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A geography of unemployment in Vancouver CMA Daniels, Peter L. 1985

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A G E O G R A P H Y OF U N E M P L O Y M E N T IN V A N C O U V E R C M A by PETER L. DANIELS B.Sc (Hons.) Griffith University, Brisbane, AUSTRALIA. A THESIS SUBMITTED IN PARTIAL F U L F I L M E N T OF THE REQUIREMENTS FOR T H E D E G R E E OF MASTER OF ARTS in THE F A C U L T Y OF G R A D U A T E STUDIES Department of Geography We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA October 14, 1985 ® PETER L. DANIELS, 1985 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of Geography The University of British Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date 14 October 1985 AM_£X Widespread and persistent high levels of unemployment now appear to be endemic in many "advanced" economies and are commonly recognized as the major socioeconomic problem (with staggering direct and indirect costs on society and individuals) to be confronted by policy and decision-makers in the incipient form of modern Western society. The province of British Columbia (B.C.) in Canada (which contains the principal study area (the Vancouver C.M.A)) lost over six percent of its employed workforce over the two years between July 1982 and July 1984 and currently (in 1985) has the second highest unemployment rate in the nation with levels well above the OEGD average. This study comprises an attempt to identify the nature and causes of unemployment in 1981 in the major metropolitan area in B.C. (the Vancouver CMA), in addition to an assessment of changes in the characteristics of unemployment during the economic downturn that has vexed the province since 1981. The research methodology is sharply divided into a specific focus on the nature of unemployment, and in particular, the processes underlying intra-urban variations in unemployment rates within the Vancouver C M A on one hand, and a more general analysis of regional trends over the 1970's in one major relevant economic sector (the goods-production industries) on the other. Unfortunately, significant problems are faced in the use of data restricted to the exceptionally low unemployment census year of 1981 and the scope of the investigation is necessarily modest given the complexity of the problem and the resources available. The urban level analysis is basically a series of tests (including the regression and correlation of aggregated and individual social and spatial data) to ascertain the relevance of the two major hypotheses of intra-urban spatial variations in unemployment The "trapped" hypothesis stresses the role of space as a direct influence on unemployment probability (often as a perceived joint result of confinement to ii certain housing locations within the city and the suburbanization of industrial employment demand). The alternative hypothesis explains the pattern of unemployment rates in terms of the concentration of unemployment upon workers with certain socioeconomic characteristics who occupy geographically distinct sections of the housing market From the research results, the role of space in the determination of unemployment probability, within the C M A , appears to be limited. However, there is some evidence that personal characteristics and spatial effects may be simultaneously having some effect on expected unemployment rates and a consideration of spatial separation between labour supply and demand,- even within- the- C M A , may well be important for labour market theory and policy. Hence, the C M A cannot be unequivocally adopted as the appropriate local labour market for all groups of people (divided on the basis of their socioeconomic characteristics and location) in the C M A . The detailed analysis of the personal characteristics of the unemployed has also suggested the high-unemployment probability, in low and high employment demand times, of the lower-skilled and the occupations with the higher proportions of low-skilled workers (generally the manual blue-collar and service occupations! A preliminary analysis of trends in manufacturing production sector changes throughout the 1970's (at the B.C. regional scale) has been completed as a result of the perceived inadequacy of the urban level focus. Although a resolution on the manufacturing production sector has meant only a partial analysis of employment demand, the goods-production industries have been the central area of focus. This sector has been specifically selected in view of a number of restrictions (including data availability and overall research resource constraints) and in order to test the relevance, in the B.C. context, of some of the processes hypothesized in the literature produced by the prolific radical geographers. Unemployment and production activities are usually important aspects of radical theory on the relation between labour and the restructuring iii of capitalism. The empirical research for this second section is essentially a simple comparison of some major structural characteristics of manufacturing production employment and output in 1971 and 1981 at three geographic scales (based on a core-periphery classification) within the province. Although there is little evidence of the processes hypothesized by the radical geography school, the methodological problems faced are prohibitive and conclusions remain tentative. There is, however, a distinctive trend toward the reduced demand for production labour input With continued capital-intensification in the face of international competition and reduced world demand; together with the direct effect of reduced- output' demand in an historical period that appears to involve a rather dramatic redefinition of B.C.'s role in the world economy, the unemployment problem is unlikely to be substantially reduced in the forseeable future without a major absorption of displaced labour into rapidly growing, labour-intensive service industries. "Full" employment policy in the contemporary mode, will probably be ineffectual in the B.C. setting. iv Acknowledgements The size of this thesis mirrors the academic and emotional support, from faculty, family and friends, that has enabled its completion. From my supervisor, Dr. Ken Denike, the inspiration, guidance, generosity, and understanding has been invaluable and will long be remembered. Without question, Dr. David Ley's knowledge, concern, and clarity have been of immeasurable worth in the latter stages of the thesis development Raymon Torchinsky, who must be the most frequently mentioned individual in UBC Geography thesis acknowledgements, has won another forever-indebted fan as a result of his selfless and endless devotion to ameliorating the problems and despairs of distraught thesis writers. To John Butcher, the pain of this thesis has been lightened by your friendship and mirth. My family, so far away, have fuelled me with continuous love and motivation but I dedicate this thesis and an ocean of thanks to my beloved Jan for her reassuring comfort and empathy, never-ending love and patience and the time and effort dedicated towards the preparation of this thesis. v Tahle of Contents I. Introduction 1 II. The Neoclassical Conception of the Labour Market 15 A. The Demand and Supply for Labour in Competitive Markets 17 1. The demand for labour 18 2. The supply of labour 21 3. The interaction of supply and demand for labour 25 B. Constraints on the Perfect Operation of the Labour Market Recognized by Neoclassical Theorists 28 1. Noncompetitive buyers of labour 28 2. Noncompetitive sellers of labour 33 3. Occupational constraints 36 4. Informational barriers 37 5. Geographic separation of supply and demand opportunities 38 C. Unemployment 39 1. The unemployables 41 2. Seasonal unemployment 42 3. Frictional unemployment 42 4. Structural unemployment 42 5. Demand-deficient (cyclical) unemployment 44 D. Macroeconomics, Labour Economics and Unemployment 45 III. The Social and Spatial Structures as Barriers to the Perfect Operation of the Labour Market 48 A. Heterogeneity in the Supply of, and Demand for, Labour 48 1. Internal and external labour markets 49 2. The dual labour market 50 B. Space as an Intervening Variable between the Equilibrium Matching of Labour Supply and Demand 53 1. Weberian industrial location theory 54 vi 2. Critiques of Weberian location theory on labour 57 3. Do "Jobs Follow People" ? 60 C. The Concept of a "Local" Labour Market - Vancouver C M A as the Study Area 63 IV. Analyses of Intra-Urban Spatial Variations in Unemployment 69 A. The Changing Spatial Structure of Industry as a Cause of Unemployment 71 B. Intra-urban Unemployment Differentials from Personal Characteristics of the Residential Labour Supply 78 V. The Decentralization of Industry in the Vancouver C M A 84 A. The Process of Decentralization 84 1. General trends 84 2. The centrifugal forces underlying decentralization 87 B. Intra-Metropolitan Decentralization - The Changing Geography of Industry in the Vancouver C M A .'. 89 VI. RADICAL INTERPRETATIONS: THE RESTRUCTURING OF CAPITAL A N D THE LABOUR M A R K E T 99 A. The Radical Critique of the Neoclassical Labour Market 102 1. The mechanistic, anti-humanist nature of neoclassical approaches ....102 2. The ideological nature of neoclassical economics 105 3. Static and narrow conceptions of the economic system -107 4. Equal and free choice in labour market supply decisions 113 5. The value of labour 115 B. The Relationship between Social Processes and the Organization of Space 121 C. The Restructuring of Capital and the Spatial Structure of Industrial Activity 125 1. Strategies which are not directly spatial in character 128 2. Strategies which are directly spatial in character 139 D. Limitations of Radical Theories on the Restructuring of Capital and the Labour Market 148 vii E. The Restructuring of Capital and the Geography of Unemployment 152 VII. M E T H O D O L O G Y 157 A. The Urban Analysis of Unemployment in the Vancouver C M A 159 1. Description of unemployment distribution in 1981 159 2. Change in the geographic distribution of C M A unemployment over time 164 3. The residential relocation of manufacturing production employees ....167 4. Geographic variation in umemployment rates for manufacturing production versus other occupations 170 5. The relationship between census tract car ownership levels and unemployment rates 171 6. The relationship between census tract unemployment rates, travel time to the CBD, and socioeconomic characteristics of the census tract population 172 7. Characteristics" of the unemployed in Vancouver C M A and the relationship between socioeconomic and housing characteristics of the labour force ; 183 8. Comparison of C M A and British Columbian unemployment levels' for occupations 186 B. The Regional Analysis of Spatial and Structural Changes in Manufacturing Production Activity Employment Demand 187 1. General trends in the spatial and organizational structure of industry in B.C 189 2. A more detailed look at structural changes and testing the relevance of radical theory in the B.C. context 191 VIII. Results of the Urban Analysis of Unemployment 200 A. Unemployment in Vancouver C M A 1981 ...200 B. Changes in the Pattern of Unemployment in the Vancouver C M A Study Area 207 C. The Suburbanization of the Manufacturing Production Labour Force 213 D. Comparison of Intra-Urban Variations in Unemployment Rates of Manufacturing Production Workers with Other Occupations 220 E. Car Ownership Findings 223 F. Results of the Regression Analysis of Total CT Unemployment Rates 1981 225 viii I 1. Stepwise regression of selected personal characteristic variables and travel time to the CBD, on total 1981 unemployment rates ....226 2. Regression analyses with indices of accessibility to manufacturing production employment zones 237 G. Characteristics of the Unemployed in Vancouver C M A and the Relationship between the Housing Market and the Socioeconomic Characteristics of the CT Labour Force 244 H . Occupational Unemployment in British Columbia 261 IX. Structural and Locational Changes in Manufacturing Production Activity in British Columbia 266 A. General Trends in Manufacturing Production Activity in British Columbia 266 B. Spatial Changes in British Columbias Manufacturing Production Output, Employment, Capital-Intensity and Wages 1971-81 276 1. Capital intensification in the core 276 2. Capital intensification allowing decentralization 287 3. The relative decentralization of industry to low cost labour areas -..292 4. The relative decentralization of industrial activity to break the bilateral relations between labour and capital 302 C. Review of Findings 305 X . Discussion of the Urban and Regional Analysis and Implications for Unemployment in the Vancouver C M A and British Columbia 310 A. Evaluation of the Urban Analysis 310 B. Regional Structural Changes in Manufacturing Production Activity and Prospects for Reduced Unemployment in the Province 329 XI. Conclusion 342 BIBLIOGRAPHY 361 APPENDIX A 374 APPENDIX B 378 APPENDIX C 381 ix Title Unemployment in Canada (Annual Average) 1921 to 1984 and Unemployment in OECD Nations Annual. Average 1955 to 1981 Unemployment Rates for Canada, British Columbia, and Vancouver C M A 1971-1985 Unemployment Insurance and Welfare Claims in British Columbia 1981-1985 The Labour Market in the Classical Economic Model The Firm and Industry Level Labour Demand Curves Under Perfect Competition Utility Maxmization:Work Utility MaximzatiomNo Work Utility Maximization and Hoursof Work The Income and Substitution Effects and the Supply Curve for Labour Labour Market Equilibrium The Competitive and Monopolistic Labour Demand Schedules Comparison of Competitive and Monopolistic Labour Markets Title The Effect of Wage Setting Contracts by Unions Effect of Supply Limitations by Unions Minimum Wage Legislation Effect on the Labour Effect The Effect of a Cheap-Labour Location on the Transport Cost Optimum Location in the WeberiaiT^Model The Assumed Labour Market Conditions at Location "O" and Location " L " in Weber's Model Occupational Composition ' of Total Unemployment and Occupational Unemployment Rates Unemployment (Labour Force-Employed) Comparison Ascending the Occupational-Skill Ladder Manufacturing Output Value-Added in British Columbia, Vancouver C M A , and the Vancouver "Core" Area 1965-1981 Manufacturing Production Employment Trends in British Columbia, Vancouver C M A , and Vancouver "Core" Area 1965-1981 Title Productivity Trends in British Columbia, Vancouver C M A , and Vancouver "Core" Area 1965-1981 Capital-Intensity Trends in Manufacturing in British Columbia, Vancouver C M A , and the Vancouver "Core" Area 1965-1981 Hourly Wage Trends in British Columbia, Vancouver ^ M A , and Vancouver "Core" Area 1965-1981 Manufacturing Exports from B.C., Percentage of Provincial GDP from Manufacturing Exports, and the Ratio of Manufacturing Shipments to GPP 1971-19.83 Occupational Shifts in the Employed Labour Force in Canada 1950-1983 List of Tables Title British Columbia Corporate Profits and Investment Income 1968-1983 The Occupational Composition of Manufacturing Activity for British Columbia 1981 Description of Major Personal Characteristic Variables and Coefficients from Correlation with the 1981 Total Unemployment Rate for each Census Tract Employment Demand CT Description and Weightings Used for Accessibility Indice Calculation Comparative Suburbanization Rates of Manufacturing Production and Other Workers Correlation Coefficients with Car Ownership Levels in Census Tracts (CAROWN) Regression Results for the Analysis of Personal Characteristics, Accessibility to the CBD, and Total Census Tract Unemployment Rates in Vancouver C M A 1981 Regression Results for the Analysis of Personal Characteristics, Accessibility Indices to Manufacturing Production Employment Zones and Total Census Tract Unemployment Rates in Vancouver C M A Unemployment Rates and the Composition of Total Unemployment by Occupation in Vancouver C M A (1980-1984) xiii Tide Occupational Composition of the Inner and Outer Area of the C M A Labour Force Distribution of Provincial Manufacturing Production Output and Employment in Vancouver C M A and "Core" Areas 1966 and 1981 Percentage Increase in Capital-Intensity (1971-1981), Percentage of Industry Output and Employment in the Core, and Wage Rates by Industry 1971 and 1981 Estimated Total and "Blue Collar" Unionization Levels in Vancouver C M A and the Rest of B.C. Capital-Intensity Levels for the Three Study Areas in 1971 and 1981 Growth in Output and Employment for the Three Study Areas (1971-1981) Capital-Intensification and the Relative Decentralization of Industries from the "Core" Areas Labour Costs (Wages) as a Proportion of Total Manufacturing Production Costs Plant Size Comparison Using Median Employment Cohort Size (MECS) Measure for Selected Areas Plant Size Comparison Using Average Employees Per Plant and Average Output Per Plant Measures - Selected Areas 1981 xiv List of Maps Title The Distribution of Manufacturing Production Value-Added Vancouver C M A 1964 and 1981 The Distribution of Manufacturing Production Employment Vancouver C M A 1964 and 1981 . Industrial Land Use 1955 Vancouver C M A Industrial Land Use Change 1955-1983 Vancouver C M A Vancouver C M A UIC Statistical Summary Office Areas 1984 Major Manufacturing Production Employment Zones of the Vancouver C M A Vancouver C M A 1981 Unemployment Rates by CT Vancouver C M A Distribution of Unemployment in Absolute Terms Vancouver C M A 1961 Unemployment Rates by CT Vancouver C M A 1971 Unemployment Rates by CT xv Title 1971 Residential Location of Manufacturing Production Labour Force within Vancouver C M A 1971 1981 Residential Location of Manufacturing Production Labour Force within Vancouver C M A 1981 Distribution of Labour Force with Trades, University, or Non-University Certificate or Diploma Variation in Unemployment Rates for Manufacturing Production and Non-Manufacturing Production Labour Force "Inner City" and Suburban Areas Vancouver C M A 1980 and 1984 1981 Manufacturing Unemployment Rates for Vancouver C M A at CT Level Definition of the "Inner City" of the Vancouver C M A Distribution of Low-Value Housing Vancouver C M A 1984 Distribution of Labour Force with Education Below Secondary Certificate Percentage of Total CT Population with English as Mother Tongue Vancouver C M A 1981 Chapter I INTRODUCTION Throughout the 1980's, unemployment has probably become the major socioeconomic problem at both the British Columbian provincial and the Canadian federal levels. Recurrent prime coverage of unemployment-related topics in the media and public perception of the severity of this problem ratify the importance attributed to the unemployment problem amongst the host of social and economic ills faced in modern life in Canada.1 Of course, the unemployment problem is by no means isolated to the Canadian context, but is a pervasive phenomenon occurring in most "advanced" Western economies. The persistently- high levels of unemployment experienced in recent years have not been matched since the depression years of the 1930's (see F I G U R E 1.1 for a plot of annual average unemployment rates in Canada from 1921 to 1985). Unemployment is expected to exceed 34 million in the OECD nations by 1984 (Kuenstler, P. (1984) p.221). Perhaps the most disturbing aspect of the rising unemployment levels is the associated longer average duration of unemployment experienced once a labour force member enters the state of unemployment (Dicken, P. & Lloyd, P. (1981) p.150). In British Columbia, the average number of weeks spent unemployed jumped from 13.4 in 1976 to 24.9 in 1985 (Statistics Canada 71-529). Canada has traditionally had higher unemployment levels than Western Europe because of dispersed markets and seasonality and, over the period 1965-75, an exceptionally rapid growth in the labour force (from demographic characteristics, changes in participation rates, and immigration policy) (Jenness, R. (1977) p.5). However, unemployment rates in Canada and the U.S. declined dramatically in the mid-1960's from large tax cuts in the U.S. and, in 1962, the devaluation of the Canadian dollar. : A Gallup Poll in mid-1984 found that 50% of Canadians interviewed felt that the most important problem, at a society-wide level, was unemployment Inflation was recorded as distant second (with only 27% of the poll vote) (Vancouver Sun (1984a)). 1 2 Unemployment r a t e (%) F igure 1.1 Unemployment i n Canada (Annual Average) I : : 1 I 1 I I I I 1921 1931 1941 1951 1961 1971 1981 '85 Source: Compiled from S t a t i s t i c s Canada data 71-001 "Labour Force Survey Group". This was the only period, since the early 1950's, that the Economic Council of Canada's target for national unemployment levels (3%) has been approached (Employment and Immigration Canada (1981) p.10). From the mid to late 1970's, Canada, British Columbia (B.C.) and the Vancouver C M A (the primary study area), all had unemployment rates that hovered around the six to eight percent level (see F I G U R E 1.2). Although a marked increase in unemployment rates after 1981 is obvious at all scales, B.C. has experienced noticeably higher unemployment rates than the Canadian average levels and the C M A figures have usually "followed" the B.C. situation with rates about one percentage point below.2 The rapid increase in unemployment in B.C. and the Vancouver C M A began after the exceptionally low unemployment resulting from the boom economic years in the province, 1979-81. There was also a recessionary high unemployment period in the Unemployment rates exclude "discouraged" workers and some researchers feel that the measure underestimates the actual incidence of unemployment or underemployment though, by definition, "discouraged" workers drop out of the labour force. Figure 1.2 Unemployment Rates f o r Canada, B r i t i s h Columbia, and Vancouver CMA 1971 - 1985 Unemployment Rate 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% B r i t i s h Columbia Vancouver CMA Canada B.C. Vancouver CMA Canada 1971 1975 1977 1979 1981 1983'84 1985 (Oct) (Jan) Source: S t a t i s t i c s Canada. Labour Force Annual Averages. 71-529 Labour Force Survey 71-001 Year 4 mid-1970's from the slowdown in economic growth, at a global scale, often attributed to OPEC supply-shock effects on world (and hence, B.C.) demand and the after-effects of the Vietnam War on the U.S. and world economies. However, the unemployment growth in the 1980's, in B.C., has been far more severe than in the mid-70's period. Between July 1982 and July 1984, B.C. lost six percent of its employed labour force (Regional Economic Services Branch (1984) p.5). By early 1985, the dismaying unemployment rates for Canada, B.C. and the Vancouver C M A stood at 11.0%, 16.5%, and 15.0% respectively. These unemployment statistics are derived from the usual source of the official unemployment rates - Statistics1 Canada's "Labour Force- Survey" (71-001). However, the "Labour Force Survey" statistics are calculated monthly on the basis of less than a one percent sample of housholds and include both part-time and full-time work seekers. The unemployment problem in B.C. actually appears worse when the more accurate unemployment totals (and hence rates) derived by adding 1) the number of Unemployment Insurance (U.I.) claimants and 2) the number of people' on G A I N (Guaranteed Available Income for Need) excluding seniors and the handicapped, are examined.3 The separate contribution of U.I. claimants and G A I N recipients to the combined total unemployment is shown in F IGURE 1.3. Unfortunately, the two data sets are only comparable at B.C. level. The plot in F IGURE 1.3 indicates that, in February 1985, almost one-quarter of B.C.'s labour force is unemployed and in receipt of unemployment benefits or some kind of work-related welfare. The actual number of unemployed could be higher as those persons who do not receive benefit whilst unemployed (which could be a substantial number for certain groups in the population, such as the unemployed youth) are excluded. 3 The statistics on G A I N recipients (after 1983) from the B.C. Ministry of Human Resources (M.H.R.) are confidential and have not been released publicly (for reasons unknown) and have been issued by special permission of the M.H.R. No. o f r e c i p i e n t s 350 000 300 000 250 000-200 000 150 000 100 000 F i g u r e 1.3 Unemployment I n s u r a n c e and W e l f a r e C l a i m s i n B r i t i s h C o l u m b i a June 1981 - F e b r u a r y 1985 22.6% 9.5% 24. 5°* T o t a l number o f unemployed r e c e i v i n g f i n a n c i a l s u p p o r t UIC C l a i m a n t s 15 .2%, Feb. 1985 S o u r c e : Employment and I m m i g r a t i o n Canada vP8840 " U . I . C l a i m a n t Summary S t a t i s t i c s " . 1980-1984 M i n i s t r y o f Human Resources- (B.C.) A n n u a l R e p o r t s f o r 19S1-82 and-1982-83 and more r e c e n t d a t a made a v a i l a b l e p e r s o n a l l y . S t a t i s t i c s Canada 71-001 " L a b o u r F o r c e S u r v e y " . F i g u r e s r e p r e s e n t a c t u a l unemployment r a t e from UIC and and M i n i s t r y o f Human R e s o u r c e s d a t a . ( T o t a l r e c i p i e n t s as a p e r c e n t o f e s t i m a t e d l a b o u r f o r c e ) 6 There would be some reason to believe that hardship levels would not be as severe as they may appear (given the high unemployment levels and the longer average duration of unemployment) due to the high percentage of working females in family groups and youths who can still be supported by working parents. That is, households would probably still have at least one member working and providing family income. However, the large increase in welfare recipients (which would exclude household members with other members at work) does contradict the suggestion that unemployment in the modern context presents minimal hardship (as is implicitly assumed in the bulk of monetarist economic theory and the concentration on inflation control).4 At the aggregated, national level, the costs of unemployment have been calculated as enormous. For example, in the U.K., Thrift (1979, p.126) describes how unemployment, even in the relatively lower unemployment period of 1974-1976, cost $20,000 million in lost tax revenue, payment of benefits, and losses in national income. Just the difference in output expected if the labour "resource" had been fully utilized has been estimated as amounting to hundreds of billions of dollars in the U.S. (and at least 11 to 12% as much in Canada) (Tarshis, L. (1984) p.115). In Canada, social cost accounting techniques have been used to estimate the total social and economic costs of unemployment (between 1970 and 1982) as approximately $76 billion dollars (Denton, R. (1983) p.19). This figure includes direct economic costs (from foregone production and lost wages), lost government revenue, and U.I. payments and estimated social costs of individual unemployment stress-related indicators. "The G A I N welfare rates are very low and would not provide a comfortable standard of living. In 1985, single people under 25 years receive $325 monthly, for the first month on welfare increasing to $375 per month after eight months (with many restrictions on possessions and house-sharing arrangements and exhaustion of credit source requirements). Those over 25 years receive $350/month for the first month increasing to $375 per month after eight months (B.C. Ministry of Human Resources (1985)). 7 At the individual level, costs include the more direct economic impacts on labour force members such as loss of income and the gradual loss of skills as well as the indirect more intangible detrimental social and psychological effects which are often virtually immeasurable (Tarshis, L. (1984) p.115; Thrift, N . (1979) p.126). The alienation and pathological ramifications of prolonged unemployment are often discussed in anecdotal form and are occasionally examined in socio-psychological studies. High unemployment incidence and duration is often linked to mortality, suicide, family breakdown, alcoholism, violent crime, juvenile delinquency, stress-related disease, and mental and prison admissions (Deaton, R. (1983) p.18). Sinfield (1984, p.240) believes that the full social cost- of unemployment is not- recognized because it falls unequally on the poorer and weaker sections of society. Work can be perceived as the key means by which an individual's life chances are circumscribed (Dicken, P. & Lloyd, P. (1979) p.128). In a market economy, the individual has to sell his or her labour power for sustenance and participation in consumer society. Work-related income and status are the determinants of the overall form of, and one's position in the social structure. Hence, the nature of work (and of course the lack of work) will be a primary influence on the individual's power and control over resources, perception by other people, and self-esteem. There would be many other broad social processes operating to influence one's life chances and access to social resources (such as education) but none would have such a direct effect upon the immediate life situation of an individual. As a result of this assumed importance of the labour force activity on the quality of life of members of society (usually a detrimental impact from unemployment), together with the recent high and persistent levels of unemployment, the unemployment problem in the Vancouver C M A has been selected as a relevant and significant topic for investigation in this thesis - at least at the time of the research undertakings. 