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«City Economy 14 Examining the relationship between commuting patterns, employment growth and long term unemployment in the Sydney Major Statistical ...»

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City Economy 14

Examining the relationship between

commuting patterns, employment growth and

long term unemployment in the Sydney Major

Statistical Region

Anthea Bill

William Mitchell

Martin Watts

Centre of Full Employment and Equity

The University of Newcastle

ABSTRACT

The paper will develop a framework to understand how employment growth and commuting patterns

(modelled using Journey to Work data) interact to determine the spatial distribution of unemployment in the Statistical Local Areas within the Sydney MSR. The paper is part of an on-going project aimed at understanding the relationship between regional employment growth and unemployment. We seek to explore how the benefits of employment growth are distributed across space. Employment change over time across urban areas is resolved by a combination of labour market responses summarised as: (a) changes in the local employment of residents, which can incorporate net in or out-migration; and (b) changes in the level of net in- or out-commuting. In areas of employment stagnation or decline, the capacity of some residents to avoid long term unemployment will be dependent on their ability to secure jobs elsewhere in the urban area and either out-commute or relocate.

The labour market accounts (LMA) framework is employed to decompose these labour market responses in the period 1996-2001 in the Sydney MSR. The LMA framework decomposes the movements in working age population (WAP) and labour force (LF) for a particular area to determine who fills the jobs arising from changing employment levels. We provide estimates for the following components: (a) labour force changes due to demographic processes, which are broken down into natural increase and net in-migration; (b) labour force changes due to changes in the labour force participation rate; (c) changes in unemployment, which are broken down into changes arising from demographic processes and changes arising from changes in the percentage of the labour force that are unemployed; and (d) changes in the local labour force due to changes in net incommuting.

Regression models are estimated to consider the relative strength of the relationships between each of these labour market adjustment responses and percentage employment change. Separate models are estimated for males and females to test whether the adjustment processes of each are different.

We also augment the regressions with a variable representing occupational structure to determine whether the initial occupational structure of an area impacts on the adjustment process.

The results highlight clear differences between males and females. The results show emphatically that employment growth between 1996 and 2001 has elicited substantial changes in commuting behaviour. Women, surprisingly, showing relatively greater in-commuting responsiveness to employment growth. Unemployment changes in local areas are swamped by commuting responses.

–  –  –

The analysis of regional labour markets in Australia reveals persistent disparities in rates of labour utilisation (Mitchell and Carlson, 2005; Mitchell and Bill, 2005b). In particular, unemployment dispersion has not fallen despite the decline in the national unemployment rate since 1993. There is increasing evidence that regional labour market outcomes are not determined exclusively by the national business cycle, even if account is taken of industrial structure, so that reliance on indiscriminate Keynesian macroeconomic policy will not redress persistent inequality in labour utilisation rates (Mitchell and Carlson, 2005). In addition, regions differ in their composition of unemployment between short and long term, but notwithstanding the spatial persistence of unemployment, the evidence does not support the commonly held view that long term unemployment is irreversible (Mitchell and Bill, 2005a).

This dispersion of labour market outcomes persists even within urban areas in Australia, with, for example, the residents of Ku-Ring-Gai in Sydney experiencing a rate of unemployment of 4.9 per cent in August 2001, as compared to a rate of 19.8 for residents of Fairfield, another Sydney suburb (ABS, 2001). Individual and family poverty is directly related to unemployment. Also, since spatial population and employment increases tend to be uneven between the urban and regional areas, there tends to be congestion and infrastructure duplication in some areas, but under-utilised infrastructure in others (Denniss and Watts, 2001).

Moreover, when employment growth is spatially uneven as it has been over the 1990s, regionally localised growth (and stagnation) is likely to promote strong migratory and commuting responses, as relatively advantaged workers seek out employment opportunities. Contrary to neo-liberal arguments that have focused on barriers between sub-markets Gordon (2003: 56) argues that few barriers exist to adjustment at the small area level. While interactions between labour markets are strongest between proximate or neighbouring regions (Tobler, 1970; see Mitchell and Bill, 2004 and 2005a, 2005b for empirical application), adjustments to disequilibria travel across all submarkets relatively quickly. In a geographic context such adjustments occur through commuting and migration; and the majority of migration is through small moves (neighbouring regions) inside





larger regions which together account for the inter-regional picture of adjustment (Gordon, 2003:

59). The willingness to undertake such movements is heavily influenced by the macro-economy.

Migration is likely to play a greater role in times of buoyant economic activity than recession (Gordon, 2003: 57), and it is the unevenness in the distribution of employment opportunities which is likely to be the key motivating factor, rather than differentials in the rewards and risks of the destination region (Gordon, 2003: 59). Thus it is relevant to examine whether commuting and migration have played a large part in the labour market adjustments occurring in one of the most buoyant regions in the Australian economy over the 1990s, the Greater Metropolitan Sydney region.

