EM 4103: Urban Planning II

Lecture 8: Employment Analysis in Planning

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.

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.

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 basic activity. - produced in the exogenous sector of the area’s economy

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

The level of economic activity in a given area is measured as the sum of the levels in these two sectors.

E = B + NWhere E = total employmentB = Basic EmploymentN = Non-basic employment

• 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.

Both sectors are related to exogenous demandThe 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.

Economic Base Ratio

Economic Base Ratio = ratio of non-basic employment to basic employmentE.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.

population total P

employment basic B

employment totalE

multiplier population

multiplierm

:where

E

PB

Em

Households(Employees/ Consumers)

Firms (Employers/ Producers)

Expenditure On goods& Services

SupplyofGoods &services

Incomepayments

Inputs Of Labour

Economic System

HouseholdsIncome

Firms Production

SupplyofGoods &services

Expenditure On Goods& Services

Addition of Trade

Exports

Imports

Supply of goods& Services

Expenditure onGoods & Services

ConsumersInsideArea A

Consumers Outside Area A

“Non-Basic”Activity

Production in Area A

Basic and Non-Basic Activity

“Basic Activity”

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

• 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

Industrial

Category

Existing basic

Employment in year t

Historic percentage annual employment growth

Growth factor

For a 10 year

forecast

Forecast basic

Employment in year t + 10

‘a’ 100 3 1.3 130

‘b’ 200 2 1.2 240

‘c’ 150 5 1.5 225

B (t)=450 B(t+10)=595

Basic Employment in a Simple Economy

3450

900450

B

NB

B

Em

)t(

)t()t(

)t(

)t(

As the non=basic ratio is 1:2 andthe base multipier is 3, then:

Industrial

Category

Existing non-basic

Employment in year t

Forecast non-basic

Employment in

year t + 10

‘d’ 250 330.5

‘e’ 300 396.7

‘f’ 350 462.8

N(t)=900 N(t+10)=1190

Non-Basic Employment in a Simple Economy

1785

)595(3

mBE )10t()10t(

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

1190

5951785

BEN )10t()10t()10t(

The total for non-basic employment is therefore:

8.462900

3501190N

7.396

900

3001190N

5.330900

2501190

BEN

)10t(f

)10t(e

)10t()10t()10t(d

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

• 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.

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;

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.

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”

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]

Concept of Plot Ratio

Buffer Stock

Space Standard

Plot Ratio

EmployedLabour Force

Space Demand

Land Demand

Land Needs

Land Savings

Population-Based Approach to Forecasting Land Demand

Rochor

Tampines

Urban Growth Processes

Resources

1. Natural

ProductiveCapacity

Population

ComparativeAdvantage

New Investment

Public Private

EconomicGrowth

Population Change

Environmental

2. Created

3. Labour

4. Capital

2. Non-Basic Industries

1. Basic Industries

3. Retirees

2. Dependents

1.Employed/ Unemployed

1. Conservation & Development

2. Investment & Growth

3. Adaptation of skillsAnd size

4. Accommodation byLenders & Investors

Basic Industries

Non-basic Industries

New Urban Structure

Adjusted Population

New Productive CapacityPlant & Equipment

Housing

Schools

Public Services

Transportation

Mercantile Outlets

Existing Growth Period Later

Location Extractive

Cultural Opportunities, etc

Natural Increase Migration

Imported Capital

IndigenousThrift