8 The general aim of the thesis is to investigate the nature and causes of unemployment in the Vancouver C M A study area. That is, the research is oriented towards a determination of how the differentiation in unemployment characteristics (which can be identified at the intra-urban level) can help in the understanding of the underlying processes causing unemployment Although a few studies have emerged recently, the intra-urban focus is not the usual scale for the analysis of unemployment A regional perspective, of considerably less depth, is also provided. Due to resource constraints and the forbidding complexity of the unemployment problem in general, the investigation will necessarily be limited in nature and the specific nature of the research focus adopted is reflected in the methodological approach utilized. A distinctly geographic perspective for the analysis of unemployment is also a rather rare and recent approach to the problem. However, geography has been considered as an important basis for unemployment research on two broad criteria. Firstly, space must provide the ultimate constraint on the matching process between the demand for, and the supply of, labour. Hence, the relative location of labour supply and demand is important for a true understanding and practical application of theory and policy on the labour market operation. The abstracted labour market (an aspatial conceptual entity) must be brought "down to Earth" where space will play a significant role in the supply-demand adjustment process. Secondly, a geographical study basis is appropriate because spatial units can provide a useful analytic framework for unemployment research. This capability is particularly important when there is a paucity of data of the type required for an evaluation of some specific aspect of the labour market operation (as is the case in this study). In fact, the data base is usually deficient for most types of unemployment research and geostatistical data and statistical inference techniques, (based on these units) can help give some idea of the nature of the required missing information. The 9 benefits to be derived from the use of spatial-based labour market data apply to both the demand and supply of labour. For the demand for labour, spatial units can be invaluable for monitoring the dynamic form of the organization and spatial structure of economic activity. In relation to the supply of labour, space can provide a basis for analyzing the changing distribution and nature of society (as the "labour force") which would be, at least to some extent, reflected in the urban residential spatial strucure. The geographic perspective adopted for this study necessitates an explicit recognition of the inherent dangers of geographical determinism (the overemphasis of space as a causal agent) in the formulation of the methodology and the subsequent analysis. The specific objective of the thesis research is twofold. The first aspect is the major section of the research comprising an investigation of the changing labour supply characteristics and nature of employment demand in the C M A , from a spatial perspective, primarily to assess to what extent job dislocation (the spatial separation of available appropriate labour supply and demand) may contribute to intra-urban unemployment variation (and, by implication, to unemployment in general). This research consists essentially of a series of tests of relevance of the two major hypotheses proposed by theorists as the dominant explanation of intra-urban spatial unemployment variations. The "demand-side" hypothesis emphasizes the negative effect of the frictions of space (usually greater commuting costs and reduced information dissemination) on the probability of finding, or being able to accept, work. This viewpoint commonly implicates the decentralization process as a cause of observed high inner city unemployment The suburbanization of industrial activity (and hence, most additional labour demand of this type) is seen to increase the required journey-to-work trip for at least part of the appropriate labour force "entrapped" in the inner city core area 10 (often low-income) housing. The greater distance to potential work is believed to reduce the ability of these inner city residents to find and accept potential jobs and the resultant differential unemployment probability is held to underlie the mosaic of unevenness for unemployment levels and to be a significant cause of unemployment in the urban setting. Hence, increased distance from potential employment demand would be expected to be associated with higher unemployment levels.5 Access, mobility and the relative locational changes of employment demand are perceived as major determinants of the pattern of unemployment The alternative hypothesis (often termed the "supply-side" thesis) perceives the intra-urban variations in unemployment rates as- predominantly a product of other non-spatial factors. The major variables utilized to explain unemployment variations are usually socioeconomic characteristics of the labour force and the differentiated nature of the urban housing market That is, the personal characteristics of the labour force are thought to determine the probability of unemployment of individual members and the observed pattern is conceived to be a result of residential distribution of people (based on their personal characteristics) to the heterogeneous housing market Hence, space would reflect the housing distribution of those people with varying unemployment probabilities but would have little or nothing to do with the actual determination of unemployment probability. Consequently, this analysis is also an investigation of the appropriateness of the usual conceptualization of the C M A as the local labour market or the area within which space should have no effect on the labour market adjustment for any individual or group. Evidence to the contrary would suggest that there is actually a series of discontinuous local labour markets within the C M A geostatistical boundaries. The labour "sub-markets" would be defined by the location and space-time possibilities of sub-groups which would, in turn, probably be a result of the personal characteristics 5 It will be very difficult to assert causality in this study given the aggregated nature of the data utilized. 11 of labour force members. Although it is realized that this approach may not necessarily provide lb_ explanation of urban unemployment, it is hoped that it will provide some insight on the underlying processes at work - particularly as a consequence of the accompanying detailed investigation of the changing nature of the occupational, skill and housing characteristics of the unemployed in the C M A . The need for a search for processes underlying unemployment, in the C M A , operating at levels beyond the urban sphere, has justified the second major section of the research which is focused on the B.C. regional level. Broad economic structural changes in the manufacturing production sector have been examined at this wider geographical scale to investigate at least one dimension of the changing nature of labour d____i across B.C. 6 The regional focus on manufacturing production activity and occupations has not been based on an a priori conception of the economically vital nature of this sector but is simply provided as a case study of a major sector for which data is available.7 It is fully realized that the manufacturing industries comprise a declining sector which has probably received too much emphasis in existing theory and research - the service sector may well be having a substantial ameliorative effect on the reduced demand for labour in the goods-production industries. However, as discussed in subsequent sections of the thesis, the selection of the goods-producing sectors comprises an interesting and relevant study focus for a number 6The study of manufacturing production activity is operationally divided into three arbitrary geographic levels within the province - the core urban area of the Vancouver C M A , the suburban area of the Vancouver C M A , and the "nonmetropolitan" area of the province. 7The "machining", "product fabrication", "processing", "metal fabrication" and "materials handling" occupations in Statistics Canada's labour force and census data have been selected to represent the appropriate sections of the workforce for the comparison and integration with the manufacturing production statistics (also, from Statistics Canada) at the sub-provincial level. Although this assumption is by no means completely accurate, the rationale for this choice is reasonably sound (and is explained in detail in the methodological description in Chapter 7). 12 of reasons including: 1. The manufacturing production sector has a high concentration of low-skilled jobs and is a major potential source of work for these groups which have the highest probability of unemployment The manufacturing production labour force also has a large share of the pool of unemployed, has had exceptionally high unemployment rates for some time (at least in B.C.) and has experienced one of the highest increases in unemployment levels in recent years in the province. 2. Changes in manufacturing production activity would be closely linked to the process of deindustrialization thought to be a contributor' to the contemporary economic woes of many "advanced" economies. 3. Many theorists believe the autonomy of the service sector has been overstated and stress the importance of the role of those services directly linked to secondary activity (Noyelle, T. (1983) p.280). The overall decline of economic activity in B.C., during the 1980's, with the downturn in the resources industries, may provide some evidence of this proposition. However, the necessary link may no longer be as geographically tied with the expansion and integration of the "world" economy (from organizational changes, decreased linkage costs and improved communications technology). Hence, the first section of the thesis research is designed to evaluate 1) the contribution that a lack of access to "potential" employment opportunity makes to unemployment levels and variations in unemployment rates within the C M A , or alternatively, 2) to what extent unemployment variations within the urban area are a housing effect reflecting broad socioeconomic factors and broad economic structural 13 changes. The second goal is to synthesize some of the wealth of literature on the broader structural explanations of unemployment (many of which stress production activity in a key role) and to examine whether there is any evidence of these trends in the B.C. manufacturing production activity context Radical geography (and associated theory on the role of labour in the restructuring of industry (in which unemployment is usually perceived as a class weapon)) is the major school whose hypothesized processes are investigated in the second major section. This perspective has been selected as the primary field for investigation in view of the mass of literature published in recent times, based on a "neo-Marxian" approach; on labour's- role in broad structural changes, and in view of the rather minimal effort to provide empirical instantiation of the existence or outcomes expected from hypothesized processes. The background literature for the thesis research has been summarized and divided into five chapters. Chapter 2 presents a brief review of the major elements of the neoclassical models of the labour market to illustrate the underlying conceptual framework of most contemporary theory and policy in the "advanced" Western nations. The limited role attributed to space, the perceived nature of labour supply and demand and the associated labour market adjustment process, and the dominant value-orientation of the neoclassical paradigm are major themes of this chapter. Recurrent reference to neoclassical economic-based labour market theory and policy shall be made throughout the discussion following Chapter 2. Chapter 3 introduces some of the major constraints on the perfect operation of the labour market - many of which are thought to result in unemployment Social structural and spatial constraints are briefly reviewed. Spatial constraints on labour market adjustment provide the underlying basis for the division of the two alternative hypotheses on intra-urban. variations, in. unemployment., and. a fairly detailed review of past research and theory on the two major schools of thought is presented in Chapter 14 4. Chapter 5 is partly empirical in content with an examination of suburbanization of industry (in terms of output and employment) trends in the Vancouver C M A study area since the mid-1950's. The intra-urban decentralization of industry is the raison d'etre of the demand-side hypotheses of intra-urban spatial variations in unemployment The principal literature review for the second major research section is completed in Chapter 6 which consists of a syntheses of the major radical views on the role of labour in the restructuring of production systems. Unemployment has a key role in many of the radical geography hypotheses. The balance of the thesis follows the format of most research reports of this type with the exception of a major division of the result findings between Chapters 8 and 9 (summarizing the urban and regional level results respectively). Chapter 7 describes the methodological approach and Chapter 10 is an attempt to integrate the research findings at the two levels and incorporates discussion of some major implications of the study findings. The conclusion provides a quick review of major findings and surmises upon the nature of predominant processes at work and the possible future scenarios faced in the B.C. context Data sources utilized are primarily secondary in nature with a heavy reliance on existing Statistics Canada data. The most detailed data available is for the census years, particularly 1981, which is not an ideal year for the study of unemployment in the C M A due to the low unemployment levels experienced in this year. Manpower U.I. data has been used for a supplementary analysis of unemployment in 1980 and 1984 and has enabled the examination and comparison of the 1981 situation with the nature of unemployment in the C M A in more recent itmes. Statistics Canada's manufacturing production statistics at the sub-provincial level (in document 31-209), which unfortunately is only available up until 1981, has been the major information source for the regional level analysis. Chapter II THE NEOCLASSICAL CONCEPTION OF THE L A B O U R M A R K E T The nineteenth century historical and sociological context of the industrial revolution heavily influenced the classical economic conception of the market for labour. Under this perspective, the labour input to the production process was implicitly considered in terms of a horizontzal, perfectly-elastic long-run supply curve - supply being equal to the size of the lower-class population (see F I G U R E 2.1) (Tait Montague, J. (1970) p. 36). Figure 2.1 cost of labour (subsistence l e v e l ) The Labour Market i n the C l a s s i c a l Economic Model supply L(0) L ( l ) L qty Source: Adapted from T a i t Montague, J.(1970,p.22) Unlike more localized and scarce resources, labour was assumed to be at hand in the quantity and quality (homogeneous and unskilled) required to man the capital equipment at whatever location was chosen for industrial development Consequently, spatial considerations were completely irrevelevant and demand for labour was perceived as being met by an automatic response from the unlimited population of workers. Excess labour supply above demand requirements would not occur as the "natural" wage rate (subsistence level) ensured on equilibrium matching of supply to demand as 15 16 mediated by Malthusian limits to the reproductive behaviour of workers. This view of the labour input was consistent with: 1. The social relations of that European historical period in which the subistence wage was perceived as a logical extension of the traditional feudal relationships from which the capitalist mode of production emerged and, 2. The massive rural-urban migration of labour to burgeoning industrial towns which ensured an unlimited supply of labour at the basic cost required for the physical sustenance of the worker (and family). In early neoclassical economic theory of the late nineteenth century, the concept of the labour "market" was developed to incorporate the analysis of labour within a market like that for any other commodity for sale. The introduction of the notion of possible scarcity in labour inputs inspired the adoption of a positively-sloped supply curve in subsequent labour market theory. The early neoclassical appproach (up to approximately the mid-twentieth century) was primarily concerned with the nature of the demand curve and the use of marginal analysis to judge the returns made possible by labour inputs (Tait Montague, J. (1970) p. 90). The market for labour was subsumed under the neoclassical rubric of marginal utility theory (proposed by Walrus and others) showing how prices at which commodities or factors of production exchanged are determined by the relative marginal utilities of people taking part in the transactions. Such fundamental neoclassical perspectives provided the foundation for the sub-discipline of labour economics which has evolved as perhaps the major Western contemporary field of study encompassing a systematic, theoretical treatment of labour in the (capitalist) economic, system. Although based on the neoclassical economic paradigm, the simple modelling of early proponents has been subsequently modified in 17 an attempt to account for observed imperfections in the ideal operation of labour market A. THE D E M A N D A N D SUPPLY FOR LABOUR IN COMPETITIVE M A R K E T S In its simplest form, the single, spatially-abstract labour market is conceived as a bourse or mechanism for matching job-seekers to job-providers (Dicken, P. and Lloyd, P. (1981) p.128) or simply as a convenient abstraction for the purpose of rationally organizing ideas about the job-matching process (Fleisher, B. and Kneisner, T. (1984) p.172). Labour, as an impersonal factor of production, is assumed to be discretely exchanged' in a market like any other commodity market with no interdependence, transaction cost or planning. The wage is portrayed as merely the price paid to the seller of labour by the buyer. In common with all neoclassical theory, the operation of the labour market is assumed as being governed by a number of axioms: 1. A perfectly competitive economic environment within which rational, profit-maximizing economic "men" make decisions with perfect knowledge. 2. Exchange is the central social and economic process. 3. Price is the key signal and short-run clearing mechanism. 4. The model is perfectly equilibriating and symmetrical. 5. Disequilibrium will be met by substitution as the main adjustment process. 6. The outcome is optimal and perfectly fair - the market is perceived as the meritocratic allocator of rewards to individual persons. 7. Individuals exercise free choice and outcomes align with preferecnes and fulfil utiliy- maximization criteria. (Clark, G. (1983b) p. 166; Storper, M . and 18 Walker, M . (1983) p. 8-9) Under this scenario, labour and its characteristics are listed in a central market place, bidding ensues, and the price is determined by the interaction of supply and demand and substitution options. Space, if recognized at all, is simply a passive stage on which labour exchange is freely facilitated (Clark, G. (1983) p.2). However, the friction of space on the labour market operation is an essential aspect of the first part of the intended research aim and spatial (and other) constraints are introduced after a brief overview of the ideal operation of labour markets in neoclassical economic theory. 1. THE D E M A N D FOR LABOUR The marginal productivity principle is the primary means of assessing the demand for labour at the level of the firm and provides the essential link, in labour economic theory, between the product and labour markets. Labour is envisaged as a divisible commodity arranged according to the most efficient mode of production. Labour demand is usually referred to as a derived demand stemming from a 1) market relationship (the demand for goods and services to be produced and the marginal returns to the enterprise from a small variation in sales) and 2) a technological relationship (the marginal physical productivity of labour or the output that results from a small increase in labour services with capital fixed) (King, J. (1972) p.19). The product of the marginal revenue (MR) (derived from the product market) and the marginal physical product of labour (MPPL) gives the marginal revenue productivity of labour (MPPL) or the addition to total revenue produced by the employment of one extra unit of labour. Having determined the returns to the enterprise from the addition of units of labour,, comparison with the cost to the employer in adding labour services, supposedly reveals the amount of labour required 19 for profit to be maximized - that is, where the M R P equals the marginal cost (MC) of labour (a function of the going wage rate). Under the equilibrium assumptions firms will hire labour as the only variable factor of production, until the M C of labour is equal to the wage that it creates. Therefore, the firm's labour demand curve is defined by: W = V M P L = P.MPPL where W = wage P = market price V M P L =• value of the marginal : productivity of labour (MPPL.P) The key concept of marginal productivity implies a negative relationship between the wage rate and the level of employment offered by the firm - ceterus paribus, increased wage rates will mean a decrease in the firm demand for labour. The negative slope of demand curve (see F I G U R E 2.2) reflects" this inverse relationship and the demand schedule itself shows the amount of labour firms would be willing to hire at various wage rates. In this microeconomic view, marginal productivity is used to derive the firm's level of employment and not its wage (which is perceived as being determined exogeneously at the aggregate or industry labour market level) (Addison, J. and Siebert, W. (1979) p.35). As such, it does not constitute a theory of wages but is simply posited as the "rational" process for establishing derived demand for any factor of production. The derivation of the demand for labour when the firm adjusts capital inputs requires a slightly more complicated analysis by incorporating the concept of an expansion path of points of tangency between isocost and isoquant lines for labour and capital (Fleisher, B. and Kneisner, T. (1984) p. 60). Isocost (or isoexpenditure) lines 20 Figure 2.2 The Firm and Industry Level Labour Demand Curves Under P e r f e c t Competition w U I ) L qty _ L L qty Source: Adapted from M. Gunderson (1980,p.148) show how the firm can implicitly trade-off labour and capital for a given budgetary constraint and isoquants are the locus of input combinations capable of producing a given level of output By allowing, for example, the wage rate (w) to vary, substitution (input mix) and scale (output quantity) effects (operating on the expansion path defining the way a firm adjusts its inputs as output grows or contracts) are considered to be the determinants of the form of the labour demand schedule. The absolute quantity of capital demanded from wage change is more unpredictable under these conditions and the elasticity of demand for labour is greater than when capital levels are fixed. Most analyses assume the technical relationship between production inputs and outputs (the production function) as fixed. At industry levels, changes in labour demand are evaluated from changes such as movements in the price of output Decline in product price is seen to affect firm's demand curve for labour because the value of the marginal product of labour will drift downwards making labour demand schedules steeper than for those at the firm level (see F I G U R E 2.2) (Fleisher, B. and Kneisner, T. (1984) p. 75). 21 In summary, the study of labour demand in labour economics is pivoted around how changes in product demand and labour and capital prices affect the firm's demand for labour (Ehrenberg, R. and Smith, R. (1982) p. 21). 2. THE SUPPLY OF LABOUR Since about World War II, there has been a considerable research emphasis shift from demand manipulation to the intrinsic nature of supply in the short and long term (Tait Montague, J. (1970) p. 35). Analysis of individual labour supply in the shortrun is primarily focused on the supply response to changes in the wage rate and in non-labour income. The neoclassical model of the supply of time (labour hours) to the marketplace is basically a theory of consumer behaviour in which individuals freely choose to sell their labour to acquire income in the light of their utility functions (containing some trade-off between consumption of goods and services and leisure (non-market) time). Individuals are prevented from consuming unlimited quantities of goods and hours due to the finite nature of scheduled time and the assumed limited income available to them (Fleisher, B. and Kneisner, T. (1984) p. 117). These limitations are summarized in the budget constraint line (see the line connecting g(l) and v(l) in F I G U R E 2.3) defining the individual's consumption opportunities - consumption measured along the vertical axis and hours of (non-market) leisure time along the horizontal axis. When the marginal rate of substitution ((MRS) the negative slope of the indifference curve between "bundles" of goods and leisure at a given utility level) is less than the market wage, the decisionmaker chooses to sell some labour time to the labour market (see point "a" in F IGURE 2.3). If the indifference curve intersecting the budget constraint at the point indicating zero hours of market work (h(m)) is steeper than the budget constraint at that point then utility is maximized, (given U(2) is a high level of utility than U(l)) by not participating in market work at all. (see Figure 2.3 U t i l i t y Maximization: Work Goods & services $ income g(D U(D U(2) Figure 2.4 U t i l i t y Maximization: No Work Goods & s e r v i c e s $ income g(D v ( l ) 0 h(m> Hrs 0 h(m) nrs Source: A f t e r F l e i s h e r , B . and Kneisner,T. (1984,. p. 120) Figure 2.5 g ( l ) U t i l i t y maximization g(0) and Hours of Work Source: A f t e r Fleisher.,B. and Kneisner,T. (1984, p.119) $ income U(2) U( l ) $1(0)-. v ( l ) J 1(0) y(0) t o t a l income earnings from market work Source: 0 h(0) h(m) Hrs A f t e r F l e i s h e r , B . and Krieisner,T. (1984, p.124) 23 FIGURE 2.4) That is, for an individual not to participate in the labour force, the MRS between market goods and time must exceed the market wage rate at the point where no work is performed (h(m)). As the market wage increases (shifting the budget constraint), it will eventually reach a value where non-participants in the labour force become indifferent between working and not working - a value called the reservation wage rate where the budget constraint is tangent to the indifference curve at h(m) hours. Further increases in the market wage will lure the individual into labour force participation. The decision-maker would be seen to maximize utility where the slope of the budget constraint (market wage rate) equals the slope" of the* highest indifference' curve for that individual. Utility is therefore maximized (see F IGURE 2.5) at point "b" by consuming h(o) hours and g(0) goods. Clark (1983b, p. 167) has paraphrased this process description as the offering of labour for sale by individuals at a minimum bid price (reservation wage) based on the calculus of utility. Individuals are valued in terms of their individual contributing value to production and supply and demand set the market price (wage). If there are no "bids" greater than the reservation wage, labour is withdrawn from the market Invariant participation rates were the prevailing view by economists until well into the twentieth century (Tait Montague, J. (1970) p.43). Previously, labour supply variations were primarily attributed to demographic changes. In more modern neoclassical treatments of labour supply in the short-run, the focus is upon the "supply of labour" as the product of the number of workers by the number of hours offered for sale and the response of this total supply of labour hours to wage rate changes. The supply schedule is ascertained by the "calculation" of utility maximization points at various wage rates thus revealing how the optimal number of hours, is affected by changes in the wage rate and nonemployment income. 