EM 4103: Urban Planning II Lecture 8: Employment Analysis in Planning

1. EM 4103: Urban Planning II Lecture 8: Employment Analysis in Planning

2. EMPLOYMENT FORECASTING • Much of urban planning activities revolves around population, employment and housing as these form the crux of most economic activities in cities. • Many models have been postulated to explain urban economic growth.

3. EMPLOYMENT FORECASTING continued • Important ones include demand-based models which emphasise the importance of the change in level and pattern of demand for goods and services produced by the city. • This is seen as the major cause of changes in the level of incomes and population.

4. ECONOMIC BASE THEORY • The most widely used model for employment forecasting is the economic base theory. • It considers demand for goods and services of a city from sources outside the city boundaries. • Growth depends on the city’s ability to export goods and services to pay for its imported goods • The production of goods and services for export is known as a basicactivity. - produced in the exogenous sector of the area’s economy

5. Non-Basic Activity • supporting activities to service workers in the basic industries, their families and the industries themselves • Output of goods and services for distribution and consumption solely within the given area • Form the endogenous sector of the area’s economy

6. The level of economic activity in a given area is measured as the sum of the levels in these two sectors. E = B + N Where E = total employment B = Basic Employment N = Non-basic employment

7. According to the model, the growth of an urban area depends upon the ratio of basic to non-basic activities (economic base ratio) • The higher the ratio, the greater the rate of growth. • Urban growth and thus demand for new building and other urban development, are determined by the success of the export base.

8. Both sectors are related to exogenous demand • The basic sector directly, • The non-basic sector indirectly by supporting the basic sector • Increase in exogenous demand – generates an expansion of supporting activities, ultimately in population • The extent of overall change is a multiple of the initial injection of basic employment • Growth there depends upon the response of the basic industries to increased demand from outside.

9. Economic Base Ratio Economic Base Ratio = ratio of non-basic employment to basic employment E.g. if EBR is 1:2, the injection of an additional basic job leads to the creation of two further jobs in the non-basic sector. Economic Base Multiplier = 3, i.e. when basic employment increases by 1, a total of 3 new jobs is created.

11. Households (Employees/ Consumers) Inputs Of Labour Expenditure On goods & Services Supply of Goods & services Income payments Firms (Employers/ Producers) Economic System

12. Expenditure on Goods & Services Households Income Imports Supply of Goods & services Expenditure On Goods & Services Exports Firms Production Supply of goods & Services Addition of Trade

13. Basic and Non-Basic Activity Consumers Inside Area A Consumers Outside Area A “Non-Basic” Activity “Basic Activity” Production in Area A

14. The Economic Base Study • First, identify the industries or categories in the basic and non-basic sectors • Existing employment in each sector can then be calculated • The base ratio and base multiplier can then be computed using the equations

15. Given that E(t)=mB(t) Then E(t+n)=mB(t+n) Where E= total employment B= base employment m= base multiplier t = base year t+1 = forecast year

16. Basic Employment in a Simple Economy

17. As the non=basic ratio is 1:2 and the base multipier is 3, then:

18. Non-Basic Employment in a Simple Economy

19. Using the computed value for the base multiplier And predicted changes in basic employment, The forecast for total employment is derived as follows:

20. The total for non-basic employment is therefore:

21. The forecast total for non-basic employment can now be disaggregated as follows:

22. Urban growth is seen to result from rising export demand, changes in the level of which have a multiplier effect on the domestic urban economy. The success of an area is determined by the level of diversification of the export sector.

23. The weaknesses of this theory • It is difficult to differentiate between basic and non-basic employment in practice; • The basic/non-basic ratio is not constant in practice; • It underestimates the importance of the non-basic sector in promoting economic activity; basic activities may be dependent on non-basic activities e.g. well-developed services sectors attract basic industry;

24. WEAKNESSES continued • It does not consider the allocation process performed by the market system nor does it consider the public allocation system. Actual households in need may not be allocated new housing. • It does not consider differences in densities (“overcrowding”), availability of land, location and tenure status.

25. Translating employment to Land Requirement: • Break down employment to occupational sectors • Obtain floor space per worker ratio by sectors (surveys, historical) • Translate floor space to land requirement using “plot ratio”

26. Projection of Office Space Projected Net Office Space: [Estimated no. of office workers] x Estimated average net office space per worker] x [1+10% vacancy rate] x [1+10% contingency reserve]

27. Concept of Plot Ratio

29. Space Standard Employed Labour Force Plot Ratio Space Demand Land Savings Buffer Stock Land Demand Land Needs Population-Based Approach to Forecasting Land Demand

30. Rochor

31. Tampines

32. Urban Growth Processes

33. Existing Later Growth Period Resources • Conservation & • Development 2. Investment & Growth 1. Natural Comparative Advantage Location Environmental Extractive 3. Adaptation of skills And size 2. Created New Investment Public Private 3. Labour 4. Accommodation by Lenders & Investors 4. Capital New Productive Capacity Plant & Equipment Productive Capacity Imported Capital Indigenous Thrift Basic Industries Non-basic Industries 1. Basic Industries Economic Growth New Urban Structure 2. Non-Basic Industries Housing Population Schools Public Services Population Change Transportation 1.Employed/ Unemployed Mercantile Outlets 2. Dependents Cultural Opportunities, etc 3. Retirees Adjusted Population Natural Increase Migration