).

 

Note that the survey used to produce the analysis asks respondents where they live, not where they work. Hence patterns discussed here cannot be explained by respondents who continue working for companies based in cities while moving out to rural areas. In the analysis, we also test whether the demographic composition of urban, semi-dense, and rural areas changed during the pandemic. Results do not show any significant changes. In other words, there is no evidence of a structural reshuffling of workers from cities to less dense areas.

What factors made it easier to work remotely?

We identify different sets of conditions potentially influencing the spread of working-from-home. Some of these factors are territorial, referring to the contextual conditions in which individuals live and work (for instance national-level policies and regional-level characteristics). Other factors, by contrast, relate to how individuals with different sociodemographic characteristics and working in different sectors are unevenly spread across places.

Our analysis suggests that while remote work uptake was evidently spurred by national lockdown measures, such policies do not explain the full variation in remote work patterns. Examining the factors contributing to the uneven uptake, we find that several key individual factors played a significant role. Figure 3 shows the association between various factors (mostly individual, but also some regional/territorial ones) and the likelihood of working remotely, while holding other variables constant. The higher the coefficient estimate, the stronger was the association. (The figure plots coefficient estimates and 95% confidence intervals on various individual and regional factors underlying remote work uptake. All regressions control for country-by-month and region-fixed effects. Robust standard errors are clustered at the TL2 regional level.)

Figure 3. Who was more likely to work remotely and where?

Workers who embraced remote work tended to be older, self-employed, and highly educated. In addition, those working in information and communication, financial and insurance, education, and professional sectors, and those with occupations such as managers, professionals, and technical experts were found to be more likely to work remotely. These findings perhaps confirm popular narratives, although more surprisingly, factors like gender, relationship status, and being a parent of children under the age of 15 were not significantly associated with a higher uptake of remote working.

In terms of territorial factors, regions with higher internet speeds and higher excess mortality rates saw higher remote work adoption in the early days of the pandemic. However, the significance of these factors waned by 2021.

Finally, we analysed the relative importance of different factors in explaining the gap between cities and other areas in remote work adoption through a variance decomposition analysis. The results suggest that worker and industrial composition played a more substantial role than territorial factors. For example, in 2020, individual worker characteristics (eg, education, age and occupation) explained approximately 88% of the overall gap in remote work between cities and other areas, while contextual territorial factors (eg, internet infrastructure) accounted for only about 12% of the difference. However, it is important to note that the current data limitations make it challenging to truly measure the role of contextual territorial factors – and it is very likely that the contribution of these factors is underestimated.

What can policymakers do?

The findings of our study shed light on how the pandemic has influenced the spread of remote working in Europe and how it has impacted cities and regions unevenly. Our research underscores the idea that besides essential factors like reliable internet access, it is individual characteristics as well as sectoral/industrial compositions that have played a significant role in the rise of remote work during the pandemic.

From the standpoint of regional inequalities and development, then, while remote work may in theory benefit mid-sized towns and peripheral areas, many workers will continue to stay in their regions, especially just outside city centres. As argued by other scholars, working from home may even favour further agglomeration of economic activities around larger urban areas, especially when workers are asked to go to the office at least a few days a week.

Considering these trends, some rural areas and towns may succeed in attracting remote workers, especially when they can offer attractive amenities and are relatively close to large cities. This is for example a goal of Ireland’s current Rural Development Policy. More generally, however, local governments should focus on developing suburban areas to accommodate the influx of remote workers and the provision of quality public services and amenities. Investment in infrastructure, housing, co-working spaces, and community facilities in semi-dense areas close to large cities can attract professionals and enhance residents’ quality of life. At the same time, it’s vital to strike a balance, preserving the essence of urban centres. Smart urban planning initiatives like mixed-use zoning and green spaces can make urban living attractive for remote and non-remote workers alike.

Finally, these results reveal some of the challenges related to the ability of some workers to adopt remote working schedules. Recognizing the changing nature of work, and the preference of most workers for more workplace flexibility, policymakers should invest in upskilling and reskilling programs tailored to remote-friendly industries. By recognizing the role of compositional factors and addressing barriers to remote work adoption, policymakers can create more inclusive and remote-friendly work environments, ensuring that the potential benefits associated with remote work are accessible to all, regardless of where they live.

 


 

All articles posted on this blog give the views of the author(s). They do not represent the position of LSE Inequalities, nor of the London School of Economics and Political Science. 

Image credits: DiMedia via Shutterstock.

About the author

Davide Luca

Davide Luca

Davide Luca is an Associate Professor of Economic Geography at the University of Cambridge and a Visiting Fellow at the LSE's International Inequalities Institute. His research is interdisciplinary, and focuses on the interactions between territorial inequality, socioeconomic outcomes, and public policy delivery.

Cem Özgüzel

Cem Özgüzel

Cem Özgüzel is an Economist at the Organisation for Economic Co-operation and Development (OECD) and a Research Affiliate at the Paris School of Economics and Sorbonne Economics Center. He obtained his PhD in Economics from the Paris School of Economics.

Zhiwu Wei

Zhiwu Wei is a PhD candidate in Land Economy at the University of Cambridge, and an Occasional Research Officer at the LSE International Inequalities Institute.

Posted In: EU Inequalities | Jobs and Work

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