24 The slope of the market supply schedule is generally perceived as being positive on the assumption that higher market wages raise the price of leisure relative to the price of consumer goods and hence encourage a substitution of work for leisure and increases hours supplied (the substitution effect). At some point, the supply curve is believed to bend backwards (see F I G U R E 2.6) as a result of the "income effect". With increasing wages, the individual becomes "richer" and eventually prefers to trade-off consumption .for greater leisure time (Addison,! and Siebert, W. (1979) p.73). Figure 2.6 The Income and S u b s t i t u t i o n E f f e c t s on the Supply Curve f o r Labour wage Income e f f e c t ( l e s s hours _ and maintain income through higher wages) S u b s t i t u t i o n e f f e c t ( s u b s t i t u t i o n of work f o r l e i s u r e w i t h higher wage rates) Hours of Work Offered f o r Sale Source: A f t e r T a i t Montague (1970, p .44) The role of cultural factors and macroeconomic change (such as increased cyclical unemployment), on the participation decision, and analytic treatments of the individual's supply decision in the light of their relevant household context are other major aspects of the labour economic study of labour supply in the short-run (Hewings, G. (1977) p.86). Long-run supply changes are examined within labour economics under the guise of theories of the investment in human capital by the household and. the firm. Human capital has been broadly defined by Myers (1975) as that: 25 ...national stock of wealth inhering in human beings, representing the capitalized value of income streams resulting from expenditures, public and private, or education, health, training, migration' and the like... (1975, p.94) Under this theoretical framework, individual wage variations are perceived as reflecting differences in labour quality and hence the V M P of labour units resulting from variable embodied human capital investment If the worker wishes to increase his or her wage rate in the long-run, they will choose to add to their skills through the expenditure of time and money on schooling and training. (Storper, M . and Walker, R. (1983) p. 8). However, this decision is also framed within utility maximization criteria, with the occupation alternative chosen being: that one yielding the greatest present value and hence maximizing the individual's wealth. Individuals must choose whether or not to incur direct costs such as tuition and foregone (lower) earnings in order to reap future benefits. The decision to undertake an increment to the individual's stock of human capital is considered optimal whenever the rate of return on that investment is greater than the applicable rate of interest Hence, the present value of the investment must exceed its cost (Fleisher, B. and Kneisner, T. (1984) p.296). Individuals are seen to rationally adjust their levels of education (embodied human capital) with respect to their immediate consumption and future expected earnings, thus fulfilling wealth maximization imperatives and their respective preferences. Therefore, observed differences in income among individuals is a result of differences in human capital which are individually derived (Clark, G. (1977) p.14). 3. THE INTERACTION OF SUPPLY A N D D E M A N D FOR LABOUR Prevailing wage rates utilized in deriving the equilibrium level of labour demand at the firm level, are generally seen to be an outcome of the interaction of labour supply and demand schedules at the aggregate market level (which many be 26 delineated on industry, occupation or geographic criteria). The firm supply of labour is usually assumed as homogeneous and perfectly elastic (horizontal) at the market wage rate. Competitive firms are wagetakers, and are therefore held to be able to employ all of the labour they want at the resulting market wage rate (see F IGURE 2.2) (Gunderson, M . (1980) p. 147). However the aggegate supply curve is, as shown in FIGURE 2.7, the total number of hours workers will wish to sell at each wage rate (with the backward bend from greater income levels being accompanied by an increased desire to spend more time in leisure activities). The market labour demand schedule represents the summation of the labour demanded by all firms in a particular labour market at each level of the real wage (allowing for feedback effects from the markets for final output) (Ehrenberg, R. and Smith, R. (1982) p.28) Where supply and demand intersect, the market-clearing or equilibrium combination of wages and quantity of labour demanded (w(o) and L(o) respectively in F I G U R E 2.7) is found and labour is assumed to be efficiently allocated and all parties completely satisfied. The market for labour is cleared at w(o) because the quantity of labour workers desire to sell matches the amount employers -desire to purchase. At w(l) there is an excess of labour up for sale and, at w(2), insufficient labour will be attracted to meet demand requirements (Fleisher, B. and Kneisner, T. (1984) p.173) The equilibrium wage rate, w(o), becomes the going wage rate for firmspecific marginal productivity assessment and consequent levels of labour demand required. As such, marginal productivity theory does not really provide a basic rationale for wage determination and has been criticized on these grounds (Smith, D. (1977) p.69). Unlike the classical economists who perceived production labour as the sole source of value, the neoclassical paradigm uses a relative measure of value - that of scarcity (supply and demand) as measured by market prices - to define the worth of 27 Figure 2.7 Labour Market E q u i l i b r i u m $ wages w(2) -A-- t -/ 1— w(0) w(l) | excess demand I at w(2) 0 L(0) Source: -. A f t e r F l e i s h e r , B. and Kneisner, T. (1984, -D.161) workers (Clark, G.L. (1984) p.178). The market wage is basically a phenomenon resulting from the supply-demand interaction (obviously within an effective labour market) and marginal productivity, as the "value" labour contributes to the enterprise sales revenue, is only indirectly responsible for the determination of wage levels. Market labour demand is the summation of all firms' demand for labour hours at various wage levels and is directly appropriate in assessing the nature of the labour-demand / labour contribution (to output) relationship. However, the wage paid to labour, even within the neoclassical conception, is still fundamentally a result of the interaction of the market demand curve with the supply curve. As a consequence, the marginal productivity of labour (though an influence on demand) could well be conceived as independent of the supply situation (which is supposedly originally determined by market wage levels) and, if so, is only an ancillary aspect in the setting of the equilibrium wage. Interdependencies and contingency, rather than unidirectional causality, characterize the neoclassical models. The somewhat tautological neoclassical explanation of wage determination is discussed further in Chapter 10. 28 Implicitly assuming away the more fundamental aspects of the creation and distribution of value (as natural and fair in market economies), supply and demand models are primarily used for predicting how "exogeneous events", such as labour supply and productivity changes influence wages and employment (Fleisher, B. and Kneisner, T. (1984) p.173). B. CONSTRAINTS ON THE PERFECT OPERATION OF THE LABOUR MARKET RECOGNIZED BY NEOCLASSICAL THEORISTS A number of real world phenomena are incorporated within neoclassical labour market theory to account for the inevitable' deviations' which impinge"' upon- and prevent the-ideal operation of the market for labour described in the previous section. These appended analyses are usually centred upon modifying or relaxing some of the tenets of the simple neoclassical market conception - the assumed perfectly competitive environment (for buyers and sellers of labour), perfect knowledge by all actors, homogeneity of the "commodity" for sale, perfect mobility (from the aspatial assumptions), and the lack of institutional constraints on wage movements and the adjustment process in general. When the ideal conditions are not fulfilled, the "exogeneous" distortions of markets are entered into labour economic analyses as malfunctions in the natural, equilibrium process. 1. NONCOMPETITIVE BUYERS OF LABOUR Imperfections in the product market can prevent the ideal labour market outcome from occurring. In the case of the firm being a monopolist in the product market, that firm will also be the industry (for the product considered) and will influence its price in the determination of output levels. Because the monopoly firm is the industry, its output demand curve is the downward-sloping, market demand, schedule, and as additional units of output are offered for sale, the price the monopolist can 29 charge must decline (Fleisher, B. and Kneisner, T. (1984) p.196). The basic disparity between adjustment in the competitive model, and the supply-demand interaction underlying the monopoly product market outcome, stems from the determination of a monopolistic labour demand curve which lies below the competitive labour demand schedule (see FIGURE 2.8). This divergence results from the different nature of the profit-maximizing output decision which has direct implications for derived labour demand. Unlike the competitive decision-maker, the monopolist bases the profit-maximization decision on the product marginal revenue (MR) schedule rather than the demand schedule (Gunderson, M. (1980) p.152). Marginal revenue- is the additional revenue generated by selling an additional unit of output and, because the monopolist has to lower the price on _J units of output (and not just additional units) to sell more output, the MR will fall faster than the price. Hence, the MR schedule will lie below and to the left of the demand schedule (Fleisher, B. (1970) p. 161). Profit is maximized where MC equals MR and the equilibrium outcome will be one of less output and a higher price than if it were a competitive firm on the product market This situation has direct ramifications for the derived demand by the monopolist The competitive labour demand schedule is given by the product of the MPPL by the market price of output (P) (resulting in the value of the marginal product of labour (VMPL)), that is: W = VMPL = P.MPPL However, the monopolist labour demand curve is derived from the MR schedule: 30 W = MPPL.MR = M R P where MRP = marginal revenue product Since the monopolist MR schedule lies below the demand schedule, the monopolist's labour demand schedule also lies below the competitive firm's demand schedule (see F I G U R E 2.3). The monopolist's demand for labour falls faster than it would for a competitive firm because both M P P L and M R fall (because output price must be lowered) when the monopolist hires more labour (thus creating more output). Consequently, if the firm has monopoly power, it will use less labour L(m) and pay a lower wage w(m) than if competition prevailed (L(c) and w(C)). In the competitive situation, labour is hired up to the point where the wage rate equals the value of the marginal productivity of labour (w(c)). Under monopoly, the difference between the wage (w(m)) paid and the VMP under monopoly (VMP(m)) has been termed as a measure of the Pigouvian exploitation of labour (per worker) (Gunderson, 31 M. 1980) p.153). The second major type of noncompetitive market imperfection is the case of the monopsonist where there is only one buyer of labour in the market Oligopsony (with only a few firms buying labour) is usually a more realistic scenario and only requires slight theoretical modification of the monopsony model. Because the monopsonist is the only buyer of labour, its labour supply curve is the labour market supply curve and it is therefore a wagesetter having to increase wages to get additional units of labour. Thus, the monopsonist faces an upwardly-sloping labour supply curve (at the going wage rate) rather than a perfectly elastic schedule faced by the competitive firm (Gunderson, M. (1980) p.165). As at the competitive industry level, this labour supply curve shows the average cost of labour or the wage that must be paid for each different size of the firm's workforce. The major departure from the competitive model lies in the derivation of a MC of labour curve, lying above the average cost (AC) or supply curve, as the relevant decision-making schedule (see FIGURE 2.9). This difference stems from the assumption that the firm cannot increase units of labour without increasing the wage rate to aJJ employees (existing and intended additions). As a result the larger the monopsonist's workforce, the larger the difference between its current wage (AC) and its cost of adding a worker (MC) (Fleisher, B. and Kneisner, T. (1984) p. 205). The MC of adding another worker equals the new wage to additional employees and the addition to wage costs of existing workers (to maintain parity). 32 Therefore, the M C of adding an additional worker is greater than the average cost and the appropriate M C schedule is thought to lie above the supply (AC) schedule. This equilibrium orientation totally ignores the possible wage effect of a potential balance of bargaining power favouring the firm as the only purchaser of labour in a particular labour market Profit maximization is obtained by hiring labour until the M C of labour equals the M R generated by that unit M R is given by the V M P schedule in the competitive product market situation. The monopsonist restricts the quantity of employment demanded, in relation to the competitive scenario, because hiring additional labour becomes relatively more expensive (required demand shifts from L(c) to L(m) in F IGURE 2.9). The actual wage paid in the monopsonist firm is read off the supply curve at that level of employment demand resulting from the interaction of the M C 33 and VMPL (demand) curves. The supply curve is the indicator of the amount of labour which will be forthcoming at each wage (that is Urn) units at w(m)). The wage paid (w(m)) is less than the wage that would need to be paid to employ the competitive labour demand outcome (L(c)) and is also less than the VMP of L(m) units of labour used in the monopsonist outcome. That is, the monopsonist pays a wage rate to the worker less than their marginal value to the firm (though the value of output does equal the MC of producing it). This difference is termed the monopsonistic exploitation of labour -equal to VMP(m) - w(m) per worker. A further outcome of the inequality between the VMPL and wage rate paid is that an increase in? wages may not necessarily lead to a decrease in the employment level in the presence of exploitation (Addison, J. and Siebert, W. (1978) p.52). 2. N O N C O M P E T I T I V E S E L L E R S O F L A B O U R Another distortion on the perfect operation of the labour market, considered in the labour economics discipline, is the effect of unionization as a situation where the sellers of labour are noncompetitive. The impact of unions, through contracts and collective bargaining agreements (often at an industry-wide level), are primarily focused on the nature of the supply curve. Wage setting in contracts is perceived as making the industry supply curve horizontal so that no employee can get paid more or less than the contract wage (Ehrenberg, R. and Smith, R. (1972) p.38). The modified supply-demand interaction outcome results in a wage above the competitive equilibrium with employment levels below those resulting from the lower competitive wage result (see FIGURE 2.10) A "surplus" of labour remains (L(s)-L(u)) as, at wage W(u), L(s) workers want jobs but only L(u) can find work. 34 Figure 2.10 The E f f e c t of Wage-Setting Contracts ^ by Unions w(u) w(e) L(u) L(e) L(s) labour quantity Source: A f t e r Ehrenberg, R. and Smith, R. (1982,p.38) Figure 2.11 E f f e c t of Supply L i m i t a t i o n s by Unions w(e) ' (u) ^ S ( c ) • L(u) L(e) labour qty Source: A f t e r Ehrenberg, R. and Smith,R. (1982, p. 4 0) 35 Another important aspect of unionization considered is restrictive entry policies which can also hamper the idealized response of labour supply to labour demand by directly limiting supply (effectively making the supply curve vertical). Employers hire all labour from the union and the union controls who, and how many members, it lets in. The noncompetitive outcome of restricted supply is also an artificially inflated wage (w(u)) and a reduction in labour demanded (see FIGURE 2.11) (Gunderson, M. (1980) p.308). Reductions in the total labour demand from higher wage levels (and restricted supply to some extent) is often attributed as a major cause of unemployment via " the determination of monopolistic trade unions to insist on* levels of pay that price men out of work altogether " (The Economist 1984 ). The impact of unions on non-union wages and demands and indirect effects on protective trade, automation, and work-related legislation constitute other aspects of labour economic theory and research (which unfortunately cannot be discussed due to the limited nature of this analysis). Minimum wage legislation, often at least partly instigated from collective labour groups, can have a similar effect to the wage contracts of unions but are generally more broad in their occupational and geographic spheres of relevance. This institutional barrier would flatten out the supply curve at the set minimum wage level ($3.50 per hour in Canada and $3.65 in British Columbia in 1984 (Statistics Canada 1984)). In FIGURE 2.12, a reduction in demand from D to D(l) would not result, in a decrease in wage below w(min) - thus decreasing labour demand even further (to L(min)). Wages under competitive conditions should drop to w(c). The negative ramifications of minimum wage legislation on efficiency aspirations and particularly on the employment opportunities of those low-skilled whose VMPL is considered below the minimum wage, is commonly emphasized within the labour economic literature (Fleisher,, B. and Kneisner, T. (1984) p. 185, P.469). 36 Figure 2.12 Minimum Wage L e g i s l a t i o n E f f e c t on the Labour Market $ w D •S w(min) w(c) competitive supply curve L(min) L(c) L qty 3. OCCUPATIONAL CONSTRAINTS Although some labour economic theory relaxes the usual assumptions of homogeneous labour and admits the existence of an occupationally differentiated workforce, there is minimal explicit analysis of occupational bottlenecks to labour market adjustment. Beyond aggregate conceptions of the working-age population as the potential appropriate labour supply, the ability of a worker to fill vacant employment demand is perceived to be severely reduced by the skill and qualification levels which act as entry prerequisites for the heterogeneous demand for labour. In labour economic theory, occupational mobility is usually considered as being relatively unconstrained except for the possible effect of a number of institutional constraints beyond the scope of the discipline (Addison, J. and Siebert, W. (1979) p.184). Where there has been some recognition of people as occupationally immobile, at least in the short-run, the result is seen as a series of "non-competing" groups in the labour market (Samuelson, P. (1967) p.552). This socially (or "biologically" as Samuelson contends) derived restraint on the individual's choice of labour demand 37 opportunities, delimits a set of sub-markets with corresponding unique supply, demand and wage conditions. In some more enlightened labour economic theoretical treatises, the conception of the aggregate labour market is acknowledged as being confined to certain occupational or industry (and geographic) contexts (Gunderson, M. (1980) p.148). The existence of occupational heterogeneity in the labour supply is also used to explain the nature of individual-based wage differentials, and imbalances in the supply-demand sub-markets are assumed as being temporary in view of the longterm equilibriating adjustments by individuals choosing to upgrade their skills as prescribed by human capital theory. The possibility of labour market segmentation is often discussed but generally given little theoretical treatment (see Chapter 3). 4. INFORMATIONAL BARRIERS Perfect information is assumed in the conception of the ideal labour adjustment model in all of the aspects relating to workers' and employers' utility -• maximizing decisions. From the marginal productivity evaluation of labour inputs, to the optimal choices made in human capital investment theory, to the awareness of any regional wage differentials, complete knowledge is an important condition for the achievement of the efficient, equilibrium outcome. However, labour economic theory does explicitly recognize the fallibility of this assumption and imperfect information is posited as a central factor underlying observed wage differentials (within given occupations) and the seemingly paradoxical coexistence of excess supply and excess demand in the labour market The job search process is inevitably restricted by incomplete information and the resultant outcome is far "inferior" to the competitive model predictions in which workers will allocate themselves to create an equilibrium situation throughout the geography of the economic system (Addison, J. and Siebert W. (1974) p.171). The potential employee, rather than the employer, is the focus of labour market theory on the job search process. 38 Facilitating the adjustment of the labour market perceived to be substantially constrained by the less than perfect awareness of the relevant actors, is a principal rationale for the establishment of Canada Manpower Centres (Employment and Immigration Canada (1981)). 5. GEOGRAPHIC SEPARATION OF SUPPLY AND DEMAND OPPORTUNITIES In the aspatial setting of the ideal, single labour market, imperfect geographic mobility, in the matching of supply and demand, is obviously assumed away. However, the physical separation of labour supply and demand locations is one of the most apparent constraints in the provision of the quantity of labour required at a potential • or actual work site. More elaborate labour economic approaches continue to adopt the stance that labour is mobile in the longer term and evidence of regional and international migration is presented in support of this doctrine (Rees, A. and Schultz, G. (1970) p.2). Whether the locational adjustment of supply to demand (for the most efficient allocation of labour) can or should be made in the long-term is a highly contentious issue in current times. In the historical period appropriate to classical economic theory, it was assumed labour would naturally migrate in response to wage and employment opportunity and this perspective has been perpetuated in the neoclassical paradigm. However, like all factors of production in neoclassical theory, the response of labour is not instantaneous and it is recognized as being relatively immobile in the short-run. There are also limits on the spatial range of potential employment from the given residence of a worker which is defined by the daily commuting trip and the means available for this journey-to-work (more on this in Chapter 3). To the extent that distance can be perceived in a positive relationship with costs which discourage interaction, spatial separation can be. considered as having a frictional effect on labour market adjustment (Dicken, P. and Lloyd, P. (1981) p. 131). 39 Consequently, short-run adjustments are constrained by the distance variable and longer-term residential relocation would be subject to a degree of inertia from community and familiarity ties, invested capital in the original location, aversion to uncertain environments, welfare policies which reduce costs of not moving, and monetary costs of relocation to accessible employment (de Souza, A. and Foust, J. (1979) p.324). Despite the recognition of short-run constraints and possible barriers to residential relocation impeding optimal labour market adjustment, labour economics has minimal analytic incorporation of geographic factors and their influence on the jobmatching process." Space is briefly acknowledged as a variable showing the* instantaneous and perfect matching of supply and demand but there is certainly no coherent treatment of geographic labour makets - particularly at the local level. In many ways, this abstract theoretical inclination is a reflection of the discipline's assumptions rooted in an underlying classical economic philosophy labelling labour as a commodity - and a willing, mobile and readily available one. C. UNEMPLOYMENT According to the classical analysis and the unconstrained labour market operation conceived in neoclassical theory, there should be no such thing as involuntary unemployment (Addison, J. and Siebert, W. (1979) p.384). "Involuntary unemployment" is roughly equivalent to the most widely accepted definitions of unemployment (as an economic indicator) which require that a person be available for work, actively seeking work, and unavailable to find work even for a real wage rate below the previously attained level (Fleisher, B. and Kneisner, T. (1984) p.24). The underutilization of any resource (including labour) will not occur, in neoclassical models, according, to Say's law of markets in which "supply creates its own demand". If a worker is made redundant, he or she will be reabsorbed by bidding 40 down wages so that a greater quantity of labour can be utilized by the firm. However, this naive conception of unemployment is criticized in labour economic theory which recognizes the constraints on the perfect labour market adjustment process (as outlined in Sections 2.A and 2.B) which will result in at least some level of unemployment at any given point in time. Nevertheless, unemployment is still perceived as a consequence of the dysfunctioning of natural equilibriating tendencies in the interaction of supply and demand. A succinct statement of the major labour economic explanations of unemployment is difficult to produce but there does appear to be a research and theoretical emphasis- within the discipline on those aspects of classical theory which explain away all unemployment as either "frictional" (short-term changes in the type of demand for labour), "voluntary" (in the sense of an unwillingness of workers to accept jobs at the wage level offered), or from institutional wage rigidities. Fleisher, B. and Kneisner, T. (1984, p.464-5) believe that unemployment has been overstressed in its interpretation as a simple form of excess supply and that, in fact, the major consideration is the role played by the individual in determining job opportunities. Few labour economic treatments of unemployment progress beyond the microeconomic examination of the labour supply curve and the effect of "exogeneous variables" (particularly minimum wage legislation, union, and unemployment insurance (U.I.) impacts) on the job search process and tend to focus heavily on how individuals determine their optimal job search strategies. The lack of information about a) job opportunities, b) appropriate human capital investment adjustments, and c) about the future in cyclically-sensitive industries, is posited as the major source of unemployment (Fleisher, B. and Kneisner, T. (1984) p:521). The other major attributed cause of unemployment relates to wage rigidities and increased reservation wages, from artificially high, minimum or contract wage levels (which require wages above the VMPL of, in particular, low-skilled workers - hence 41 making them "unemployable"). Ul effects are thought to raise the reservation wage leading to longer durations of search, higher wage expectations and decreased incentive for firms to smooth out employment demand fluctuations as an alternative to layoffs. Labour economic literature also covers (albeit in brief) the macroeconomic policy impacts on overall employment levels and texts usually provide outlines of the various categories of unemployment based on the original Keynesian (1942) schema dividing unemployment types into those due to: 1. Unemployability 2. Seasonal factors 3. Men moving between- jobs 4. Misfits of trade or locality due to lack of mobility 5. A deficiency in aggregate effective demand for labour (Kahn, R. (1976) p. 29) It is beneficial at this point of the paper to briefly describe the breakdown of unemployment used in most salient analyses. Although there is little general consensus on the definition and utility of the scheme, the disaggregation (by cause) is probaly the only broadly acknowledged classification and will be used repeatedly in the following analysis and discussion. The classes are by no means perfectly mutually exclusive. 1. THE UNEMPLOYABLRS This type of unemployment is seen to be the result of an extreme form of skill mismatch whereby some people of working age have no attributes making them suitable for employment The low-skilled, whose VMPL for firms' activities is below minimum wage rates, could be grouped into this class of unemployment Part of this class would still be included in the unemployed labour force. 