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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