Posts Tagged ‘Labor Market’

Metropolitan Labour Markets and Urban Productivity

July 8, 2016

By Anjum Altaf

Urban productivity is determined by a number of variables, including population size and urban sprawl. With effective infrastructure investment, cities can enable more workers to access available jobs, creating integrated labour markets and increasing urban productivity.


 

From an economic perspective, the concept of a metropolitan area is related to the existence of an integrated labour market. If the labour market extends beyond the municipal boundaries of a city, it becomes part of a metropolitan labour market.

Metropolitan labour markets are important because output per worker increases with the size of the labour market; increased population density leads to a higher number of economic interactions per unit of area.

However, the population size of a city is only one determinant of its productivity. The other critical determinant is urban sprawl, which takes into account how far jobs and residences are located, and the speed of transport, which influences access to jobs. The speed itself is a product of the transport system and infrastructure investment management. In this framework, one key objective for an urban area is to increase the size of the labour market, which becomes a useful indicator to measure policy effectiveness for increasing urban productivity.

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Factors Explaining Productivity of Cities

Source: Prud’homme, R. 1997. Urban Transport and Economic Development. Revue Region & Developpement.

One measure of the ‘effective size’ of a labour market is the average number of jobs available to city residents within a travel time of 60 minutes, using a mode of transportation available to the majority

Research suggests that the agglomeration effects on labour productivity die out almost completely beyond the one-hour commute boundary. Studies show that 100% of the total jobs in cities like Los Angeles, Chicago, District of Columbia and Atlanta are accessible to every worker within a one-hour commute, i.e. these cities have fully integrated labour markets. This high access, despite the well-known sprawl of these cities, is due to the combination of high-speed public transit (DC, Chicago) or reliance on the personal automobile for commuting (LA, Atlanta).

One would expect the effective size of the labour market to be smaller in South Asian countries, where not all workers will be able to access every job easily, because high-speed public transit is limited and most households do not own motorized transport. This matters from a policy perspective since without an integrated labour market a city does not benefit from its large population size but only bears all the well-known disadvantages. In effect, a city with fragmented labour markets is really a set of smaller cities juxtaposed to each other. To access a higher paying job in a non-overlapping labour market, a worker would need to relocate.

The case of Lahore

This hypothesis was tested in the 40th largest city in the world, Lahore, which has a metropolitan population of 9 million. We limited ourselves to one aspect of the size of the labour market – access to the presently existing number of jobs leaving aside the equally important employment creation aspect, which aims to increase the total number of available jobs.

Formal estimation of the average number of jobs that can be reached by the typical worker in one hour requires sophisticated modelling and a rich data source. With sparse data and budget constraints, a proxy measure can be used – the population that can access a particular node in the city within a one-hour commute as a proportion of the total city population.

Taking Lahore city centre as the relevant node we first measured access to it from three small cities within a 30 mile radius of Lahore. We found none within a one-hour commuting distance to Lahore using public transport. Hence, Lahore does not have a metropolitan labour market. We then investigated the labour market within the municipal boundary of Lahore. Using the main industrial and service sector hubs and residential housing concentrations as relevant nodes, we confirmed that the Lahore labour market is highly fragmented.

Potential solutions to the fragmented labour markets

Increasing the economic productivity of Lahore requires the integration of its fragmented labour markets. A time-bound target would require strategic investments in high-speed public transit and improved traffic management along particularly congested corridors. The unambiguously measurable indicators of effective labour market size would allow progress to be easily monitored over time.

Such an intervention would simultaneously augment the metropolitan labour market, since our study revealed that the commuting time from the neighbouring small cities to the municipal boundary of Lahore was well within 60 minutes. The main delays occurred in the segments connecting the municipal boundary to the city centre.

Our study showed that the prevalent policy of road investments does not support the labour market integration; rather it enables the affluent to move out to less dense suburbs and commute back on new roads using private automobiles further congesting city centres. The mobility of the lower-income majority within the dense quadrants of the city continues to worsen. The perverse outcome is that while the area of some one-hour commute circles increases over time their population densities drop significantly.

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A Typical Traffic Jam in Lahore

Such an infrastructure investment strategy caters to the convenience of the affluent and does virtually nothing for economic growth. It promotes a rapid increase in the number of private vehicles and prevents the city from staying ahead of the demand for road space. A strategy that is focused on urban economic growth needs to reorient itself to infrastructure and traffic management investments that positively impact the speed of movement in the dense areas themselves, rather than in facilitating access to the dense areas.

A unique approach for South Asian cities

While the focus should be on high-speed public transit in dense areas of cities, we do not recommend emulating developed cities by extending the network outside municipal boundaries (e.g. as in Washington, D.C., where outlying cities within 30 miles are a part of the metro-rail system). This is because the wage differential for the majority of workers between the outlying locations and the primary city is not sufficient to cover the incremental transport costs.

This conclusion raises the much bigger question of whether South Asian cities at their present levels of economic development and per-capita incomes should aspire to be compact or connected. This issue has not received adequate attention and real estate imperatives have caused most cities to spread out (sprawl) without adequate connectivity. They have become automobile-centric cities, even though less than 10% of their households own automobiles and compensating investment in public transport has been insufficient.

While it is too late for cities of the size of Lahore to undo their sprawl, the question should be taken seriously for smaller cities that are urbanizing rapidly, but still have time for intelligent spatial design interventions.