42 Reasons for unemployability can include a) age, b) lack of skill, c) ill health, d) physical disability, and e) simply "unwillingness to work" (Standing, G. (1983) p.148). The long-term unemployed may well develop traits inimical to productive employment (such as loss of skills and dexterity, alcohol and drug use, and other forms of anomie) and end up under this categorization. The concept is debatable on the basis of its subjective nature and "unemployables" are often classified as part of structural unemployment (see 2.C.4). 2. SEASONAL UNEMPLOYMENT Seasonal unemployment is simply unemployment' attributed- to* the seasonal- labour demand requirements of some forms of economic acitivity on which portions of the labour force depend. 3. FRTCTTONAL IJNEMPT DYMENT Frictional unemployment is thought to occur when unemployment and vacancies (in the same occupation) occur simultaneously in a given location (Chiplin, B. (1982) p.289). It consists of all those unemployed persons for whom there appears to be vacancies in the categories for which they are registered but have not yet been brought together by job search activity (Gunderson, M. (1982) p.288). Even when supply equals demand for a given job type, there are perceived to be inevitable lags or delays in workers finding jobs which stem, at least in part from inadequate information flows within the labour market Thus, informational barriers on the labour market operation are an important aspect of frictional unemployment 4. STRUCTURAL UNEMPLOYMENT Although, the idea of "mismatch" is probably the key concept of structural unemployment its definition is subject to a great degree of variation and contention 43 within and between respective labour-related disciplines. Paul Cheshire (1981, p. 228) describes structural unemployment as that resulting from the coexistence of vacant jobs and unemployed persons within the same labour market where the unemployed are, in some way, unqualified for the vacancies. The underlying causes of structural unemployment are usually attributed to long-run changes in the economic base of a region or economy and changes in demand for labour in particular occupations, industries and regions (Chiplin, B. (1982) p.287). However, the labour supply side has also been emphasized. This aspect relates to the inability or failure of labour to adopt to changes in technology or changing demand so that unemployment- becomes concentrated, for long periods of time, among specific occupational groups in particular areas (Thirl wall, A. (1969) p.23). This perspective lays the blame on the unemployed. Standing (1983) describes seven major contributing causes of structural unemployment: 1. Changes in industrial structure 2. Mismatch of skills 3. Geographical mismatch 4. Demographic shifts 5. Institutional rigidities (including growth of non-wage labour costs, U.I. effects, unionization, the "poverty trap", wage rigidities, minimum wage legislation, income policies and labour market segmentation) 6. Unemployability 7. Capital-restructuring unemployment He also attempts (rather unconvincingly) to conceptually separate technological unemployment, as the labour displacement associated, with mechanization and automation linked to cyclical factors, from structural unemployment as the qualitative mismatch of 44 the demand for labour and the supply of workers (which could exist at any level of aggregate demand) (1983, p. 138). Barriers in hiring practices and procedures (including discrimination) have also been included in this category. A selective comparison and amalgamation of alternative definitions has been undertaken for the purposes of this research. Structural unemployment will primarily refer to the situation where workers and vacancies are considered to be in different labour markets, either by virtue of geography or because of a mismatch in regard to qualifications and characteristics (Gunderson, M. (1980) p.289). Thus, the two major synthesized dimensions of structural unemployment relevant for this study are a) occupation-structural' unemployment, and b) geographic-structural unemployment -though institutional and discriminatory aspects must be regarded as important As a consequence, the spatial and occupational (and institutional) constraints on the ideal labour market are perceived to fall primarily under the aegis of structural unemployment 5. DEMAND-DEFICIENT fCYCIJCAU UNFMPLOYMENT Whereas structural and frictional unemployment are generally conceived as components of non-cyclical unemployment demand-deficient (or cyclical) unemployment is defined as that caused by fluctuations in the national level of economic activity (usually equated to the "business cycle") (Taylor, J. and Bradley, S. (1983) p.114). It is that component of unemployment which is the excess of total unemployment over total vacancies once frictional, structural and seasonal elements have been accounted for. Demand-deficient unemployment has little to do with direct spatial or skill mismatches and is the prime target of Keynesian macroeconomic full employment policy approaches. 45 D. MACROECONOMICS. LABOUR ECONOMICS AND UNEMPLOYMENT There is a mass of literature on the appropriate macroeconomic responses for dealing with unemployment and it is impossible to cover the substantive theory, at any level of detail, in this review. Macroeconomic policy oriented towards the amelioration of cyclical (demand-deficient) unemployment has its roots in Keynes' (1936) "General Theory" and its explanation of mass unemployment in the industrialized world (in the 1930's) which was largely a rebuttal of some of the tenets of classical theory (Jordan, B. (1982) p.14). The Keynesian approach contended that the national economy might reach an equilibrium below- the level of full- employment because of an insufficiency of aggregate demand. This possibility was conceived as a result of the constant danger that the total sum of consumption and investment would fall short of the levels required to provide jobs for all. His economic theory, insisting that the state accept responsibility for ensuring sufficient aggregate demand, achieved rapid and widespread political acceptance in the post-1945 period. Government spending (via deficit-spending and money supply expansion), tax reductions and low interest rates would act to remove involuntary unemployment by stimulating growth in aggregate demand (and hence labour demand) (Addison, J. and Siebert, W. (1979) p.389). The relationship between wage inflation and unemployment is a popular area of theory and research in labour economic study particularly in regard to the microeconomic foundations. The so-called "Phillip's curve" (after Phillips (1958)), based on United Kingdom data for the. period 1861 - 1957, estimated a negative relationship between money wage changes and unemployment levels in the economy as a whole. The simple Phillip's curve wage-employment trade-off suggests that one determinant of change in the level of aggregate money wages is the "tightness" of the labour market (Gunderson, M. (1980) p.261). Conversely, controls on wage increments and price controls could be seen to help keep unemployment at "acceptable" levels. However, the 46 negative relationship between wages and unemployment, as embodied in the Phillip's curve, was not upheld in the 1970's when stagflation challenged the postulated trade-off relationship. Friedman (1968) and Phelps (1968), as spokespersons of the monetarist approach (emerging out of the late 1960's) have questioned both the nature of the Phillip's curve and the efficacy of Keynesian demand manipulation to reduce unemployment in the long-term. By introducing a central role for expectations in regard to inflation and money wages, the monetarists proposed that any trade-off in the Phillip's curve must only be short-term. The central issue revolves- around the "natural rate of unemployment", that is, the level of unemployment at which there is no tendency for inflation to either accelerate or decelerate (requiring the expected inflation rate to equal zero) (Chiplin, B. (1982) p.297). Unemployment is perceived to be held below the "natural rate" (a product of structural and frictional forces) only by allowing the inflation rate to increase. Therefore, any decrease in unemployment by Keynesian aggregate demand macroeconomic policy, which forced unemployment below the natural rate, was necessarily temporary and would be based on faulty expectations. The end result would be that real wage and unemployment levels would remain unchanged. According to the monetarists, their modified, expectations-augmented Phillip's curve would have to be based on the natural unemployment rate which has increased over time and is used to explain the stagflation phenomenon of the 1970's. Monetary expansion by the government, and subsequent inflation, is perceived as the major culprit and both inflation and unemployment are seen as consequences of monetary policy rather than as causes (Jordan, B. (1982) p.40). Deflationary policies are pursued directly on the assumption that inflation and expectations are responsible for high unemployment levels. 47 However, there is also an emphasis, in monetarist economic theory, that increased unemployment is largely a product of the growth of the natural rate of unemployment (the frictional and structural components) which could be changed by policies that directly affected conditions in the labour market (such as skills and mobility levels). This emphasis is contraposed to the Keynesian approaches of manipulation of aggregate demand to decrease unemployment The microeconomic persuasion of the labour economic discipline appears to align well with the monetarist philosophy (which currently has a strong influence in Canadian, United States and British politico-economic contexts). The overall operation of the economy (the- aggregate labour market) is seen as best left to the- benevolence of the "invisible hand" of market forces, free from fumbling government demand manipulation, while the frictional and structural problems of the natural unemployment rate are attacked by facilitating the micro-level operation of the labour market - via informational improvements and the easing up of supply-side impediments (such as geographic immobility, redundancy in skill levels, and institutional rigidities on wages). Chapter III THE SOCIAL AND SPATIAL STRUCTURES AS BARRIERS TO THE PERFECT  OPERATION OF THE LABOUR MARKET Those constraints on labour market adjustment which are recognized by neoclassical economic theory have been broadly outlined in the previous section. However, this chapter will extend upon the discussion of barriers to the idealized labour market by introducing the institutional, segmented labour market perspectives, focused on socio-structural constraints which are largely outside the realm of neoclassical models, and by elaborating upon the role of space in demarcating the matching process between labour supply and demand. A. HETEROGENEITY IN THE SUPPLY OF. AND DEMAND FOR. LABOUR Although neoclassical-based labour economic theory admits the existence of differentiated occupational supply and demand which defines distinct sub-markets for labour in the short-term, occupational mobility is assumed as being no impediment to equilibrium conditions in the long-run as individuals sapiently and autonomously choose to invest in human capital. Structural unemployment from lags in the occupational adjustment process would only be temporary. Rigidities in the social structure would not exist and all people would be treated equally by society's institutions. Neoclassical economic theory essentially embraces a labour "queue theory" perspective in which employees are ranked along a single ordinal scale according to their respective marginal productivities (Montagna, P. (1977) p.66). Occupational and wage differentials are therefore just marginal productivity differences which are amenable to changes in human capital (though admittedly limited by inherent ability). The labour market is perceived to be shaped by economic motivation only and discrimination should not occur under competition as firms, which do. no allocate labour on purely economic criteria, will not survive. 48 49 There is a brief mention of the institutional and dual labour market structures in neoclassical economic theory, but the notion of an institutionally determined heterogeneous labour force is by no means fully accepted (Clark, G.L. (1984) p.179). 1. INTERNAL AND EXTERNAL LABOUR MARKETS The possibility of unemployment resulting from social institutions and patterns was originally outlined by C. Kerr (1954) in his treatise on the "balkanisation" of the workforce. Institutions were proposed as the main determinant of the framework of labour market operation and were seen to present formal barriers which workers would face in a highly structured'labour market (Montagna, P. (1977) p.67). The original work of Kerr (1954) was expanded upon by Doeringer and Piore (1971) in their attack on the neoclassical theorists' conception of the labour market The "institutionalists" argue that the labour market could actually be separated into internal and external segments. Structured, "internal" labour markets would be characterized by the preferential treatment of workers inside the firm for jobs at higher skill levels or supervisory positions (over competing applicants from the open market) (Cooke, P. (1980) p.545). Demand for vacant employment positions would be met largely within the context of a single organization (Addison, J. and Siebert W. (1979) p.186). In labour economics, this internal bias in promotion from within the firm is explained in terms of the worker reaping the returns from their on-the-job training investments (Fleisher, B. and Kneisner, T. (1984) p.360). "External" labour markets are conceived as structureless, open labour markets comprising of everyone else outside the firm and are seen as the relevant field of choice for filling entry-level jobs. Whereas external labour markets would be more compatible with the neoclassical conception of the labour, market (where pricing and allocation decisions are controlled directly by economic variables), the widespread 50 existence of large internal labour markets within the modern form of (predominantly corporate) economic organization would be considered to place further restraints on the supply-demand matching process even within given occupations. Workers would compete in the open market only for initial entry at certain job classifications (usually at the bottom rungs of the employment ladder) and other jobs would be filled by promotion of those workers who had already gained access to the organization. Selection in the internal labour market would be related to the conduct and performance of the individual in terms of the administrative institutional rules of the firm (derived from joint negotiation, unilateral imposition, custom and tradition) which define the pricing and allocation of labour (Dicken, P. and Lloyd. P. (1981) p.200). The tendency toward internal promotion and job availability would restrict the overall inter-firm mobility assumed by aggregate, competitive models. D 2. THE DUAL LABOUR MARKET Piore (1975) and his associates have elaborated upon the internal-external labour market dichotomy by tying them together dualistically as "primary" and "secondary" in nature (Cooke, P. (1980) p.545). This perspective emerged in the late 1960's to explain the phenomena of urban poverty and unemployment The basic premise of dual labour market theory is the existence of a bipartite (or tripartite) labour market fragmented on the basis of the different nature of behavioural rules between workers and employers. Within the labour market, two broad sectors could be identified: 1. A "primary" labour market composed of "good" jobs (usually in large firms) with higher relative wages, good working conditions, employment stability and security, higher levels of unionization, and prospects of upward mobility and, 2. A "secondary" labour market consisting of the "bad" jobs with lower 51 wages, poor working conditions, little upward mobility, high labour turnover and minimal on-the-job skill acquisition. (Clark, G. and Gertler, M. (1983b) p.277 ; Danson, M. (1982) p.258)) Doeringe and Piore (1971) suggest that entry and promotion in the primary labour market is assessed on the basis of the ranking of workers (on their potential productivity) who are advanced by a queuing process (Addison, J. and Siebert, W. (1979) p.189). The primary labour market has been subdivided into 1) an upper tier characterized by white collar, professional occupations with power, wealth and prestige, considerable autonomy, good working conditions and prospects and a command of theoretical knowledge, protected by an internal labour market setting, and, 2) a lower stratum containing salespersons, clerical, and skilled manual labour whose work is highly supervised (they "respond the demands of capital") and involves training which is primarily on-the-job (Danson, M. (1982) p.259). In the primary sector, wages are not determined by individual productivity (as with promotion) but are thought to be related to long-term contracts and union power. Employment is drawn from the secondary labour market as if it were an undifferentiated labour pool (with homogeneous skills, education and motivations) with wages determined simply according to the quantity requirements of employers (Clark, G. and Gertler, M. (1983b) p.277). There is some disagreement over the nature of the relationship between employer and employee in the secondary labour market (for example, see P. Montagna (1977, p.68) and M. Danson (1982, p.258). The employment relation between labour and management has been seen as highly personalized - thus encouraging favouritism and discrimination. However, other perspectives (such as those of A. Alexander (1974)) argue that "the only nexus is cash". Overall, the views are probably compatible in regard to job security aspects and the nature of the relationship would depend on the level of management considered. The disorganized, 52 semi-skilled and unskilled production and service occupations of the hypothetical secondary labour market are not included in the firm's internal labour market A central argument in dualist theory is that entry into and confinement of disadvantaged workers in the secondary sector is not attributed to differences in skill, motivations, or demands for labour but to the power of institutional forces like discrimination from employers and unions. Hence, there would be severely limited mobility from the primary sector into the secondary sector even in the situation of increased aggregate demand for labour. The existence of the dual labour market (which is yet to be universally accepted on the basis of sketchy empirical evidence) would split the labour market into at least two discontinuous, if not entirely separate, systems and would alter the depicted nature of the supply curve and the adjustment process initiated from movements in demand and wage levels. Thus, the segmented labour market theorists, with their emphasis on real, formidable barriers in the institutional framework of the labour market and from the existing social structure, suggest that there are, in fact a set or series of discontinuous labour markets (which have approximate parallels in "occupational" strata). The dual labour market perspective, in particular, was born of the same intellectual tradition as current radical theory - Marxism. However, the more conservative Marxist conceptions of the labour market incorporate poverty and inequality in the social system as necessary functional aspects of capitalism and a central emphasis is placed on the role of a reserve army of unemployed in a purposeful organized stratification of the labour market by the capitalist class (Montagna, P. (1973) p.72). Although some parallels could be drawn between a reserve army of. the. unemployed and the secondary labour market, dual labour market theory does not 53 attribute the same teleological status to capital but identifies the causes of unemployment in 1) the social institutions which realize the theoretical operations of the labour market, 2) from active discrimination, and 3) from rigid labour market stratification - which can only be interpreted as the outcome of the dynamic nature of capital rather than as a functional requirement of the process of capital accumulation. If labour market segmentation can be structured along class, racial, ethnic (or other group attribute) lines, the mapping of residential social area patterns has been suggested as enabling an identification of the "building" of dual labour markets in space (Scott,- A. (1981); Clark, G.L. (1983) p.277). This possibility is seen to be enhanced given that labour market segmentation creates distinctive income distributions which could be located in space (within the differentiated urban housing market). However, the contentious existence of duality and fragmentation in the nature of employment demand, and the problems of internal heterogeneity in neighbourhood spatial units, remain as impediments to further development in geographic interpretations of labour market segmentation theory.1 B. SPACE AS A N INTERVENING VARIABLE BETWEEN THE EOIJIIJBRTIJM M A T C H I N G OF LABOUR SUPPLY A N D D E M A N D Probably the first major consideration of the relationship between the spatial structure of economic activity and its required labour supply (hence implicitly involving the role of space in the labour market operation), emerged with Weberian industrial location theory. In earlier neoclassical economic theory, locational aspects of labour supply were disregarded. This neglect is easily understood in the relevant historical context of undifferentiated, low-skill labour demand requirement, the relative abundance of labour in the new industrial towns, and the overall aspatial orientation of economic theory, 'For an attempt at linking dual labour market theory and geographical consideration, see M . Danson (1982) 54 The agglomeration economies of the rapidly growing industrial areas included a large urban labour pool able to more than satisfy the production activities of firms. Primarily as an adjunct to theory on transport cost derived optimal locations for industry, the bulk of traditional, labour-related location theory market has revolved around how industry takes into account given, fixed wage differentials (or other supply characteristics likely to affect labour productivity) (Addison, J. and Siebert, W. (1979) p.170-190 ; Dicken, P. and Lloyd, P. (1981) p.212 ; Lloyd, P. and Dicken, P. (1977) p.214) 1. WEBERIAN INDUSTRIAL LOCATION THEORY Weber's theory of industrial location is essentially rooted in the neoclassical economic paradigm where partial equilibrium and cost-minimization set the framework for "economic man" capitalists deciding where to optimally locate their industries. However, in Weberian models there is a marked divergence from early neoclassical theory. Labour becomes an immobile, spatially heterogeneous factor of production instead of the perfectly mobile, equally productive supply factor of the idealized, aspatial labour market model. The firm is seen to "move to labour" (or at least consider its spatially-fixed properties in its optimal location decision) rather than perceiving labour as moving to the firm. A daily commuting field is implicitly assumed as the uniform accessibility area for capturing a local labour supply. In the simplest, "pure", Weberian industrial location model (1909), which adopts a partial equilibrium approach, the labour input was assumed to have a negligible impact on locational choice consistent with the primacy attributed to transport costs for raw materials and finished products. This emphasis on linkage analysis as the major stock in trade of Weberian location theory involved the central idea of profit-maximizing firms being attracted to locations that minimized aggregate transport costs on all input (and output) flows (Scott, A.J. (1981) p.113). Firms would therefore 55 locate either at resource sites, break-of-bulk points, markets or where other firms already existed. However, in subsequent modifications Weber included a theoretical analysis of how industry would incorporate a consideration of the given distribution of labour (with fixed differential wage rates across the geographic surface) in its location decision, by introducing his concept of the "critical isodapane". As an extension of his orignal model, Weber proposed that the optimal location of the industry (determined solely on the basis of total transport cost isodapanes) could alter if possible wage savings were considered. If location at point "L" (see FIGURE 3.1) entailed a wage saving of five dollars per unit of output and lies within the total transport' cost isodapane which has the same value as the saving in labour costs (the five dollar critical isodapane), the firm will reduce total costs by locating at "L" rather that the original optimal location "O" (Smith D. (1981) p.72). This analysis presupposes that wage differentials exist at different points in space due to unspecified unique supply-demand interaction characteristics (see FIGURE 3.2), and that supply is perfectly elastic at any given point (note the horizontal supply curve) and immobile beyond that point. Consequently, Weber considered the cost of labour as a "regional" factor influencing the resultant geography of production, with the initial locational pattern set by transport costs, and subsequently distorted by spatial variation in the cost of labour (de Souza, A. and Foust, J. (1979) p.323). Although this rather simplistic approach ignores both the possible effects on wages and the relevance of other characteristics of the labour supply, Weber did realize that labour costs were not equally important to all industries in his concepts of a "labour index" (the average cost of labour needed to produce one unit by weight of output) and a "labour coefficient" (the ratio of the labour cost divided by the unit product weight to the total weight, of material and product to be moved) (Lloyd, P. and Dicken, P. (1977) p.211). The characteristics of the firm would influence the relative importance of 56 c r i t i c a l F i g u r e 3.1 The E f f e c t of a Cheap-Labour L o c a t i o n on the Transport Cost Optimum L o c a t i o n i n the Weberian Model Source: Based on D. Smith (1981, p.72) Fig u r e 3.2 The Assumed. Labour Market C o n d i t i o n s at L o c a t i o n '0' and L o c a t i o n 'L' i n Weber's Model 57 labour as a locational factor. Weber also noted that industries strongly attracted to low labour-cost locations tend to become concentrated in few locations. The long-term trend in decreasing transport cost would tend to increase the relative attraction of labour cost savings locations by accentuating the general predilection of manufacturing activity to agglomerate (Conkling, E. and Yeates, M. (1976) p.94). The model must be considered rather tenuous in the light of limiting assumptions of uniform cultural, economic and political characteristics across the landscape, disregard for institutional barriers, and from the usual weaknesses encountered by partial equilibrium, least-cost approaches' which intrinsically divorce themselves from a consideration of the spatial nature of demand and possible ramifications of "explained" change. In summary, the treatment of labour in Weberian industrial location theory is similar to that of any other localized factor of production or input except that labour (and its geographic pattern of productivity) is assumed as spatially-fixed - mobile only within a daily commuting field. Unlike the prescriptives of neoclassical labour theory, residential relocation and movement of labour to the firm for varying wage and employment opportunities is virtually ignored. The two approaches may be reconciled if the Weberian partial equilibrium analysis is viewed as only applicable in the immediate short-term. The firm is perceived as the dominant actor perusing the landscape of possibilities for labour and trading-off the various costs of required factors of production to choose the optimal site. 2. CRITIQUES OF WEBERIAN LOCATION THEORY ON LABOUR Although most recent location theory acknowledges the limitations of simplistic Weberian models (particularly in regard to labour), the most concerted critique would, stem from the radical labour market theorists. 