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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:
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]
Buffer Stock
Space Standard
Plot Ratio
EmployedLabour Force
Space Demand
Land Demand
Land Needs
Land Savings
Population-Based Approach to Forecasting Land Demand
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
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