Unemployment and Urban Labour Markets

Abstract

Two quite distinct views on how metropolitan labour markets work have co-existed for over three decades. Both claim empirical support and, after a brief period of confrontation, they continue to co-exist today giving quite conflicting signals to policy-makers. According to the first model, the urban labour market consists of a number of spatially defined sub-markets so that local unemployment exists primarily because of deficiencies in highly localised demand for labour. By this argument, unemployment rates remain high in the absence of a renewed supply of appropriate jobs within short commuting distances of the jobless. The solution according to this model is to attract private- and public-sector production into such areas. In contrast, a second model views the city as a single market in which transactions between labour and capital take place regardless of the location of residence and employment sites. According to this perspective, the spatial incidence of unemployment simply reflects the residential clustering effects of a housing market reacting to an unequal income distribution. Demand for labour may still be deficient, but only at the aggregate, metropolitan-wide level. According to this model, creating jobs for labour in particular parts of the conurbation in order to reduce unemployment in certain neighbourhoods will only have a temporary, short-term effect at best. The apparent conflicts between the policy implications drawn from these segmented and seamless models of the urban labour market arise out of a failure to recognise explicitly the marked differences that exist in the ability of different levels of human capital to adjust. Both models have relevance, but to different categories of labour. As soon as the implicit assumption of homogeneous labour is relaxed, the simultaneous presence of spatially seamless and segmented markets becomes a source of insight rather than conflict and their role in policy discussion becomes more transparent. The research challenge lies in achieving a better understanding of the scope and practice of adjustment of individuals with different skills together with the way the urban markets as a whole adjust.