58 Given the centrality attributed to the conflict between labour and capital in structuring spatial outcomes in radical theory, this school heavily criticizes the Weberian emphasis on linkage analysis rather than the role of labour in the process of capital accumulation. The geography of industry is perceived as a prime consequence of the dynamics of accumulation rather than as a result of the static allocation of activities to their best location vis-a-vis markets, labour and materials (Walker, R. and Storper, M. (1981) p.481). The dependence of labour, on the activities of the production system for the sale of its labour power, is stressed in opposition to the simple view of the firm choosing from a number of labour-cost alternative sites. This difference probably stems from the moral rejection of the fundamental perspectives of neoclassical location theory oriented towards maximization of firm profit levels. A situation of mutual interdependence between labour and capital (though the balance of power is seen as favouring the capitalist) is posited as a far more realistic scenario, for explaining observed spatial outcomes, than the unidirectional determinancy assumed in Weberian theory. A. Scott (1983, p.234) rejects the focus on the structure of transport costs and the single-minded rationality of individual spatial behaviour and decision-making as a theoretical formalism which has lost the sense of spatial relationships as structured outcomes of the social logic of production systems (that is, capitalism in the Weberian era of relevance). Rather than assuming the "siting" decision or the location problem as the starting point of theory, Scott (1982a, p. 134) believes any legitimate explanation must be ground in its historical context Traditional industrial location theory is criticized for assuming the economic system as given (and fixed) therefore ignoring the unique historical setting and the associated dynamic of the "form of organization" (Massey, D. (1973) p. 183). Space is framed in terms of political and institutional space rather than just "abstract" space. 59 Processes operating in space (such as decentralization) would thus need to be examined with reference to the ongoing process of accumulation and technological change. The production system itself would have to be related to a conception of capitalism as a set of human relationships built around the central mechanisms of 1) the labour process, 2) the distribution of economic surplus and 3) accumulation (Scott, A. (1983) p.234). The basis of neoclassical locational explanation rests on the existence of factor supply differentials (in quantity, quality, or real or expected price) resulting from the fact that the equilibrium has never been reached or has been upset by exogeneous forces. The static, limited perspective* of neoclassical location theory has been criticized on the grounds that an analysis dealing only with factor supply aspects (and differences in these aspects, which are never properly explained) is bound to be inadequate (Walker, R. and Storper, M. (1981) p.486; Massey, D. (1973) p.186). The actions of individual firms are thought to require interpretation at the level of the total economy where the forces which shape the space economy can be identified. The Marxian models of capitalist reproduction contend that capitalism is forever altering the basis for the industrial space-economy, under the imperatives of capital accumulation, regardless of the initial distribution of factor supplies - by technological, organizational and spatial changes. Both the location and conditions of factor supplies and markets could therefore be altered by the actions of capitalists and the effects of capital in general (Walker, R. and Storper, M. (1983) p.494). Spatial outcomes would be subject to the structural requirements of capitalist society to expand the reproduction of capital and maintain capitalist social relations. These requirements are seen to be ideologically embedded in the nature of neoclassical industrial location analysis (Massey, D. (1973) p.185). Although there is substantial criticism of Weberian location theory from, radical theorists, it is notable that many of his basic perspectives are still frequently utilized 60 in radical literature. For example, explanations of the restructuring and consequent movement of capital to lesser developed and newly industrializing nations are rationalized in terms of Weber's least-cost criteria. In addition, Scott's (1981) intra-urban plant location theory is pivoted upon firm locational decisions with an explicit consideration of intra-urban spatial variation in wages (though his variations are primarily based on commuting cost differences and he does extend discussion to include the effects of location on wages within the urban area). The principal radical objections to neoclassical location theory are probably predicated upon the delimited scope of explanation (ignoring the overall "logic" of social and economic systems) and their intrinsically ahistorical and ideological nature. The radical "school" also rejects the neoclassical conception of the labour market (necessarily implicated in traditional location theory) as discussed in Chapter 6. 3. DO "JOBS FOLLOW PEOPLE" ? Whether jobs follow people in search of suitable, high-productivity, or low-cost labour or whether people move to the location of existing demand, has been a significant area of debate since the late 1960's and well into the 1970's. For evidence of Weber's treatment of labour, we would expect mobile firms to evaluate the relevant cost surface, and establish themselves in relation to the original factor supply spatial pattern. Thus (labour-dependent) firms would be expected to "follow" people. Alternatively, orthodox neoclassical theory predicts that people will respond to spatial wage differentials (as a function of employment opportunities) and long-term equilibrium will eventually occur through people moving to jobs. Marxian theory appears to be confused or at least flexible in predicting which actor actually leads the changes in spatial structure. The upper hand in resultant spatial relationships between labour and capital is clearly attributed to capital but one specific school of thought, the "capital-logic" school, contends that capital (being more mobile 61 thant labour) initiates and tends to lead labour migration (Clark, G. and Gertler, M. (1983b)). Other Marxian theorists would point to the movement of capital (at urban, regional and international scales) to utilize existing cheap or disorganized labour and would be aligned, in part, with Weber's conception of labour in the firm's locational decision. The empirical evidence on the direction of causality, at all geographic scales is unclear and probably reflects the fallibility of attempts to generalize across industries, time and socioeconomic contexts. In North America, Steinnes (1977; 1982) found evidence, contradicting that of Kain (1968) and Hoover and Vernon (1959), that manufacturing' jobs- decentralized before people at the intra-urban level. Hall (1984, p. 24) concludes that most evidence supports the contention that the suburbanization of people has occurred before that of manufacturing jobs. However, the causality link inferred by Steinnes (1982) is extremely difficult to prove particularly in recognition of the expanding spatial range of the journey-to-work trip from technological improvements. Suburbanization of both employment and residence cannot even be assumed to guarantee accessibility levels higher, or equal to those in previous conditions. Accessibility considerations are probably a cost for both employers and employees in the matching of supply and demand, but the influence of this factor, in relation to a host of other possible reasons for changes in relative spatial structure of the workforce and production activities, is very difficult to assess. Although the balance of evidence suggests that residential suburbanization preceded (manufacturing) employment suburbanization (Kennett, S. (1980) p.97), the causal link cannot be established. Results obtained tell nothing about the effect on specific groups within the city, which may not have (or not be able to) suburbanize, and for which the journey-to-work to changing employment locations may be an important factor on the. ability to find employment A more acceptable link between the suburbanization of supply and demand would probably be that of technological 62 change. Decreased transport costs may also be accompanied by a reduced dependence of firms on labour supply inputs thus eroding the need for a consideration of accessiblity to large labour markets. For example, persistent excess levels of appropriate labour supply or greater capital-intensification could reduce the firm's necessity for high levels of labour market accessibility. In addition, the movement of people to the suburbs before manufacturing jobs does not indicate which actor is dominant in the labour-firm relationship. "Following" the other actor may give some advantage on past conditions or may simply be a necessity. At regional levels (where migration could be separated from those effects which have simply expanded the- daily commuting field) evidence on the temporal ordering and spatial structure of growth and decline in labour supply and demand, would probably be more meaningful. However, what research has been done at this level is equally inconclusive and the lines of causality between capital growth and labour migration are similarly plagued by the inevitable chicken-or-egg problem (Clark, G. and Gertler, M. (1983b)). Referring to aggregated employment demand, Long and DeArc (1983, p.41) contend that for the 1970's, population has tended to follow jobs from urban to rural settings. Even at international levels, migration has undoubtedly occurred in response to the growth of employment demand opportunity (for example, to British Columbia in the 1970's) together with the movement of capital in response to (and as a cause of) national and regional variation in labour supply characteristics. The only general conclusion that can be drawn from the "people follow jobs" or "jobs follow people" debate is that the distribution of the labour supply and its characteristics is important to the firm's locational decision subject to the particular requirements for employment demand. The firm may, or may not, make its locational decision on the basis of geographical variation in labour properties, depending on, the sectoral, intra-industry, and technologically-derived demand for this "raw material". The 63 particular historical context, state of the organization and form of the production process, and the existing overall, and area- and occupation-specific labour market considerations (such as excess supply or demand), would influence whether the required labour input was treated as effectively "localized" or "ubiquitous" in the firm's locational decision. The frictional impact of space on the supply-demand matching process and the resulting relative location of employment demand and supply must be considered at a micro-level. Understanding and interpreting the processes which change the spatial structure would, however, require explicit consideration of the dynamic total economic system and' the "forces" of change: C. THE CONCEPT OF A "LOCAL" LABOUR MARKET - VANCOIJVER CMA AS  THE STUDY AREA The work of Weber, which includes an identification of spatial variations in labour characteristics and the recognition of geographical constraints on the matching of supply and demand in labour economics, exemplifies the importance ascribed to an integration of the spatial dimension into a realistic conception of the labour market -particularly in the short-term. Some sort of limit on daily commuting fields will prevent the acceptance of available jobs without residential relocation. Residential relocation itself may be constrained by a number of factors and increasing distance to available potential job destinations may well be related to information, certainty, cost, and hence the probability of moving residence. As a consequence, space is likely to impede the job search process of the worker and hence influence the length of duration of unemployment Spatial separation, as a direct cost and as an added barrier for effective information dissemination, could be hypothesized as a contributing cause to unemployment Even if residential mobility is possible (as is explicitly assumed in neoclassical economic labour market theory) 64 spatial boundaries need to be drawn around the exchange process in the short-run. Geography will therefore play some role in the understanding of the operation of the labour market and in explaining the existence of unemployment The appropriate scale at which spatial separation will result in job dislocation is a complex issue and remains a moot point between many labour theorists. The use of regional perspectives has been common in applying regional policy (for example, in the United Kingdom and Canada) as the framework for linking ad hoc policies aimed at tackling disparities in economic welfare levels between regions (Armstrong, H. and Taylor, J. (1983) p.311). This level of resolution reflects prevailing attitudes that conceive of economic development problems as basically regional in nature (as in regional economic theory since the 1950's) and accept medium-distance worker migration as both possible and appropriate. However, without migration the Census Metropolitan Area (CMA) (or equivalent travel-to-work geostatistical areas in the United States and United Kingdom) is usually assumed as the functional unit within which space does not impinge upon the perfect operation of the labour market (that is, the CMA is assumed as the local labour market). Functionality is usually defined on a journey-to-work basis. Geostatistical units to represent local labour markets are usually determined on the basis of two concepts: the extent to which the area is self-contained (measured by the proportion of the resident employed population working locally and the day employed population living locally) and the strength of a given area's commuting links with other contiguous areas (usually a gravity-type equation) (Carmichael, C. (1978) p.130). The Vancouver CMA comprises the focal study area for the following research undertakings. In the Canadian context, a Census Metropolitan Area: Refers to the main labour market area of an urbanized core (or. continuously built up area) having 100,000 or more population... They contain whole municipalities (or census subdivisions). CMAs are comprised of (1) municipalities completely or partly inside the urbanized core; (2) 65 other municipalities if (a) at least 40% of the employed labour force living in the municipality works in the urbanized core, or (b) at least 25% of the employed labour force working in the municipality lives in the urbanized core. (Statistics Canada (1981) 95-978) Thus the CMA is assumed as being the relevant local labour market area (LLM) within which any two points are an "acceptable" daily commuting trip length apart The underlying belief for this definitional basis of the local labour market is that the collective daily journey-to-work interaction patterns of a metropolitan population represent the spatial exchange relationship for all particpants in the urban labour market (Clark, G. and Gertler, M. (1983b) p.275). The local labour market which realistically defines the commuting capabilities of all, or a designated portion, of the labour force has been proposed as the ideal areal structure of exchange for effective targeting of intervention and monitoring of public policy (Clark, G. (1978a) p.2). The assumption and use of such travel-to-work areas (like the CMA), as the leal local labour market or catchment area, has been criticized on a number of grounds. An inherent weakness in the use of a local labour market concept is that it implies a static, equilibrium context for the exchange process. Boundaries are identified as if they were contours of equal commuting in either direction (Cheshire, P. (1979) p.33). Cheshire (1979) argues that such lines are impossible to distinguish, except as "snapshots", given the dynamic nature of the labour exchange process under study. In addition, the local labour market (defined on journey-to-work functionality criteria) is incorrectly assumed as being a closed system - reflected in the elimination of existing interaction with contiguous areas. The rather arbitrary selection of levels, for defining when the area is self-contained, is a recognized limitation of the implementation of the LLM concept (Gordon, I. and Lamont D. (1982) p.239). 66 However, the arbitrary nature of definitions of the spatial extent of LLMs, would apply to attempts to demarcate the exchange process at any level of resolution. The pattern of journey-to-work movements (if assumed as the true representation of employment spatial range possibilities) is a highly complex and dynamic system of interaction which may show identifiable concentrations of interaction density at any given point in time but certainly has no distinct, objective and immutable boundaries. Destinations and origins are not sharply defined but are scattered, if unevenly, across the landscape. A major criticism of the use of travel-to-work areas, as LLMs, revolves around the acceptance of behavioural outcomes (that is, the' observed journey-to-work dimensions of the employed) as the sufficient condition for delineating areas of perfect (or at least unconstrained) daily mobility. Not only does this imply the existing commuting pattern is optimal, but it fails to take into account the commuting range capabilities of those people who do not have a journey-to-work trip as a result of accessibility or mobility constraints. The final but probably most poignant attack on the journey-to-work, self-containment models of LLMs, is levelled at the implicit assumption of homogeneity in the levels of mobility of individuals within the demarcated area. Instead of passively accepting that every "unit" has uniform mobility (and unconstrained accessibility), this criticism is based on the contention that the spatial range of employment opportunities varies amongst particular social and economic groups (Dicken, P. and Lloyd, P. (1981) p.198). The travel-to-work based CMA is believed to reflect the commuting pattern of upper income, higher-educated and skilled suburban residents (with greater levels of mobility and capacity to travel long distances) (Clark, G. and Gertler, M. (1983b) p.275). Variations in mobility levels between socioeconomic groups are seen to be a result, of different group-specific capability constraints (based, on the resources available to individuals such as actual or expected income levels and car ownership) and 67 coupling constraints (which define where, when and for how long the individual has to join with other individuals to produce, transact, consume or fulfil family roles) (Miller, R. (1981) p.4). Hence, some groups (those with more severe mobility constraints, would be unable to undertake daily commuting trips to every and any place in the CMA. For example, it is a well-established phenomenon that (in the United Kingdom) higher education level occupations and males tend to be more mobile than manual or female workers. (Carmichael, C. (1972) p. 130) If labour supply within the CMA boundary is heterogeneous in terms of the capacity for movement and is, in part, sometimes less mobile than the maximum extent of commuting observed would- indicate; the generalized- definition of the LLM must be a compromise on reality. Ball (1980) has suggested that metropolitan travel-to-work areas in the United Kingdom are too broad and should be replaced by local authority districts as more meaningful areas of ease of access. The possibility of heterogeneity in the spatial ranges of groups within the labour supply has led some theorists to perceive the CMA as a set of discontinuous labour markets, dynamic in nature, and each with their own supply and demand schedules which could be circumscribed in space according to the appropriate nature of space-time constraints (resulting in very complex but transitory patterns) (Bederman, S. and Adams, J. (1974); Clark, G. and Gertler, M. (1983); Vipond, J. (1980) p.132). Under this condition, the CMA would really be a superset of overlapping labour markets divided along the lines of gender, age, occupational, income and other related social and economic characteristics. One of the principal aims of this study is to evaluate the efficacy of the Vancouver CMA as a local labour market by examining possible geographic barriers to the daily commuter, and residential relocation, matching of supply and demand locations 68 - at least for certain occupational groups (in particular, the manufacturing production labour force). The existence of geographic constraints within the CMA would have important ramifications for the implementation of effective policy aimed at facilitating or manipulating the adjustment of supply and demand. Of course, broad national (and even international) economic and social structural change would also be a vital consideration in assessing how unemployment arises as a malfunction of the equilibrium conception of the labour market and some discussion of the nature of these trends will be included in subsequent sections. Chapter IV ANALYSES OF INTRA-URBAN SPATIAL VARIATIONS IN UNEMPLOYMENT Theoretical and empirical geographic studies of unemployment characteristics at the intra-urban level appear to be of fairly recent origin. Throughout the 1950's and 1960's, most labour market analyses incorporating the spatial dimension were applied at the regional level and attempts at explaining unemployment patterns were usually hinged upon the role of the regional industrial structure. Even among the ecological and social area analysis studies stemming from the Chicago school of sociology, unemployment characteristics received little explicit attention. The emphasis, in this work, was placed upon segregation of urban areas by more' "stable" social and economic characteristics such as ethnicity, occupation, race and life-cycle stage (Ley, D. (1983) p.58-72). Although some more "secondary" aspects, such as juvenile delinquency, were considered in particular case studies, unemployment experiences were probably conceived more as epiphenomena of the more essential socioeconomic traits. Spatial variations in unemployment levels would therefore be little more than a byproduct of those processes (variously described by human ecologists and land economists) which acted upon the "major" social and economic characteristics enabling distinctive socio-spatial patterns to be identified, within the metropolis. Among the earliest detailed, well-known, urban studies utilizing spatial unemployment differentials were those examining the effects of major redundancies in industrial employment in the United Kingdom accompanying its gradual decline in world economic standing which started as early as 1900 in some sectors. The persistent high unemployment rates since the 1970's have instigated substantial research on urban unemployment The unequal negative impact of restructuring by industry on the inner city areas was the underlying theme of the Inner Area Studies (1977) in the United Kingdom and in associated works, such as those of Metcalf and Richardson (1976), Evans (1976), and Cheshire (1977;1979) which examine and discuss intra-urban 69 70 variations in unemployment levels. One of the major concerns in the studies of geographic variations in unemployment (usually at either a census tract or local authority level) is the origin of the distinctive mosaic of unevenness. During the 1970's, there emerged two major schools of thought on the predominant causes of observed intra-urban employment differentials. On the assumption that a major portion of the unemployment pool is comprised of displaced industrial workers, the "demand-side" explanations argue that there are direct spatial causes of observed unemployment variations by area of residence.- With the decline; and decentralization of industrial activity from' particular urban areas (usually the inner city core areas), the appropriate labour force, which remains residentially "trapped" in these areas, is believed to be locationally disadvantaged in terms of access to the new distribution of industrial activity.1 Longer and less efficent job search and the greater costs of commuting to remote opportunities are posited as determinants of higher unemployment in the deserted areas. However, the opposing school's explanation of concentrations in unemployment is based on the housing supply characteristics of the urban area and broad economic changes beyond the isolated urban milieu. The cause of unemployment differentials is rooted in the "supply" characteristics of particular socioeconomic groups who are systematically allocated to the housing submarkets of the urban spatial structure. To some extent, an evaluation of the relative efficacy of the two major schools, in explaining observed census tract variations in unemployment in the Vancouver CMA, shall constitute a major research objective of this thesis. However, given that Vancouver CMA does not match the size, age, or industry-intensity of the decentralization is assumed here to refer to the process of spatial change generated by "centrifugal" forces, which result in a relative shift of population and/or employment away from the major urban cores (Kennett, S. (1980); Johnston, R.J. (1981)). The process is examined for industry in the Vancouver CMA context in Chapter 5 to establish if the necessary condition for demand-side explanations is present in the study area. 71 large traditional industrial areas where the explanatory power of the two schools may be more balanced, the research is undertaken on the accompanying rationale that a detailed examination of unemployment in the CMA, within a spatial perspective, will contribute to an understanding of the nature of this foremost problem in the study area context. This chapter will provide a brief synopsis of the existing literature relevant to the "decentralization of demand" / "characteristics of labour supply" debate. A. THE CHANGING SPATIAL STRUCTURE OF INDUSTRY AS A CAUSE OF  UNEMPLOYMENT Concern for job dislocation resulting- from' geographic separation of the home and workplace arose as a consequence of the well-documented phenomenon of the relative decentralization of economic activity - particularly manufacturing activity from the inner city area. As proposed, the geographic explanations presuppose that industrial activity is a major source of employment for a significant portion of those unemployed. If this is not the case, possible geographical barriers to the job-matching process for manufacturing activities, which may influence spatial unemployment variations in manufacturing and associated occupations, would be unlikely to be a significant factor in explaining total unemployment rate variations. However, the manufacturing production occupations do appear to constitute a major component of the total unemployed pool in the Vancouver CMA (see discussion of FIGURE 8.1) and the possibility of the substantive existence of such geographic-structural unemployment is entertained. The decentralization of manufacturing activity in . the CMA is examined in Chapter 5. The "demand-side" school centres its argument on the flight of industry from the inner city to suburban areas, and beyond, leaving behind an abandoned inner city pool of unemployed. Spatial restructuring is seen to detrimentally affect, certain residence-based sectors of society (Gillespie, A. (1983) p.180). Observed inner city 12 concentrations of the unemployed are therefore perceived as a result of 1) inaccessibility (because commuting costs are too high for the daily commuting trip to new job locations) and, 2) a "housing trap" restricting the ability of this socioeconomic group (or groups) to residentially relocate to within an acceptable daily, commuting range of the suburban peripheral industrial destination areas. The "trapped" hypothesis purports that the decline in inner city jobs has created a residue of low-skilled unemployed who are unable to relocate because of either the costs involved (pecuniary and other) or the nature of their tenancy in the housing market (Elias, P. and Keogh, G. (1982) p.26). In many respects, this- argument aligns with the criticisms of the conception of travel-to-work areas supposedly defining large metropolitan areas as effective local labour markets (LLMs). If suburbanization of industry locationally disadvantages residents of the inner city, the "ease of access" assumption of the CMA would be violated. The existence of geographic-structural unemployment (for certain occupations anyhow), within the CMA, would suggest that labour markets were, in fact, localized and that employment decline has led to deficient demand within the actual spatial extent of the labour supply-demand exchange process (Bramley, G. (1980) p.273; Vipond, J. (1980) p.132). The increased separation of homes and jobs for inner city manufacturing workers, as a constraint on job-matching, would be exacerbated by lower levels of car ownership for lower occupation-skill groups (assumed as being disproportionately represented in manufacturing production activity) and by the requirement for reverse, non-radial commuting to suburban locations (Gillespie, A. (1983) p.183). It is important to note that, if the trapped hypothesis is to be regarded as a possible major direct cause of observed unemployment differentials, there has to be an underlying assumption that total labour, supply and demand requirements are approximately equal for the CMA as a whole. There is little evidence of this necessary condition in the British 73 context (Gillespie, (1983) p.182). Inaccessibility and housing entrapment tend to be more widely accepted as determinants of inner city