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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+N
Where E = total employment
B = Basic Employment
N = Non-basic employment
• According to the model, the growth of an urban
area depends upon the ratio of basic to nonbasic 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 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.
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.
E
m
B
P

E
where :
m  multiplier
  population multiplier
E  total employment
B  basic employment
P  total population
Households
(Employees/
Consumers)
Inputs
Of
Labour
Income
payments
Expenditure
On goods
& Services
Firms
(Employers/ Producers)
Economic System
Supply
of
Goods &
services
Expenditure on
Goods & Services
Households
Income
Imports
Supply
of
Goods &
services
Expenditure
On Goods
& Services
Firms
Production
Addition of Trade
Exports
Supply of goods
& Services
Basic and Non-Basic Activity
Consumers
Inside
Area A
Consumers
Outside
Area A
“Non-Basic”
Activity
“Basic Activity”
Production in
Area A
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
Basic Employment in a Simple Economy
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
As the non=basic ratio is 1:2 and
the base multipier is 3, then:
m

E (t)
B(t)
B(t)  N (t)
B(t)
450  900

450
3
Non-Basic Employment in a Simple Economy
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
Using the computed value for the base multiplier
And predicted changes in basic employment,
The forecast for total employment is derived as follows:
E ( t 10)  mB ( t 10)
 3(595)
 1785
The total for non-basic employment is therefore:
N ( t 10)  E ( t 10)  B( t 10)
 1785  595
 1190
The forecast total for non-basic
employment can now be disaggregated
as follows:
N d ( t 10)  E ( t 10)  B( t 10)
N e ( t 10)
N f ( t 10)
250
 1190 
900
 330.5
300
 1190 
900
 396.7
350
 1190 
900
• 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 nonbasic 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
Land Savings
Employed
Labour Force
Space Standard
Space Demand
Plot Ratio
Land Demand
Buffer Stock
Land Needs
Population-Based Approach to
Forecasting Land Demand
Rochor
Tampines
Urban Growth Processes
Existing
Later
Growth Period
1.
Resources
1. Natural
Location
Environmental
2. Investment & Growth
Extractive
Comparative
Advantage
3. Adaptation of skills
And size
2. Created
New
Investment
3. Labour
4. Accommodation by
Lenders & Investors
Public
Private
4. Capital
Productive
Capacity
New Productive Capacity
Plant & Equipment
Imported
Capital
Indigenous
Thrift
1. Basic Industries
2. Non-Basic
Industries
Conservation &
Development
Economic
Growth
Basic Industries
Non-basic Industries
New Urban Structure
Housing
Schools
Public Services
Population
Transportation
1.Employed/
Unemployed
Population
Change
Mercantile Outlets
Cultural Opportunities, etc
2. Dependents
3. Retirees
Natural Increase
Migration
Adjusted Population