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A Scene on the New BRT Line in Lahore

While recent investments in Bus Rapid Transit are ostensibly moves in the right direction (the completed BRT line in Lahore increased the size of the contiguous labour market by about a third), the orientation must be reassessed in the context of the compactness versus connectedness debate, necessitated by ability to pay realities. This would force much needed attention to issues of land use efficiency and how to enhance it using planning tools such as Floor Area Ratios, Transferable Development Rights, and Urban Growth Boundaries. These tools are currently not being leveraged at all in the urban planning of most cities in South Asia.

This article was published in City Voices,Vol 7, No 1, 2016 and is reproduced here with permission of the author. The article was written when the author was Vice-President and Provost at Habib University. Earlier he was Professor of Economics and Dean, School of Humanities, Social Sciences and Law at the Lahore University of Management Sciences.

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Megacity Narratives

March 2, 2015

By Anjum Altaf

Megacities

The discussion of megacities has drifted into a combination of oh-my-god and pie-in-the-sky narratives displacing potentially sensible and useful analyses.

As an example of the first, consider how often one hears that Karachi had a population of 11 million in 1998 and is twice that now – as if that was enough to clinch the argument that we have a mega-problem on our hands.

My response is: So what? I am not particularly bothered if the population rises to 30 million. What matters, and this is the real question we should be asking, is whether Karachi is well managed and whether its management is improving or deteriorating over time.

Suppose the answer is that Karachi is not well managed. If so, does that have anything to do with its size? As a test, I would ask the proponents of the size-is-the-problem argument to go live in Mirpur Mathelo and confirm if the latter is much better managed because of its much smaller size.

Simple observation should convince people that size is irrelevant to the argument – there are examples around the world of well-managed large cities and poorly-managed small ones. In that sense, Karachi having over 20 million people is nothing more than a statistic.

Another oh-my-god narrative pertains to the dominance of mafias in Karachi. Once again, there is no correlation with size. Trudge around a few villages to see how land and water are controlled in small places. The brutal truth is that scarce resources everywhere in Pakistan are controlled by mafias. Some go as far as to say that the entire country is run by mafias of various sorts and if that is the case why would Karachi be an exception?

Now consider the pie-in-the-sky narrative – the mantra that cities are the engines of growth, the bigger the city, the bigger the engine because of bigger labor markets, etc.

Once again, a little questioning would dent this argument. Suppose, we could double the population of Karachi overnight, would the city become much more productive? Most likely not.

The more sensible question is the following: What it is that makes some cities more productive than others? As an example consider Mumbai and Karachi – they have about the same number of residents but the output per person is roughly three times higher in the former.

Why might that be so? Mumbai is not immune to mafias or political groups adept in the use of violence. Nor is it claimed that Mumbai is managed all that much better than Karachi.

The one stark difference is that Mumbai’s labor market is actually much bigger than Karachi’s, a result of the fact that its suburban railway – reputedly the busiest transit system in the world – transports over 7 million commuters per day while Karachi lacks any public transit worth the name.

Raw numbers tell us very little. In this case, the critical analytical question relates to understanding the labor market. Intuitively, if a worker cannot afford to reach a job within a travel-time of one hour, the job is located in a separate labor market. It is quite obvious that Karachi’s labor market is fragmented because of constrained mobility. In actuality, Karachi is made up of five or six labor markets adjacent to each other – it has all the disadvantages of a large population and very few of the advantages of an integrated labor market.

Given the impact of labor market size on economic productivity, it would make sense to consider ways in which to overcome fragmentation. The most obvious connector is increased worker mobility. An example from China should drive home the point: In 1990, the number of people who could reach Shanghai port within an hour was 4 million; by 2007, it was 12 million, a result of conscious and well-planned efforts to increase mobility within dense parts of the city.

Such an increase in mobility does not come about simply by making traffic flow more smoothly for people who own automobiles in cities like Karachi where the majority does not own private vehicles. The imperative is to increase the mobility of workers without motorized transport living in dense and congested parts of the city. For that, investments need to be directed towards rapid public transit, a focus on facilitating bicycling and walking, and better traffic management in general.

In this perspective, investments in under-passes and fly-overs are not necessarily growth-enhancing; they are convenience-enhancing for automobile owners who move further out into less-dense residential areas and commute to work into more-dense employment zones using a means of transport that is grossly inefficient. The private car transports one or two persons per trip, uses the largest road-space per capita, and consumes valuable city-center land for parking.

Much is required to improve city management and economic productivity but a transition to a sensible discussion requires moving beyond simplistic narratives fixated on size.

Anjum Altaf is the provost at Habib University and was formerly dean of the School of Humanities and Social Sciences at LUMS. This op-ed appeared in Dawn on March 1, 2015 and is reproduced here with the author’s permission.

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Karachi is a Small City

November 15, 2010

By Anjum Altaf

City size is back in fashion as a variable of interest and this time bigness is being viewed as an advantage. This is quite a change from the perspective that prevailed for years when countries, specially developing ones, were decidedly anti-urban and wished to retard migration to prevent cities from increasing in size. Size was seen as a handicap and served as an excuse to explain away the problems of big cities. How should we see Karachi in this new perspective?

Of course, well-managed big cities have been around for a long time – Tokyo, New York and London are obvious examples. But somehow it was felt that such success could not be replicated in developing countries. (more…)