unemployment concentration in the United States than in British urban areas (Gordon, D. (1972); Metcalf, D. and Richardson, R. (1976) p.202). The racial dimension of the United States appears to play a significant role in explaining this disparity (Gillespie, A. (1983) p.181; Kain, J. (1968)). The McCome Commission report declared that high levels of unemployment, from the inadequacy of public transit services in overcoming home-work separation, was a significant factor in provoking the 1965 race riots in Los Angeles. De Vise's (1976) study of Chicago found that the rate of job decentralization from inner to outer city areas • was more than twice the employed resident decentralization rate (over the period 1960-1970) thus reducing the accessibility of inner-city blue-collar workers. His results also indicated a net commuting outflow of blue-collar workers from the inner city illustrating that reverse commuting had become a major feature of Chicago's travel patterns. The exclusion of inner-city blacks from new suburban housing, coupled with lower mobility in reverse commuting to decentralized factory jobs, was proposed as conferring a major employment disadvantage on this group. In their exploratory study in Los Angeles, Wachs and Kumagai (1973, p.450) identified lower accessibility for low-skill primary, machine trades, and bench work occupations to their appropriate employment destinations than for professional, technical, clerical, sales and service workers. This initial accessibility disadvantage was also suggested as being accentuated by car ownership patterns. In addition, Wachs and Kumagai found that low income workers were less accessible to jobs (for that income category) than for the highest income group to their opportunities. However, workers in the low income range were more accessible to their work than the middle income groups to their employment 74 Bederman and Adams (1974) examined the relationship between job location and employment in Atlanta to assess whether areas of underemployment and poverty matched those of low job accessibility. Unlike the other studies supporting accessibility limitations on inner city residents, the areas of highest accessibility to (aggregated-occupation) employment were found to be those with the highest rates of underemployment Although the five employment centres used covered only 32% of jobs and destinations were not analyzed in terms of the appropriateness of jobs available, Bederman and Adams conclude that the variation in underemployment is not explained by the accessibility of residential tracts to job centres and that reasons for underemployment and poverty in the inner city would have to be sought elsewhere. Although, in the U.K., there is some evidence of housing mobility constraints operating disproportionately on the bottom-end of the occupational-skill spectrum, the "demand-side" (inaccessibility and decentralization) thesis is not well supported overall. Gillespie (1982, p.182) notes that while the number of manual jobs in the U.K. city cores declined substantially over the period 1966-71, the number of resident manual workers declined by a larger amount and at a faster rate. In fact core job surpluses actually increased slightly over the period. Thus the necessary condition for accessibility impediments to job matching is not fulfilled at this generalized level in the U.K. Hall (1981, p.2) proposes that the deprivation of many inner city areas is sustained and reinforced by a vicious circle of poor jobs and poor housing via the joint operation of a technological-employment trap (technology removing existing potential jobs) and a housing trap (from people being afraid to move to new job sites, having inadequate information, and being restricted to rent-controlled housing). According to Cheshire (1979, p. 36), the renowned Inner Area Studies (1977) of Liverpool, Birmingham and Lambeth, all espouse variants of the "trapped" hypothesis claiming the large numbers of unskilled workers have, as a result of inferior mobility, become incarcerated in the job-deficient inner city as industry has decentralized, and 75 have thus become ensnared in a vicious circle of unemployment and immobility (similar to Halls' "vicious circle"). He provides an example from the Liverpool study which claims that the 100,000 new manufacturing jobs (from regional policy) have been predominantly located on the periphery of the Merseyside conurbation out of daily commuting range of the inner city unskilled. However, N. Thrift (1979, p.178) highlights different conclusions from the Inner Area Studies reports, quoting paragraphs that do tend to indicate an acceptance of geographical variations in intra-urban unemployment rates as directly attributable to non-geographical factors such as the occupational structure of the residential labour force. Bramley's (1980) contribution- to the- Lambert studies discusses the' existence- of real barriers to emigration for the less-skilled and lower-paid due to uncertainty coupled with relatively higher rents and housing payments at residential areas near employment growth destinations. The necessity for the use of cars for access to suburban job locations was also considered as a constraint on the low-income inner city residents. One-quarter to one-third of inner city residents expressed a desire to move out for various housing and environmental reasons but were prevented by housing cost considerations. Studies in London by Berthoud (1980, p.240) also provide some evidence on the limited nature of housing mobility. While two percent of managerial and professional households were found to move for job reasons in a year, a scant 0.4% of semi- and unskilled manual workers did the same. Less than one in five manual workers would ever move for job reasons in their working lifetime. However, in his analysis of travel time to work-areas (for occupational groups), the three manual groups were found to have slightly lower journey times than either of the non-manual groups. Although this outcome suggests greater accessibility for the manual worker, Berthoud discusses how the positive, association social class and car ownership, and the necessary dependence of manual workers on public transport or foot, would mean a 76 relatively smaller geographic range for the manual worker in his or her daily commuting trip for a given length of time. The radial focus of the transport network was also considered as placing further constraints on the job choices (many being located in suburban areas) of the manual worker. Berthoud refers to Daniel (1972) who found that, when male manual workers were made redundant in south-east London, their new jobs involved an increase of 23% in journey-to-work times together with a 15% decrease in real earnings. Gillespie's (1983, p.182) findings at the U.K. national aggregate level contradict Bethoud's journey-to-work disadvantage for the manual worker. His calculations indicate that "core" to "ring" journeys for semi- and unskilled manual workers1 have remained a constant proportion of total work trips for that group (for the period 1966-71) whereas, for skilled manual workers, reverse flows were shown to increase slightly in importance. Although this phenomenon could reflect greater capability constraints on the less skilled, Gillespie concludes that the various studies do not lend much support fo the "accessibility crisis" hypothesis (admittedly only for his relevant study period) and subsequendy renounces the possible efficacy of isolated transport improvement solutions. Several other studies in the U.K. stand directly opposed to the "trapped hypothesis" as an explanation of intra-urban variation in unemployment rates. The majority of these studies favour the supply-side explanations as adequate alternatives. Cheshire (1979, p.36) criticizes the Inner Area Studies for failing to present any evidence to support their assertion that the unskilled had become trapped by the changing pattern of industrial employment Metcalf (1975) and Metcalf and Richardson (1976) reject the importance of area characteristics in explaining unemployment on the grounds that no association could be found betwen London boroughs' employment in manufacturing in 1966 and the unemployment rate in 1971. In addition, greater variation in unemployment rates (for inner versus outer metropolitan areas) would be expected for unskilled, than other 77 groups, if differential locational advantages were operating. However, Metcalf and Richardson (1976) found no more variation in unemployment rates of the unskilled than for the other groups. Evans (1976) obtained similar results indicating systematic differences in observed unemployment rates. Some areas of London (for example, outer Inner London) were found to have higher than national unemployment rates at all skill levels. Joan Vipond (1984) ran a multiple regression analysis on census tract data (for Sydney, Australia in 1981) to reveal a positive unemployment gradient, with distance from the CBD, after the influences of spatial variations in characteristics of workers had been removed. This result supported her' hypothesis that increased spatial" frictions, from decreased accessibility and greater resistance on information flows with increasing distance from the CBD, would increase the length of the job search process. To Vipond, the positive unemployment gradient is evidence contradicting those U.K. and U.S. studies emphasising spatial causes of inner-citv unemployment Although her regression results reaffirm the traditional importance of workers' personal characteristics in explaining unemployment differences, the overall results are supportive of the significance of geographic-structural (and frictional) unemployment in explaining intra-urban unemployment variation patterns - only the observed pattern is different in the Australian context In Canada, the problems of job dislocation from the relocation of industrial plants from the City of Toronto to outlying municipalities beyond community range of displaced workers, have been addressed to some extent (see City of Toronto Planning Board (1975)). However, this study focuses on the effect of relocation beyond the Metro Toronto boundary and could not be conceived as a test of the local labour market effectiveness of the Metro Toronto area (though geographic mismatch at broader scales is stressed as the problem, for specific groups). The research did reveal that older workers and low-wage employees experienced the most difficulty in finding new 78 work but the results do not help to isolate the relative explanatory power of accessibility constraints versus housing and personal characteristics in regard to spatial variations in unemployment within the urbanized area. B. INTRA-URBAN UNEMPLOYMENT DIFFERENTIALS FROM PERSONAL CHARACTERISTICS OF THE RESIDENTIAL LABOUR SUPPLY The other major school of thought on the fundamental causes of observed variations in intra-urban unemployment levels upholds the role of personal characteristics of the residential labour supply as the key set of factors behind this mosaic of unevenness. Stated' simply, unemployment is perceived to be high in certain areas of the city (such as the inner city) because low-skilled workers, who are prone to high unemployment live in the cheap (low-income) housing of those areas (Vipond, J. (1980) p.131). The observed pattern would then be just a consequence of the low-income housing preferences of "unemployables" and those that recurrently suffer unemployment spells. Inner city areas, in particular, are often held to be areas with a high percentage of residents vulnerable to unemployment2 (Corkindale, C. (1980) p.181). Spatial concentrations of unemployment are thought to reflect concentrations of people with certain characteristics (such as age, skill level, race and family situation) which, in turn, reflect the impact of the housing system on residential location patterns (Bramley, G. (1980) p.273). People would be allocated to the differentiated landscape of the housing market on the basis of their socioeconomic and cultural characteristics and related needs and constraints. The form of the housing market itself would be the result of complex historical processes and an underlying "rationale" by participant decision-makers. This approach implies that the relevant urban area is a single spatial labour market which may, however, be linked to non-spatial aspects of segmentation -2There is a considerable body of evidence intimating the propensity for low-skill occupations to suffer longer durations, and more frequent spells, of unemployment This evidence will be examined, in part, in Chapters 7 and 8. 79 particularly the dual labour market thesis (Bramley, G. (1980) p.273). The spatial structure and its influence on the labour supply-demand adjustment process is ignored. To some extent, the conclusions of the Lambeth Inner Area Study (1975) do facilitate the supply-side explanations. Although they propose that people are possibly trapped in the inner city because they cannot afford to move out or commute, the alternative explanation is considered when people are also seen to, perhaps, c]lQQS£ to live in this area because housing is cheap or available (for renting) (Corkindale, J. (1980) p.169). However, the fundamental contention of the personal characteristics explanation is that, if people are trapped, they are trapped in low-income housing, iM. the location of this housing- does not impinge upon the job search process- and: access-to available jobs. This school is, therefore, passing on the actual explanation of the observed variation in unemployment rates by residence to those theories and models which attempt to explain the urban housing structure. Unemployment traits would just be ancillary aspects of those more fundamental socioeconomic and cultural characteristics which are seen to guide households to particular areas of the housing market (though there is an obvious direct and confounding association between unemployment and income levels). The original attempts at accounting for intra-urban spatial variations in land use (and values and intensity) stem from the work of Von Thunen (1826) and were further developed throughout the twentieth century by Hurd (1903) and the land economists (such as Haig (1926)) and the Chicagoan human ecologists Park and Burgess (1925) and then Hawley (1950) and Firey (1947). In the 1960's, Alonso (1960), Wingo (1961), Mills (1967; 1969) and Muth (1969) developed the models widely accepted (and criticized) in the contemporary analysis of intra-urban land use. The key concepts in Alonso's model are accessibility (to a city centre assumed as being the only source of employment) and the income available to households. 80 Increased distance from this centre would imply reduced accessibility and greater commuting costs which, in turn, would reduce the amount remaining for a household to spend on property. This setting: ...produces a bid-rent curve, portraying the amount of money which people are able to afford for land with increasing distance from the city centre. Individual housholds can choose where to live on this curve: each has an indifference curve indicating its relative preferences for the two elements of the equation. Alonso assumes that all households want as much land (space) as possible; land is more plentiful on th edge of the city, as well as being cheaper, so it is the rich who choose to live in the lower-density outer, wheras the poor are confined [emphasis added] to inner-city districts (where relative increases in commuting costs have less impact). (Johnston, R.J. (1981) p.9) Therefore, the poor (who are more vulnerable to unemployment) would end up living at high densities on expensive land near the city centre as a result of the income-derived trade-off betwen space and accessibility to work. The concentration of unemployment in the inner city areas would then exist even in the face of high accessibility levels to. the assumed central focus of job opportunities. The supply side explanations of intra-urban unemployment variations have been supported by many British theorists in the wake of the early Inner Area Studies (1975) - mainly in response to evidence against the demand-side approaches. As described, Evans (1976) rejected the "trapped" hypothesis on the grounds that unemployment rates were exceptionally high for both unskilled and other occupational groups in the outer Inner London area. Corkindale (1980, p. 184) attributed a major part of the differences in residential unemployment rates to variations in the structure of the labour force between boroughs (the inner boroughs having a higher percentage of unskilled, manual workers). In support of Evans' work, he found that, in general, there was n_ obvious tendency for unemployment rate differentials (within socioeconomic groupings) to be higher in inner versus outer boroughs thus concluding that the concentration of the unskilled and out-of-work in inner areas was probably derived from the operation of the housing market 81 After dismissing the potential spatial causes of unemployment variation because of the absence of a relationship between the percentage in manufacturing in London boroughs in 1966, and the unemployment rate in 1971, Metcalf and Richardson (1976) applied a multiple regression analysis of the (selected) personal characteristics' make-up of the boroughs on the 1971 male unemployment rate. They found that variations in the male residential unemployment rate, between boroughs, could be well explained by individual characteristics - especially marital status (married men being less likely to be unemployed), number of dependents (in a positive relationship with unemployment rate), and the the proportion of unskilled workers (positive relationship). Once these variables were controlled for, age, ethnicity, and area characteristics1 (proportion of labour force in manufacturing in 1966 and number of redundancies before 1971) were apparently unrelated to 1971 unemployment levels. By extending the model to include some "wealth" variables, Metcalf and Richardson found that boroughs with a high percentage of owner-occupied dwellings tended to have low unemployment rates and that the unskilled tend to live in low-rent housing. Because direct accessibility variables were not incoporated, the outright rejection of a relationship between accessibility and the probability of unemployment is questionable. A study by the Northern Region Strategy Team (1975) also indicated that skill, and age, were the most important factors making an individual vulnerable to unemployment Overall, the housing effect explanation has probably gained the most favour in the British urban context Inner city problems are seen as occurring because individuals who suffer labour market disadvantage live disproportionately in the inner city because therein lies the largest stock of cheap housing (Metcalf, D. and Richardson, R. (1976) p.202). On the other hand, inner, city unemployment in the U.S. is commonly attributed to employment suburbanization, housing segregation, inadequate public transport 82 systems, poor labour market information and discrimination. Cheshire (1973; 1979) also acknowledges that supply-side characteristics, the "logic" of the urban structure, and patterns of residential location are very important for explaining intra-urban unemployment disparities. However, he questions the utility of studies focused solely on the supply aspects on the contention that implications of differences in the observed personal characteristics of the unemployed are impossible to identify and that personal characteristics of the unemployed, in one spatial labour market, actually tell nothing about the causes of unemployment The characteristics of the entire labour force are seen as being more persuasive for an understanding of unemployment- rate variations. Although demand differences are admitted to play only a minor role in explaining high relative inner city unemployment Cheshire (1979, p.32) stresses that demand characteristics of a particular town or region are crucial in explaining unemployment variation over time and hence the h'igh absolute level of inner area unemployment in the 1970's. To Cheshire, supply factors (that is, factors determining the quality of an area's labour supply) which are important in explaining intra-urban unemployment differences, should be far less influential in determining inter-urban differences. He perceives long-term unemployment differences between regions and towns as the outcome of long-term differences in the spatial pattern of excess demand for labour (or regional demand deficiency) (Chesire, P. (1979) p.36). At this level of "determinancy", crises of the inner city areas (particularly in the U.K.) can be seen as crises of the manufacturing (or other low-skilled employment demand) sectors (Thrift, N. (1979) p.175). The inner city, with its traditional dependence on low-skill production or service jobs to match its typically high proportion of low-skill workers has been described as an "open economy" highly senstitive to the rapid transmission, of economic fluctuations from other, regions or countries. The strucural transformation of the economic base of Britain (mirrored in 83 varying degrees throughout the capitalist world economy) would lie at the heart of worsening inner city unemployment problems. Hall (1981) describes the inner cities of Britain as extreme versions of the economic woes of the country. Hence, although it is likely that persistent long-term supply characteristics (of socioeconomic groups and the housing system) are responsbile for relative inner city concentrations of unemployed, the absolute magnitude of variations in unemployment rates would be a result of profound changes in the nature of prevailing economic systems. A recognition of the profound influence of "exogeneous" effects at national and international levels, where broad structural changes have a differential impact on the regional levels of demand for labour, implies a shift' in emphasis to macroeconomic perspectives in order to understand urban labour market phenomena. The futility of isolated, local, piecemeal policy to reduce urban labour demand and supply "mismatch" problems (as in the inner city), without an explicit consideration of the changing nature of the Western economic system and the "processes of social equality", appears to be gaining considerable acceptance (Thrift, N. (1979); Cheshire, P. (1981); Elias, P. and Keogh, G. (1982) p.30). One of the principal aims of the thesis will be to examine which of the aforementioned explanations of intra-urban unemployment variations is most appropriate to the Vancouver CMA. The research results obtained should enable a comparison of this Canadian city with the urban environments examined in Britain and the U.S. If the supply-side explanation is supported, the original causes of unemployment would have to be located somewhere in the far broader macroeconomic interpretations. However, the suburbanization of industrial activity is a necessary condition for the demand-side explanations (and a significant aspect of broad economic explanations) and evidence on the existence and nature of this process is examined in the. Vancouver CMA study area in the following chapter. Chapter V THE DECENTRALIZATION OF INDUSTRY IN THE VANCOUVER CMA A. THE PROCESS OF DECENTRALIZATION 1. GENERAL TRENDS The rapid centralization of population and economic activity experienced with the onset of the industrial revolution continued to be the major spatial trend until well into the twentieth century. The radical technological changes which powered the urbanization process favoured the strategic- concentration of the burgeoning goods-production sector and its required labour force. These areas of spatially-clustered economic activity and population acted as self-reinforcing magnets of growth by offering a range of agglomeration economies to firms within small, centralized core areas whose boundaries were rather narrowly defined by the relatively expensive transport and communication costs of the relevant time period1 (Myrdal, G. (1957)). However, during the twentieth century (particularly in the latter half), a number of countervailing forces have emerged to stimulate a reversal in the dominant process. The decentralization of population, and many forms of economic activity, at the intra-urban, urban to rural, metropolitan to nonmetropolitan, regional, national and even international scales has been well documented as a pervasive phenonemon in Western mixed economies (see Dicken, P. and Lloyd, P. (1981) p.155-168). Although there has been some evidence of an incipient decentralization of certain manufacturing activity sectors since early in the twentieth century (de Souza, A. and Foust, J. (1979) p.234), it was not until the 1950's that the suburbanization of the residential population and certain forms of economic activity was recognized as a distinct and entrenched process. 'This process of concentration stimulated by agglomeration economies would only apply to those firms for which the benefit of an existing urban core location more than offset cost advantages of a non-urbanized, raw material site. 84 85 The massive suburbanization of the residential population after the Second World War, in many nations, is linked to a range of motivations and causes which vary according to the perspective adopted. Undeniably, government housing policy targeted at home-ownership (and inspired by Keynesian macroeconomic theory) and the technologically-invoked improvements in transportation, communication, productivity and related increases in community wealth, played prominent roles in the formation of the low-density urban residential sprawls which characterized the post-war period (see Chapter 6 for some of the radical perspectives on residential suburbanization.) The other major element of the urban system undergoing substantial decentralization (and the most relevant aspect for this paper) has- been that of industrial activity. There has been a very pronounced redistribution or relocation of secondary activity away from its traditional location in the inner cities of large industrial metropolitan areas to a variety of more peripheral settlement areas. This phenomenon is of major importance to the research objectives of the thesis, both as 1) the underlying factor in the proposed spatial causes of unemployment in the "trapped hypothesis" and 2) as a notable aspect of the production process changes at macroeconomic levels which have indirect, but critical, implications for the nature of the outcome of regional and local labour market operation (and hence for the supply-side theories of unemployment rate variation). The "Frostbelt- Sunbelt" regional shift of productive capacity (and people) in the U.S., is frequently monitored, analyzed and discussed as the prototypical illustration of the decentralization process (Cohen, Y. and Berry, B. (1975); Gertler, M. (1984) p.155; Norton, R. and Rees, J. (1979); Phillips, R. and Vidal, A. (1983) p.297). The onset of nonmetropolitan industrialization (the relative decentralization of industry from major metropolitan areas to rural and smaller urban areas),in the U.S., has also been identified by many researchers. For example, between 1962 and 1978, 56% of the increase in U.S. manufacturing employment took place in rural and other 86 nonmetropolitan areas (Norcliffe, G. (1984) p.27). In Britain, similar changes in the geography of industrial activity have been identified. Keeble (1976) concluded that there was a core to periphery movement of manufacturing at the regional scale because the growth in manufacturing employment between 1966 and 1971 was inversely related to city size and positively related to 1) the perceived desirability of cities and 2) whether or not the region had "assisted area" status. In their regional shift-share analysis for the period 1959-1971, Fothergill and Gudgin (1971) observed that the Southern and Midland regions of the U.K. showed the fastest growth (though less marked for manufacturing alone) while London suffered a decline in total and manufacturing' employment growth. Monitoring decentralization processes at the international level is a far more difficult problem - particularly in terms of evaluating the extent of actual relocation of productive capacity from the traditional core industrial nations to the "developing" nations of Latin America, Asia, Oceania, and Africa. The shifting of investment capital through the international capital markets and the operation of multinational corporations (both mechanisms are primarily post World War II phenomena) is often conceived as the major impetus behind the relative decline of the First World nations as producers - especially in the older "smokestack" industries (Multinational Monitor (1984)). The output of manufacturing industry grew far more quickly in the "developing" nations than it did in most "advanced" nations (Jordan, B. (1982)). In fact, from 1970 onwards, there was a relative stagnation in manufacturing output in many "developed" nations. The redistribution in the geography of manufacturing output towards the industrializing Third World (particularly for low-skilled manufacturing "branch plant" functions) could be framed within the context of a relative decentralization of industry at the international level. 