Commuting and migration are liable to directly impact the effectiveness of local job-creation strategies (Renkow, 2003). Commuting may frustrate the attempts of local policymakers to deliver opportunities to resident unemployed or to stimulate local business via increased resident purchasing power. However on the plus-side, to the extent that workers are able to adjust to joblosses by seeking employment in neighbouring regions, local job creation strategies may not be strictly necessary to revitalise flagging local economies. Alternatively policy-maker reliance on residential mobility to remedy regional downturns may see certain low-skilled workers who are less likely to undertake commutes or migration, heavily disadvantaged. Increased cross border commuting for jobs in periods of economic upturn raise a number of public finance issues (Renkow, 2003). Commuters enjoy employment opportunities, amenities and possibly transport provided by the destination region, but pay taxes that cover the local infrastructure costs in their origin region.

Thus the ability to predict the nature of labour market adjustment across demographic groups, Commuting patterns and employment growth City Economy 14 - 2 City Economy 14 particularly in areas of rapid labour market growth, may help predict who is best able to adjust to changing employment patterns and sharing the financial responsibilities for service provision.

Employment change over time across urban areas is resolved by a combination of labour market responses summarised as: (a) changes in the local employment of residents, which can incorporate net in or out-migration; and (b) changes in the level of net in- or out-commuting. In areas of employment stagnation or decline, the capacity of some residents to avoid long term unemployment will be dependent on their ability to secure jobs elsewhere in the urban area and either out-commute or relocate.

The labour market accounts (LMA) framework is employed to decompose these labour market responses in the period 1996-2001 in the Sydney MSR. The LMA framework decomposes the movements in working age population (WAP) and labour force (LF) for a particular area to determine who fills the jobs arising from changing employment levels. We provide estimates for the following components: (a) labour force changes due to demographic processes, which are broken down into natural increase and net in-migration; (b) labour force changes due to changes in the labour force participation rate; (c) changes in unemployment, which are broken down into changes arising from demographic processes and changes arising from changes in the percentage of the labour force that are unemployed; and (d) changes in net in-commuting.

Regression models are estimated to consider the relative strength of the relationships between each of these labour market adjustment responses and percentage employment change. Separate models are estimated for males and females to test whether the adjustment processes of each are different.

We also augment the regressions for occupational structure to determine whether the initial occupational structure of an area impacts on the adjustment process.

The results highlight clear differences between males and females. The results show emphatically that employment growth between 1996 and 2001 has elicited substantial changes in commuting behaviour. Women, surprisingly, showing relatively greater in-commuting responsiveness to employment growth. Unemployment changes in local areas are swamped by commuting responses.

In Section 2, recent studies that have employed the LMA framework are reviewed followed in Section 3 by the presentation of the LMA framework in analytical terms. Section 4 provides a detailed description of the data. Section 5 then utilises the decomposed labour market responses in regression models to estimate the relation between employment change and labour market adjustment. Concluding comments are presented in the final section.

THE LABOUR MARKET ACCOUNTS APPROACH

A number of UK studies have analysed the ‘sectoral and spatial shifts for different sections of the labour force’ for cities (Bailey and Turok, 2000: 631) arising from the processes of deindustrialisation and de-urbanisation within the labour market accounts (LMA) framework. An equivalent approach to regional labour market analysis with extensions to analysing localised fiscal impacts of growth was developed separately in the US by researchers under the banner of the Community Policy Analysis Network (CPAN) (see Scott and Johnson, 2000; Renkow, 2003). The major differences between the two approaches relate to the analytical methods used and applications by the two groups (compare Bailey and Turok, 2000 and Renkow, 2003). In this paper, we use the UK approach to decomposition and regression analysis, whereas in a forthcoming paper we will employ systems estimation, common to the US literature, to determine the sensitive of labour market adjustment components to employment growth.

Commuting patterns and employment growth City Economy 14 - 3 City Economy 14 In the UK literature, the LMA framework has been used by Owen et al. (1984) and Green and Owen (1991) to explore local labour market areas for the periods, 1971-81, and 1981-84 and 1984respectively. Clustering analysis was employed to identify similarities and differences between the local labour market areas in both studies. Owen et al. (1984) point to the influence of a range of spatial processes operating at different levels, both between broad labour market regions as well as along the urban-rural continuum, with non-spatial factors such as the industrial composition of employment also influencing labour market processes. Across a number of labour market change components, notably employment, participation rates, net migration and unemployment, there was evidence of a north-south dichotomy. This spatial distinction is least apparent for unemployment, due to the offsetting impact of regionally differentiated patterns of migration. Green and Owen’s study spanned periods of depression and improved economic circumstances. They also found evidence of the north-south divide in economic performance, but a closer comparison of the two studies is not possible because they are based on different numbers of local labour market areas.

More recently, Turok and Edge (1999) looked at cities. Bailey and Turok (2000) looked at the impact of job loss on the labour market adjustment process across major cities in Britain over the period 1981-1991. They found high rates of adjustment occurred through migration and changes in commuting patterns, but some of these changes were an artifact of relocating out of the cities, but continuing to work in them (p.647). For some of the resident workforce, however, the adjustment took the form of higher levels of economic inactivity, which combined with the out-migration lead to unemployment falling despite lower employment. The authors identified major differences between men and women and across occupational groups in their capacity to respond to employment changes. Women had a higher incidence of becoming economically inactive in response to employment loss, while females in less skilled occupations had a much higher rate of inactivity than their more skilled counterparts.



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