The Economic Base of Cities and Communities

1. The Economic Base ofCities and Communities • Represents the core economic activity on which much of the community’s local economy depends. • Even if tied to a core economic activity, communities are active (to some extent) in all four phases of the nation’s economy: • Extracting Resources • Producing • Distributing • Servicing

2. Historical Factors • The natural resources that were available in the area. These helped shape the economic base that could be created in the community. • Transportation networks available to distribute raw materials and products (ships, railroads, roads/turnpike systems). These networks helped shape where communities would be established.

3. What factors have brought change to the economic health of rural communities? • Technology: has decreased the need for workers in a variety of economic sectors. • Although high tech industries and firms require greater proximity to skilled labor, markets and information. For these firms, the cheap land, abundant labor, and lax environmental regulations available in rural areas have seemed more appealing.

4. Health of Rural Communities • Shifts in Transportation Systems • Decreased dependence on local area to meet needs • Economic Restructuring: umbrella term for any economic changes occurring in business • Shift to a global economy • Economic basis of many nonmetro communities have been dominated by the production of goods which have close substitutes in other countries • Communities dependent on a single economic base most vulnerable.

5. Economic Portrait of Rural Communities • Natural-Resource-Based Communities • Agriculture, forestry, energy mining, non-energy mining, and fishing • All have experienced declines over the last two decades • Been susceptible to boom-and-bust cycles in response to the price of these commodities in the international markets

6. Economic Portrait of Cities and Communities • Manufacturing Communities • Grew during the 1950s, 1960s and 1970s • Became single largest employer in rural areas by the late 1970s. 40% of rural labor force. • Many footloose manufacturing firms left rural areas and moved overseas in search of even cheaper labor. Others struggled to maintain their operations in an environment of increased competition.

7. Economic Portrait of Cities and Communities • Specialized Government Communities: • Includes military bases, prisons, universities, public lands. • Experienced significant growth during the late 1970s and early 1980s. • While paying low wages, these jobs have been fairly stable. However, they have limited the tax base of these communities.

8. Economic Portrait of Cities and Communities • Destination-Retirement Communities • Defined as those that have experienced a net in-migration of people 60+ years of age • Have experienced positive growth due to the income that retirees have brought to the community • Impact on the local infrastructure and services remains to be seen • An area of the economy that is not clearly addressed in these four groupings is the rising importance of the Service Sector

9. Economic Portrait of Cities and Communities • During the 1980s, about 12 million service jobs were created in the U.S. • But, the service sectors experiencing the most rapid growth have exhibited a marked preference for metro locations • Only tourism and retirement-related activities have shown an inclination for rural locations.

10. The Notion of Dual Economy • Proponents of the dual economy theory suggests that industries can be grouped into two qualitatively distinct sectors --the CORE and PERIPHERY sectors. • This current economic segmentation is the result of the historical evolution of American Capitalism. This means that: • this segmentation is not the product of variation in the quality of labor or other attributes of workers; • rather, it is the cause of differences in the composition or quality of labor.

11. Dual Economy • Job instability is not a personality characteristic of the worker but a characteristic of the sector in which the person is employed. • The argument has been made that the core sector firms tends to be found primarily in metro areas; peripheral sector industries are more dominant in nonmetro areas.

12. Theory of Dual Labor Markets • Central thesis is that jobs are situated in primary and secondary labor markets. • Jobs existing in one sector have a distinct set of characteristics relative to the other sector.

13. Primary Sector • Prominent features are: • Internal markets are pervasive • Employment is stable and jobs secure • Wages are high • Working conditions are good • Workers are punctual and dependable • Investment in employee is extensive • Worker turnover is low • While jobs in this sector have entry level requirements associated with them there is opportunity for upward mobility.

14. Secondary Labor Markets • Prominent features are: • Few opportunities for advancement, if any • Employment unstable and jobs insecure • Virtually no requirements for gaining entry into these positions • Wages paid and work conditions tend to be poor • Few, if any, job training programs are extended to workers. • Employee commitment is low, so turnover, absenteeism, and tardiness are extensive

15. Bottom Line • Human capital investments are likely to pay higher dividends to those gaining access to and advancing within the primary labor market. Adequate compensation for education and training are significantly lower for those employed in the secondary sector given the “dead end” nature of these jobs.

16. Theories of Human Capital • Education as an Investment • Status Attainment Theory (Family and Community Contributions) • Labor Models • Screening Model • Job Competition • Dual Labor Markets • Dual Economy

17. Education as an Investment

18. Status Attainment Theory

19. Screening Model

20. Job Competition

21. Internal Labor Markets Stable Employment/Job Security Upward Mobility Entry Requirements Job Training Good wages - Conditions Low Turnover No Internal Labor Market Unstable / No Security No Entry Requirements No Training Poor Wages - Conditions High Turnover - Absenteeism Dual Labor Markets Primary Secondary

22. Concentrated Economic Activity Small Number of Firms Large Scale Firms Diversified Products High Profits Capital Intensive High Productivity Low Economic Concentration Intensive Competition Little Capacity to Exercise Market Power Small Sized Firms Low Profits Labor Intensive Low Productivity Dual Economy Core Sector Periphery Sector

23. Well-developed Internal Labor Market Significant Unionization High Skilled Good wages and conditions High Investment in Training Low turnover Minimal Internal Labor Market Lack of Unionization Low Job Skills Poor Wages and Conditions Minimal Training High Turnover Dual Economy Core Sector Periphery Sector