87 2. THE CENTRIFUGAL FORCES UNDERLYING DECENTRALIZATION The underlying causes of the dispersal of industry from its central area location have received considerable emphasis in research and theory over the past twenty years. In order to avoid undue repetition of some impressive existing accounts and summaries of the major factors proposed as the forces behind this pervasive process, a review of the alternative explanations shall only be included in Appendix A. This list has been compiled on the basis of Scott's (1982a, p. 123) replete description which has only been modified in part to account for several other possible determinants of the decentralization phenomenon. The factors are not necessarily mutually exclusive or compatible but represent an ad hoc listing of propositions from a variety of theoretical and methodological perspectives. In addition, as Scott (1982a, p. 121) has stressed, most of the postulated explanations do not stand alone as final causes and do not fit within comprehensive, integrated broader theoretical contexts (that is, they are essentially a-theoretical) and tend to form a piecemeal listing of changes which would favour non-central locations. However, perhaps the most powerful common determinant of the listed factors would be the effect of technological and organizational innovation on both the specific nature of the production process and the relative costs of factors of production including the costs associated with linkage requirements. Technological change could be perceived as directly initiating increased land requirements, the reduction in transport and communication costs (which previously tied the firm to clustered core locations), and shifts to transport modes (such as trucking) - outcomes which enable and encourage peripheral locations. It could also be linked to the economic concentration, and functional specialization, and possibilities for separation, which have resulted in function-specific locational requirements which are often no longer optimally fulfilled in the core area. The changes in the production process (and. associated employment demand) and the evolving geographic pattern of required labour supply (which has 88 been strongly affected by technological change) have also been proposed as providing a dynamic set of locational considerations often reversing the centripetal tendencies of earlier times. Obsolescence of central plant and equipment is an obvious product of innovation. Even changes in the land price gradient could be at least partly attributed to the technologically-invoked transformation of the economic base and "highest and best use" possibilities for inner city versus suburban sites. The impact of technology appears to seep through to almost every aspect considered as "pushing" industry from the core and "pulling" it to the peripheral areas. Only a simplistic conception of physical constraints- on expanding- inner city firms, the exacerbation of negative externalities with city growth, variation in municipality policy and taxes relating to housing and industry, interest group lobbying, and changes in the collective bargaining power, or militancy of labour would escape djieci association with the changing nature of technology.2 Probably the most elaborate, integrated treatment of decentralization in the traditional models of industrial location lie within incubation, product cycle, and hierarchical filtering theory (Hoover, E. and Vernon, R. (1962); Norton, R. and Rees, J. (1979); Struyk, R. and James, F. (1975)). The theory (actually an amalgamation of three related theories) places prime emphasis on explaining the differing locational requirements of firms, and in particular, product lines, as they evolve in response to demand requirements. The inner city is conceived as the safest place for the nurturing of new and innovative firms dependent on the agglomeration economy benefits of this area. As they become self-sufficient and stable (if they survive), or as the market increases for the product and standardization becomes viable, the firm becomes increasingly independent of the central city and is likely to be "spun off from the 2Changes in the nature of the labour process, and labour relation, from technological and organizational innovation, and the effect of increased auto use and transport improvements factilitating suburbanization, and the expansion of firms initiated by technology-based changes, would have to be discarded. 89 incubating central area to the suburbs or down through the urban hierarchy. The theories have been criticized for their intrinsically static nature, underemphasis on labour aspects, and failure to go much beyond the investigation of formal spatial relationships (Scott, A.J. (1982) ;Webber, M. (1982)). The relevance of some of the appended list of decentralization factors will be assessed in the following description of the changing geography of industry within the Vancouver CMA. B. I N T R A - M E T R O P O L I T A N DECENTRALIZATION - THE CHANGING GEOGRAPHY OF INDUSTRY IN THE VANCOUVER CMA The intra-metropolitan decentralization of manufacturing industries (and tertiary and quaternary activities to some extent) has paralleled, if not preceded, the similar trends found at larger geographic scales (Dicken P. and Lloyd, P. (1981) p.155-158). Movement from the inner city area, to suburban peripheral areas, beginning since the early 1900's, but accelerating in recent years, has been instantiated in many geographic studies. In the U.S.A., numerous case studies and U.S. Bureau of Census Data analyses have revealed the pronounced tendency for manufacturing (and associated blue-collar) employment to shift from the inner city to the suburbs (Struyk, R . and James, F. (1975); Berry, B. and Kasarda, J. (1977); Kain, J.(1968)). Although at a lesser scale than manufacturing, office and service suburbanization has proceeded at an increasing rate since World War I I (de Souza, A. and Foust, J. (1979) p.234). A plethora of studies in the U.K. have also monitored the decentralization of manufacturing activity output and jobs from inner city regions (particularly in London) (Drewett, R . , Goddard, J., and Spence, N. (1976); Dennis, R . (1978)). The process of decentralization, (along, with outright "deaths" of industrial firms) has been attributed as major causes of "deindustrialization" of traditional manufacturing 90 core areas (Phillips, R. and Vidal, A. (1983) p. 291). The loss of industry from these core areas can result in the creation and exacerbation of social and fiscal problems (such as unemployment, job dislocation, and reduced municipal tax revenues without similar declines in needed expenditures) in traditional manufacturing core cities. The urban industrial decline phenomenon has had profound negative repercussions in many of the older industrial cities and constitutes a key problem addressed in urban, regional, and national economic development policy (particularly in the U.K.). Manufacturing value-added and employment statistics for individual municipalities (when available) were extracted from the Statistics Canada, "Manufacturing Industries of Canada" data, at the sub^provincial level, calculated as a percentage of the total for the CMA, and plotted on the maps shown in MAPS 5.1 and 5.2. 3 Vancouver City has lost about 18% of both the total CMA manufacturing employment and manufacturing production value-added over the period 1964 to 1981. Although it still has the largest share of both these variables, it has lost its relative share of manufacturing employment and value-added primarily to the suburban municipalities of Richmond, Delta and Surrey and to Port Coquitlam around the eastern arm of the Fraser River. Burnaby has encountered slight increases in its portion over this period while New Westminster has lost approximately 4.5% of the total share of the CM A's manufacturing employment and value-added. While North Vancouver has experienced slight increases in its share of manufacturing activity, West Vancouver's tiny proportion in 1964 was virtually reduced to zero by 1981. The pattern of manufacturing production employment change for the component municipalities is shown in MAP 5.2.4 3 There are some inconsistencies between the percentages calculated for the two years as some of the statistics were not available for all municipalities. However, figures have been adjusted to take account of missing data where possible and the major trends, should still be fairly accurate. "Statistics for Coquitlam, Maple Ridge and Pitt Meadows, were not available for both years, due to confidentiality criteria and were hence omitted from the calculation. Source: Compi.l ed from S t a t i s t i c s Canada 31-209 S VANCOUVER C M A Map 5 • 2 The D i s t r i b u t i o n of M a n u f a c t u r i n g P r o d u c t i o n Employment SourceiCoir.oiled from S t a t i s t i e s "Canada 31-209 L a n g l e y C. 0. 1 X 1. U Z 93 Absolute changes in the number of jobs for manufacturing production workers are fairly consistent with the relative distributional changes. Both Vancouver and New Westminster suffered absolute losses over the 1971-81 period. Vancouver City lost 7.6% of its manufacturing production workforce (1724 jobs) and New Westminster lost 7.1% of its manufacturing production employment (265 jobs). The municipalities which gained the bulk of new jobs in industry were Richmond and Surrey which together accounted for almost 50% of the increase. Other suburban municipalities each captured between 2% and 10% of the net gain in employment. The rate of growth was quite spectacular in Langley C. (297% increase), Langley D.M. (132% increase) and Port Coquitlam (203%). Vancouver City and New Westminster were the original areas of settlement and the hub of early industrial activity coalescing around the railway lines and along the waterfront (MacDonald, N. (1973) p.142-151). False Creek and the area along the harbour to the east and New Wesminster (with its sawmills, and fish cannery) were the dominant industrial areas of the region until the 1960's (Hardwick, W. (1972) p.126). Although these areas could only be seen as traditional core manufacturing areas at a far lesser scale than the older core areas of cities of the "manufacturing belt", decentralization, from Vancouver City in particular, has occurred in terms of a decrease in their combined relative share of manufacturing employment and value-added - from over 65% in 1964 to only about 45% in 1981. The concentration of industrial land use in Vancouver City in 1955 is illustrated by the plot of industrial land use activity, at that time, in MAP 5.3. The absolute growth rate of the industrial sector in Vancouver City has been very slow over the last two decades. Between 1968 and 1976, the City actually lost 123 acres of industrial land use (an average of 1.1% per year) and manufacturing employment fell by 2,500 jobs in the period 1966 to 1972 (City of Vancouver Planning Department (1977) p.7-9). 95 After World War II, the population sprawled in the Lower Mainland area and new manufacturing plants, especially the larger ones spread eastwards along the Fraser River and into the suburban areas (Walker, D. (1980) p.219). MAP 5.4 shows those areas of the CMA which either gained or lost industrial land use over the period 1955-1983.s Apart from the loss of some scattered areas in West Vancouver and Richmond (some of which could be a result of inaccuracy in the original land use maps used), False Creek has been the most significant area of industrial land use to be displaced in the Vancouver CMA. The loss of industrial land use and manufacturing employment (which declined by 6,000 jobs from 1966 to 1978) in both absolute quantity, and relative proportion- of the CMA total, supports the notion that-Vancouver City has been undergoing a sustained reduction in its importance as an industrial centre since the late 1960's (DPA Consulting Ltd. (1981) Table D-l). However, manufacturing shipments (adjusted in line with the Canadian C.P.I.) did increase slightly (by 20%) over the period 1966to 1981. By the early 1970's, Steed (1973, p.239-40) described the^ geography of industry in the Vancouver CMA area as having a high proportion of suburban manufacturing associated with the rather specialized locational requirements of a few large plants. The wood processing and paper mills were located along the waterfront areas where .their input and water needs could be easily provided and the export nature of their output could be satisfied by the capability for port facilities. Fish processing plants could be found in Richmond, shipyards in North Vancouver and chemical plants and petroleum refineries at the eastern end of Burrard Inlet Steed described the suburbanized pattern as heavily influenced by firms which, for the most part, required large tracts of land, 5Although "industrial" land use covers wholesaling, warehousing, distribution and construction activities in addition to manufacturing, processing and fabrication in the previous discussion of manufacturing, this measure is the only sutiable indicator of land use available. It is important to note the limitations of an analysis, of industrial, activity changes by illustrating the simply aggregate areal changes shown in MAPS 5.3 and 5.4. These areas mask variation and changes in use intensity (of output and employment) and variation in specific industry types within their homogeneous spatial expression. 97 waterfront and some isolation due to pollution problems. The decentralization of industrial land use in the CMA, since 1955, is clearly ilustrated in MAP 5.4. The map showing the spatial distribution of industrial land use in 1955 (MAP 5.3) highlights the role of Vancouver City as the industrial centre of the CMA prior to the 1960's. The period from 1955 to the early 1970's, was a time of drastic physical change and land use instability in the region with considerable demolition of inner city neighbourhoods (Ley, D. (1980) p.254). The outflow of industry from False Creek (around 1963 to 1972) was accompanied by the growth of Port Moody, New Westminster and North Vancouver and the prolific suburbanization of industrial land use in Richmond, Delta, Surrey and to some extent, Burnaby. These changes (up to the early 1970's) are consistent with Guy Steed's (1973, p.255-257) study findings on industrial land use activity in the Greater Vancouver Regional District (GVRD) from 1954 to 1967 - the eastward shift from the core, the decline of the False Creek area, the rapid growth in North Vancouver, and a considerable expansion in suburban industry areas. However, after the early 1970's, the decentralization of industry to outlying suburban municipalities was by far the most pronounced aspect of industrial land use change and this trend suggests that industry has tended to locate (or relocate) at even greater distances than those involved in the more modest extensions of the earlier period. In the high economic growth context of the 1970's, physical constraints on land availability and high land values in Vancouver City reduced the appeal of the central area for potential or expanding industry. The environmental awareness preferences dominant in the late 1960's and the early 1970's also contributed to the "pushing" of industry from its traditional stronghold (City of Vancouver Planning Department (1977), p.7.9 ; Roy, P. (1981) p.146). The increased demand for land by industry, from horizontal plant layout requirements of modern production techniques and increased 98 employee auto use and parking needs, meant that land constituted a greater cost component in the firm's investment hence exacerbating this negative aspect of the city area. Increased demand by commercial uses (which can generally outbid industry for available land) has also raised land prices and added pressure for rezoning away from industrial uses (Tennant, L. (1977) p.56). The rezoning of 400 acres of industrially-zoned land in Vancouver (from 1968 to 1976), civic efforts to convert False Creek from an industrial area to mixed residential, commercial, and recreational uses, suburban municipal industrial park provisions and tax incentives, and the "balanced growth" strategies of the GVRD "Livable Region Plan" have all played a vital role in the decline of core industrial areas and the growth of suburban industry. P. Roy (1980, p. 134) saw the False Creek transition as "symbolizing Vancouver's emergence as a post-industrial city". The decisive influence of social groups and institutions in directing the nature of industrial development in the city illustrates the potential for social perceptions and "meanings of place" to act back upon the spatial structure and spatial distribution of the economic base. In more recent times, the City of Vancouver Planning Department has been adopting strategies to preserve and maintain a strong industrial sector. The guidelines of the "Economic Strategy for Vancouver in the 1980's" and the creation and possible implementation of two new (light) industry zoning schedules ("1-1" and "1-2") are oriented toward the achievement of a more stable environment within which industries can operate and develop (City of Vancouver Planning Department (1983) p.18). Fears of negative economic repercussions from continued industry loss (particularly in times of economic recession) may well be currently outweighting the environmental concerns of the past The construction of additional bridges across the Fraser River, and reduced linkage costs acting to reduce the accessibility disadvantages of the periphery, have 99 allowed a number of "pull" factors to draw new and relocating industries to- the suburban areas (as shown in MAP 5.4). Industrial land values in the. suburban municipalities have been far cheaper than those in the city - ranging from less than $1 per square foot in Delta and Surrey, to $18 per square foot in Vancouver City (in 1976) (City of Vancouver Planning Department (1977) p.7.10). The existence of cheap large parcels of land, available in the suburban areas, and the shift of the "market centre" towards the south-east (to near Port Mann Bridge) away from Vancouver CBD (due to strong residential suburbanization in the 1960's and 70's), have stimulated the industrial decentralization process. In summary, there appears to be considerable evidence that the decentralization of industrial land use, manufacturing employment and manufacturing value-added, is occurring away from the traditional core area of Vancouver City and New Westminster to the suburban municipalities (particularly since 1970). The • process is probably not as pronounced as in the large older metropolitan industrial core areas of the U.S. and Europe. Vancouver has never been a heavily industrialized urban area over its relatively short history of settlement and the original industrial sectors were not focused exclusively on an identifiable large, dominant "inner city" area. The export-orientation and "upstream" nature of resource exploitation and production activities have always relied heavily on transport locations (such as those along the many waterfront sites of Burrard Inlet False Creek and Fraser River) rather than on the agglomeration economies and high central market access features of .a concentrated industrial core area. Chapter VI RADICAL INTF.RPRFTATIONS: THF. RESTRUCTURING OF CAPITAL AND THE ' LABOUR MARKET The purpose of this chapter is to provide a brief synopsis of the significant field of radical theory on the labour market (and hence, on unemployment) in order to acknowledge the Marxian-based explanations of unemployment Selected aspects of these radical interpretations will be examined to gauge their relevance or applicability in the British Columbian setting (in Chapter 9) with specific reference to the manufacturing production employment sector. The existence of institutional and spatial constraints on the ideal neoclassical models of the labour market have already been discussed in Chapter 3. However, since about the mid 1970's, there has emerged a vigorous growth in the use of Marxian-inspired theoretical (and to some extent empirical) analyses in geographical literature. .One of the central concerns of such radical theory in geography has focused upon the role of labour in capitalist economies. The rapid increase (throughout the 1980's) in the volume of radical works salient to the labour market makes it appropriate to address this (rather loosely) unified view which probably constitutes the major, singular school diametrically opposed to the fundamental assumptions and perspectives of neoclassical interpretations of the labour market6 The selection of the neoclassical and radical labour market models for review is not meant to imply that these two perspectives encompass the appropriate theoretical literature in its entirety. Existing models of the labour market and the labour process include a number of other conceptions (such as labour queue theory, labour exchange models and those framed within industrial sociology studies) but many of these draw heavily on, and involve only minor modifications to, the quintessential views of the neoclassical or radical schools. To some extent it is also true that the radical and 6The Marxian-based criticisms of Weberian location theory were briefly outlined in Chapter 3.B.2. 100 101 neoclassical conceptions do agree on, some basic theoretical relationships, motivations of actors and treatment of the labour "problem" and one has to move to "higher" epistemological, ethical and aetiological levels before major disparities become obvious. The variety of perspectives within the Marxian-based interpretations also complicates the execution of a concise review of radical labour market models (Kirwan, R. (1981) p.79). Within geography, the influence of Marxian thought ranges from the more rigid, holistic, structuralist interpretations inspired by Althusser (1969; 1976), Castells (1977) and the French School of structural marxism to the somewhat more flexible interpretations of theorists such as Massey and Meegan (1978; 1979), Clark (1977; 1978a; 1978b; 1978c; 1979a; 1979b; 1981a; 1981b; 1983a), Gertler (1984), Scott (1980; 1981a; 1981b; 1982a; 1982b; 1983a; 1983b; 1984) and Walker and Storper (1981; 1983) who use many of Marx's philosophical orientations and concepts in their analyses of aspects related to the labour market and the effect of restructuring and locational strategies of capital. However, the differentiation is largely a matter of degree. The organismic orientations which portray capitalism as having an "inner logic" (inner laws of transformation), with each. part functioning to preserve the existence and general structure of the whole, abound in the works of Castells (1977), Peet (1979) and Harvey (1978) and appear sporadically throughout the less orthodox radical theory.' However, outside the formalist theoretical structuralist readings of the political economy, structuralism has been deployed much less restrictively (and rigorously) to connote a concern with the historically-specific and deep-seated constraints which set the limits to human action (Johnston, R.J. (1980)). Although primacy is attributed to "capital" and the operation of a capitalist economic system perpetuated by a socially-reproduced set of social relations, and the effect of "capital" on the economic base or structure, many of the current Marxian geographical works could be more 7 See Duncan and Ley (1982) for a comprehensive critique of structural marxism in human geography. 102 accurately cast in structuralist-realist terms. This general theme would be purported in the explanation of the phenomena • of human geography as lying in hidden mechanisms rather than in the phenomena themselves and would involve both the underlying "structural" relations and their inner logic (of which human actors are largely unaware) and human agency and contingent circumstances which generate the actual events of everyday life (Storper, M. and Walker, R. (1983) p.27). The prescriptive tendencies of capitalism are adopted without the inviolable determinacy of the economic structure of Marxist dogma (Badcock, B. (1984) p.53). In addition, the renunciation of empiricism by Castells (1977) appears to be implicitly rejected in the considerable body of research, undertaken throughout the 1980's, in an attempt to assess the evidence for and against radical theory constructs versus other models (for example, see Clark (1981b; 1983b; 1984) and Scott (1983a; 1983b; 1984)). In some respects, the adoption of more appropriate modern conceptual schema and the heavy revision of original Marxist theory could be conceived as iconoclastic. However, despite these modifications, the lack of consensual theoretical formulations, and a surprising lack of internal recognition, the "radical" school could probably be collectivized on the basis of a number of common axioms concerning the structural relation between social institutions and groups within capitalist society and in relation to the way they "read" the dynamic form of the social and spatial structure of economic organization. This chapter will outline the common themes of the "neo-Marxian" perspectives, specifically in regard to the operation of the labour market and is aimed at illustrating how the radical geography orientation fits the overall Marxian mode of social theory. It is not meant to be a summary of the diverse and voluminous encompass of Marxian theory in general. A brief review of the major radical critiques of the neoclassical model will be followed by a limited summary of the school's 103 conception of the socio-spatial relationship. Finally, but most importantly, a synthesis of the contemporary Marxian-based theory on the restructuring of capital and the spatial structure of industrial activity is presented as an example of the radical explanation of the true dynamic form of the labour market in capitalist societies. A. THF RADICAL CRITIOTJF. OF THF. NEOCLASSICAL LABOUR MARKET The attacks on the neoclassical labour market from the radical school cut across many disciplines and would require a review of massive proportions to provide a truly representative account. However, given the weaknesses of arbitrarily attempting to isolate and synthesize a few key subject areas, the following list should outline some of the major points of contention. 1. THE MECHANISTIC. ANTI-HUMANIST NATURE OF NEOCLASSICAL APPROACHES There are at least two major sets of objections to the neoclassical conception of people as decision-makers and participants in the labour marker, espoused by radical theorists. Firstly, there appears to be some consensus on an implicit underemphasis in the role attributed to labour aspects in neoclassical economic theory. The importance of labour in the processes of change stimulated by class conflict, and as the sole source of surplus value, elevate the worker to a central status in Marxian economic theory designed to analyze and understand the operation of the capitalist economic system. Walker and Storper (1981) argue for the primacy of labour considerations in the decision-making process of firms (assumed as being structurally-dominant over labour) in industrial location theory, on the basis of an assumed priority of cost, control and reproduction characteristics of the labour force. 104 The treatment of labour (in geography and economics) in a market like that for any other commodity, and as simply one of a variety of supply factors of production, is rejected on the basis of both moral grounds and as a gross simplification of labour devoid of its crucial role in exchange and consumption (Cooke," P. (1980) p.544). The abstraction of labour as a commodity, rather than as people's existence, and in aggregate, society itself, could thus be seen as carieaturizing society as a supply factor for the utilization of the firm rather than giving society its deserving key role. Criticisms of the minor role attributed to labour as an element in the production system are also accompanied by a related, second set of objections opposing the dehumanization of labour as a passive factor of production to be manipulated and exploited by the firm. Under the radical conception, labour is a unique factor of production which is, by nature, embodied in human beings, and is consequently alive, conscious and antagonistic to domination by capital (Walker, R. and Storper, M. (1981) p.498). The nature of labour market structuring and outcomes at a given time and place are seen to be ultimately the result of power relations rather than' the product of neutral principles of supply and demand or other mechanistic economic principles (Clark, G.L. (1983a) p.2). A consideration of the historically-specific mode of production and social relations defining worker behaviour is perceived as paramount to a proper understanding of the labour market operation. Although some radical interpretations adopt the stance of the complete subordination of labour to the structurally-dominant whims of capital (a perspective which aligns with classical economic theorizing), the "bilateral relations" school within radical theory conceives of workers as entering explicit and implicit contractual agreements with employers (Clark, G.L. (1983a) p.2 ; (1983b) p.166). The existing social relations of production would define the collective power of labour and determine the nature of wage and employment outcomes. 105 Hence the labour market would be a far more restrained market than that for any other productive factor given the emotional, physiological and routinized capability and capacity constraints of the "commodity" in question (Cooke, P. (1980) p.544). As an antagonistic, inconsistent input, human labour would not fit the fixed laws and parameters of mathematical modelling applied in marginal utility and other deterministic aspects of neoclassical economic theorizing. This criticism is akin to those from behavioual and humanistic geographical perspectives on the inadequacy of the "economic man" concept used to establish the rules for human behaviour in normative neoclassical model assumptions.8 If radical theory drawing on Marx's works is to be perceived as more humanistic in orientation than neoclassical economic theory, it would probably have to be related to Marx's approach in earlier publications such as the "Economic and Philosophic Manuscripts" (1844) concerned with the nature of capitalist society creating alienation (Johnston, R.J. (1983) p.92 ; Lavine, T. (1981) p.274). This early Marxist work clearly expresses a moral or humanistic viewpoint which has, as its fundamental theme, the moral regeneration of humanity through world revolution. The more scientific socialist or economic theory of history Marxist approaches to some extent eclipse this theme and have been criticized as anti-humanist for neglecting the social and psychological aspects of lived experience (phenomenological dimensions) in accounting for human action and, therefore, change in the larger system at hand (Duncan J. and Ley, D. (1982) p.45). However, if a humanistic orientation can be considered in terms of the concern for human welfare and dignity, the radical approach does inculcate such a perspective in 1) attributing priority to the welfare of labour (as society) over the maximization of returns to the unevenly distributed ownership of capital, 2) in the more realistic 8The critique of the robotic creature of "economic man" conceptions, and his or her idealized behaviour, by no means stems exclusively from radical theory and will not be attempted in the discussion. 106 treatment of labour as an animate, intelligent contributor to the production process, and, 3) in expressing the improvement of the condition of human society as a direct, fundamental goal (rather than implicitly, as a byproduct of. facilitating the production process controlled by the firm). 2. THE IDEOLOGICAL NATURE OF NEOCLASSICAL ECONOMICS Within its positivist mode typical of most conventional economic analysis, neoclassical economic treatments of labour are thought to be undertaken on a value-free basis like that of the mimicked natural sciences. The approach generally involves the determination of the mathematical, economically-efficient optimal condition or the natural equilibrium outcome to be derived given the prevailing economic system (usually idealized and abstracted considerably from reality). The application of mathematical physics to human economic behaviour (inaugurated by Francis Edgeworth in the 1880's) has been recognized by non-Marxist and Marxist scholars alike, as rationalizing the tenets of conservatism and as operating as a calculus of human mathematics in order to justify divisions of sex and status (Heilbroner, R. (1972) p.169). With people as its subject matter (though in dehumanized form) and, in dealing with matters that will inevitably have social ramifications, the possibility of a value-free economic approach is highly questionable. Any economic study would necessarily be a study in political economy. To much of radical theory, neoclassical economics, and its labour-related spin-off disciplines, fulfill an ideological role by nurturing and legitimizing market capitalism (Badcock, B. (1984) p.26). The bulk of theory is seen as being oriented toward the formulation of strategies that firms should, or actually do, use in maximizing their profits, and, for the orthodox Marxist theories, the only way to do so is to increase the rate of exploitation (or surplus-value) derived from labour. Its natural inclination is, therefore, conceived as being anti-labour. 107 There is evidence of a pro-capital bias to be found in neoclassical-based disciplines such as labour economics. Distributional and normative issues are convenientiy disregarded as beyond the scientific approach implemented (Fleisher, B. and Kneisner, T. (1984) p.13). The evils of wage rigidities and union actions are frequently claimed as the major cause of unemployment (Addison, J. and Siebert, W. (1979); Fleisher, B. and Kneisner, T. (1984) p.469; Marsden, D. (1982) p.240). Minimum wage levels and inflated reservation wages from unemployment welfare and insurance are considered to either raise wage levels above the value of the marginal productivity that the worker can offer the firm, or prevent the worker from accepting a low-paying job in line with his or her marginal productivity. There is also an emphasis on the expected mobility of labour in response to the economic efficiency locational choices of firms in labour economic literature and conventional labour market studies.9 For example, Employment and Immigration Canada's (1981, p.46) publication on labour market economic policy states: A primary purpose of labour market policies is to facilitate more smoothly functioning labour markets by increasing mobility from regions and industry where demand and productivity are low to expanding sectors with a minimum of wage pressure... to ensure that avilability of labour will not impede realization of our economic potential. The underlying assumption is that people should move to jobs. Most of the solutions resulting from neoclassical economic reasoning are pivoted around the removal of wage rigidities and the facilitation of the "invisible" hand of the labour market operation by increasing labour mobility and encouraging human capital investment to increase worker marginal productivity as the only true method of increasing real wages (Addison, J. and Siebert, W. (1979) p.387 and p.391). According to Marsden (1982, p.240), such free market policies act as an ideology to reduce worker power to oppose the operation of dominant financial interests. 'However, this perspective diverges with the treatment of labour in Weberian industrial location theory and the assumed movement of firms to exploit cheap labour supply sources. 108 The superstructure of capitalism is seen as being underpinned intellectually (often unwittingly) in economic textbooks, thus ensuring its perpetuation, preserving the status quo, and masking the deeper processes of class exploitation (Badcock, B. (1984) p.26). 3. STATIC AND NARROW CONCEPTIONS OF THE ECONOMIC SYSTEM Another major facet of the radical critique of the neoclassical models is focused on their essentially ahistorical nature. The neoclassical economic world is basically devoid of long-term change in the conditions and forces that govern the labour supply-demand matching process. Cultural factors and historically-specific social conditions are assumed not to alter the nature of the immutable forces tending towards equilibrium and any dysfunction would be the result of institutional blocks primarily bestowed by the actions of government and unions. Technological innovation can proceed to increase productivity but within the ' short-term focus, the production function defines the possibilities and the painless substitution between labour and capital inputs will occur consensually on the basis of factor price and marginal productivity differentials. However, radical theory usually rests on the essential Marxian social theory of historical materialism which would emphasize the dynamic nature of conditions that influence the labour market For example, relations which determine the wage level are seen as social relations which change over time (see section 6.A.5). The profound importance of the historical context in the Marxian analysis would stand directly contraposed to the static conception of neoclassical models and has been recognized (amongst radical theorists) as probably the most valuable offering of Marxian analysis (Badcock, B. (1984) p.175). The historicism interpreted in many Marxist works has been criticized by, among others, Popper (1957) in his rejection of large-scale laws of 109 historical development. However, the importance of the historical approach has been embraced in much of the radical literature (for example, see D. Gordon, (1973), A.J. Scott, (1982a) and _ M. Webber, (1982)) without the underlying historicism described by Popper. Whereas long-term equilibrium and consensus are the basic axioms of the timeless, neoclassical models, the Marxian-based interpretations contend that the labour market cannot be isolated from its unique social and historical context - an integrated setting that is believed to be "evolving" over time as the result of j'_nilici between social groups. In Marx's time, the conflict ensued primarily between the working class labourers and capitalist owners of industry. However, in more modern radical treatments of the capitalist system, the argument has been adapted as the struggle between labour and management, or, between those primarily dependent on selling their labour power for economic survival (labour), and those responsible, or directly dependent upon, maintaining the institutionalized system (capitalism) and whose function is to maximize the return to investment capital (that is, the owners and managers of capital). Thus the entire economic system and social relations of production are seen to evolve over time as a result of the drive to accumulate and class conflict, but Marxism asserts the priority of capital in these social dynamics.10 (Walker, R. and Storper, M. (1981) p.475). Technology is imputed a critical role in Marxian analysis for two major reasons. Firstly, technology can be conceived as a significant component of the definition of the labour process at any particular point in time. Its fundamental link to the level of individual and social wealth (and therefore financial support alternatives and levels), the nature and quantity of employment demands, and the spatial, organizational and scale characteristics of the work process, is seen to provide the very 1 "Neoclassical theory implicitly accepts the primacy of capital in its analytical orientation. This is reflected in the stance adopted - from the perspective of the firm in its profit-maximizing decision-making context no fabric for the labour relation and the bilateral power outcome. The workplace or production process at a given moment, is seen to be a society in miniature shaped by the relevant technology (as the way nature is transformed by human action) and the class character of capitalist production (Storper, M. and Walker, -R. (1983) p.29). However, technology is seen as both the outcome and the basis of class struggle and workplace relations. Motivated by competition and the imperatives for capital accumulation, technological change (for example, capital intensification) is often held to be a weapon utilized by capitalists to reduce worker power and reward (Storper, M. and Walker, M. (1983) p.29). In radical "labour process" studies control-induced innovation (rather than the priced-induced technical change of neoclassical economics) is given a central role. Non-technical and technical aspects of work organization are conceived as managerial tools for breaking worker militancy and, in turn, the strength of worker bargaining is considered as affecting the course of technological development This perspective aligns with Marx's original belief in technological innovation and the deliberate creation of mass unemployment (a "reserve army of the unemployed") in order to undermine bargaining power and keep wages down (Marsden, D. (1982) p.240). However, technology has also been attributed as the most important factor in the resilience of capitalism - by allowing standard of living improvements over society as a whole through increased productivity (Malecki, E. (1983) p.90). The key role attached to technology in radical theory is a far cry from the models of neoclassical economics where technology is simply appended to the equilibrium outcome descriptions. Under its short-run perspective, technology is assumed fixed and technical substitution between labour and capital is thought to occur in appropriate response to changes in the relative costs of these production factors. Treatment of technology in the longer-term is quite limited and neoclassical theory tends to bypass issues such as the relationship between technological change and Ill unemployment Through the price mechanism and the presumed ease of factor sustitution, technological change is considered to cause only temporary departures from equilibrium (Standing, G. (1984) p.131). The orthodox Marxian theory predicts a long-run trend towards a rising organic composition of capital, through technical innovation, associated with a decline in the average profit rate. Although this prophecy would not be wholeheartedly supported by all radical theorists, the general tenor of radical theory favours the acceptance of each technologically-based historical period, and the related relationship between labour and capitalism, as unique. The capitalist economic system is seen to be in constant flux and particularly noticeable periods of marked economic base or organizational change are denoted as involving "restructuring" or more euphemistically the "rationalization" of the economic system. This is thought to occur at the firm or sectoral level but in the aggregate, entails a discernible, unidirectional change in the very nature of the capitalist production system. Within standard neoclassical theory, however, there is no account of structural change and aberrations from equilibrium conditions are described in terms of cyclical phenomena (the "business cycle" being the most popular conception). The explanations of cyclical movements in the amount of business activity ("business cycles" and "Kondratieff long-waves") are usually defined- in reference to degree of utilization of productive resources and were basically derived from extended Marxian theory on accumulation as passing through cycles of productive expansion and contraction (Standing, G. (1984) p.131). Cyclical (or demand-deficient) unemployment was named on the basis of faith in the cyclical nature of business acitivity with an expected return to equilibrium conditions in the long-term. But to the radical theorists, there is a basic restructuring or evolution of the capitalist system over time which involves transformation to a new stage of development (Walker, R. and Storper, M. (1981) p.489). The dynamic in this 112 model is seen as a product of the struggle between labour and management The struggle is pictured as occurring in a structured employment relation played out on a dynamic "chessboard" with a varying pattern, rules and powers for the actors involved - ascribed by the evolving state of technology and related social relations of production. Another related aspect of the radical attack on the ahistoricaf neoclassical paradigm concerns the narrow scope of factors used for explanation and assumed as influencing the original models - even at a given point in time. The stripping away of reality to the hypothesizeed major variables assumed to operate under strict behavioural axioms within a perfect environment is pursued in order to apply rigorous mathematical modelling (under partial or general equilibrium perspectives) or at least to attempt the "rational" prediction of changes in endogeneous, or from exogeneous, variables. The problem with the idealized, simplistic models is though to lie in the arbitrary selection of factors directly incorporated in the models and the sacrifice of an understanding of the real and changing causes of phenomena observed for mathematical, "scientific" rigour in explanation and prediction. The tendency for neoclassical economic fields (such as labour economics) to remain fearfully within their allocated discipline ignores the complexity of the real world. Often only a very narrow part of the social and economic context is considered in the neoclassical search for causality. For example, the role of the labour supply as the consumer of the output of goods and services, as well as a factor of production, receives very little attention in neoclassical economic theory. Consumption is usually reduced to an aggregated lump as an independent variable in national income equations or as a function of real disposable income (for aggregated, homogeneous households) in macroeconomic theory. In microeconomic labour theory, labour is simple treated as a supply factor. 113 Factors which have not been included in the operational universe of hypothesized models are labelled as "exogeneous" and existing models usually account for these factors only in regard to how the included variables will respond to their influence. Frequently, exogeneous events involve aspects that the economist can't count or measure and, therefore, by definition, don't fit within mathematical models of the globe (Cohen, D. and Shannon, K. (1984) p.43). In labour economics, the principal study area of labour in neoclassical economic theory (particularly for microeconomic theory), the models used for other commodity markets are applied to labour and any factors which disturb or distort its operation (for example, technological change) are proclaimed as belonging to a mixed bundle of "exogeneous" influences and hence outside the field of direct relevance and are dismissed from further explanation. Many aspects of neoclassical economic model building have been criticized for their failure to examine the full context of influential variables. Bergman and Goldstein (1983, p.264) argue that modern neoclassical regional economic development theory ignores the influence of the ownership and control of industry and the changing nature of the international division of labour. Clark (1981a, p.566) challenges the utility of the "Phillip's Curve" 1) on its implicit assumptions of the homogeneity of the labour force in which workers are hired and fired on the basis of their contribution to total output and, 2) in assuming away the complexity of production requirements and the interdependence of labour and capital in the wage and employment contract However, radical conceptions of labour are held to be superior to the constrained, static realm of the neoclassical world because they recognize the importance of historically unique frameworks on the dynamic labour relation. An eclectic perspective, involving sociological, philosophical, economic, human geographic, and historical spheres of study, is adopted. The trade-off between complexity and mathematical rigor is considered worthwhile. 114 4. EQUAL AND FRF.F. CHOICE TN LABOUR MARKFT SUPPLY DECISIONS An assumption of the relative, and equal, autonomy of all individuals and households in their labour supply decisions pervades most of the labour economic literature. This perspective is reflected in the theoretical and research emphasis involving the job search process, the ease of worker mobility, and the role of the individual in deciding on his or her occupational level (and hence future wages). Although there is some recognition of differential constraints acting on certain individuals and groups on the basis of their existing wealth, labour market knowledge, number of children and other related factors, such aspects are given very little explicit theoretical treatment in labour economic theory (Fleisher, B. and Kneisner, T. (1984) p.465). One immediately apparent weakness of the choice assumption in microeconomic labour theory is the conception of labour supply (or the number of hours supplied) as being determined by the wage rate (and non-employment income) rather than by the basic need to obtain employment for economic survival and maintenance of living standards. The generally positive relationship theorized between wages and hours supplied ignores the likelihood that a reduction in the relative real wage is accompanied by an increase in the labour hours supplied to the market to support the worker and his or her family. As previously discussed in Chapters 2 and 3, the major longer-term labour market barriers envisaged in neoclassical economic labour treatments relate to the lack of information and the existence of institutional barriers (from unions and minimum wage legislation rather than the social structure). Accordingly, the unemployment problem is perceived as primarily of frictional and structural (wage rigidity) origins and recommended solutions are formulated on this basis (Fleisher, B. and Kneisner, T. (1984) p. 478). 115 Nevertheless, perfect information does remain as a fundamental tenet of much' of the neoclassical economic theory on labour. This dependence is evidenced in the key role attributed to perfect information in 1) the individual's "setting" of the reservation wage for job search process decisions and 2) in human capital investment decisions which assume knowledge of the rate of return from further investment in human capital. Over and above perfect information limitations, a major source of criticism by radical theorists is focused upon equal and unconstrained choice assumed in human capital theory. Identifying fundamental inequalities resulting from the social structure and the processes that form and maintain that structure, the radical theories on labour market segmentation are related to the dual and institutional labour market perspectives described in Chapter 3. Thus, there is perceived to be an oligopoly, or at least markedly different constraints, on who can acquire skills within the social structure of the labour force. To the mainstream neoclassical proponents, the poor and "disadvantaged" workers have only their low-productivity (from insufficient human capital investment and possibly inherent low ability) to blame for low wages (Clark, G. and Gertler, M. (1983b) p.276). These people have simply failed to make the appropriate response to poverty and underemployment - increase their individual productivity by investing in human capital (skills, education and training). The freedom of choice implied in human capital theory has been severely criticized in radical literature as grossly overestimating the power of individuals to change their employment skills or occupation when not in demand (or move residence to employment opportunities) (Clark, G. and Gertler, M. (1983) p.277). Implicit assumptions of equal oportunity are rejected on the grounds that opportunity for advancement and occupational mobility outcomes are structured by broader social phenomena such as racism, sexism or socioeconomic background. Skills are considered 116 as not being freely accessible to all workers (Storper, M. and Walker, R. (1983) p.10). Hence, there are perceived to be inequalities built into the labour market' mechanism which determines the value of labour power (Cooke, P. (1980) p.544). Human capital investment decisions and histories (and therefore, the distribution of income) would be a function of the existing order of social inequality and unequal power distribution reinforced by the nature of social and political institutions (Clark, G. (1977) p.15). The societal structure is posited as the overarching determinant of individuals' decision possibilities and as the means for the "reproduction" of existing wealth distribution.11 Although education, in itself, is believed not to guarantee occupational entry and mobility, it is attributed as having a significant role in the perpetuation of the social order (Clark, G.L. (1977) p.15). The extra wages of the skilled are argued not to be a measure only of the cost of training but also as a scarcity value artifically created by the structure of society (Robinson, J. (1966) p.12). Neoclassical labour theory does acknowledge the existence of unequal constraints on different individuals from the existing structure of society. However, in general, these aspects are deemed as "institutional" and exogeneous factors beyond the designated realm of the discipline. Consistent with the proposed scientific, non-ethical basis of the neoclassical economic paradigm, no judgement is offered on exogeneous factors which may favour certain individual and group actors in the models devised. 5. T H F , Y A U J E O F L A B O U R There is little doubt that both neoclassical and radical models of the labour market share their roots in the classical economic tradition of the late eighteenth and early nineteenth century. For example, the underlying assumption of profit maximization uIn many ways, the argument over autonomy in the labour market, between neoclassical and radical schools, is akin to the basic structuralist versus agency debate rooted in the philosophical foundations of these perspectives. 117 as the objective function. of capitalist enterprises is explicitly adopted in neoclassical models and accepted in radical models. However, a major division between radical and neoclassical models, as theoretical descriptions of the functioning of the capitalist (or any) economic" system, develops around their conception of the determinants of the true "value" of the objects and services exchanged. The labour theory of value, associated originally with the classical economist David Ricardo, is assigned a central place in Marxist theory. The classical labour theory of value asserts that the prices (exchange-value) of all goods must be seen as derived from the current labour input and from the labour input embodied in the materials of production (Johnston, R.J. (1981) p.203). Therefore, human labour, (together with nature in some interpretations), is conceived as the sole source of surplus value (the return to the capitalist and the source of profit) and is proposed as the prime object for exploitation under the capitalist's imperious desire to maximize the returns to capital (profit).12 The major alternative view is, of course, neoclassical theory which accepts that the productive factors of capital, land and entrepeneurship, as well as labour, contribute to the creation of value and hence their owners deserve some return from the total revenue to the firm - depending on their marginal productivities (see Chapter 2). As described, marginal productivity theory assumes that each production factor should earn the equivalent of the value-added by the last (marginal) unit employed. The neglect of scarcity, considerations is posited as probably the major criticism of the labour theory of value (Smith, D. (1977) p.67). In the Marxian analysis, value is considered as socially and historically contingent whereas neoclassical theory sees value arising from some almost mechanical process of market determination. Smith (1977, p.97) describes the principal objection to 1JDetailed accounts of Marx's basic economic anaylsis and concepts have not been attempted due to resource constraints, and on the assumption of familiarity by the reader. 118 the distribution of rewards to land and capital: Ownership of land and capital require particular institutional arrangements, whether proprietorship is to be vested in private individuals or some public collective. On these arrangements will depend who gets any return attributed to non-human factors employed in production. The size of the return is itself an institutional outcome ... Distribution of society's product thus depends on how society is organized. To the neoclassical school, the value of the labour factor of production (its price or wage) is appropriately determined by its contributing share to the total value-added while the rest of the returns to the firm are distributed, on the same basis to (the owners of) land and capital and the entrepeneurs who devised the lucrative scheme. To Marx (1967, p.315) all value-added had its original source in the actions of labour. The "transformation problem" - that is, translating value to prices - remains a central point of theoretical debate within Marxist literature and some resolution is required to extend the labour theory of value to actual events and their interpretation (Clark, G.L. (1984) p.182). However, there are a number of Marxian-based criticisms of the neoclassical conception of wage determination, which provide equivalent difficulties in that school's justification of any "true" notion of the appropriate reward and return to labour as a factor of production. The marginal productivity theory of wages is presented as the neoclassical economic explanation of the approriate price of labour. The theory states that the rate of pay for any group of workers tends to equal the change in the value of output associated with a variation of one unit in the size of that group (Bullock, A. and Stallybrass, O. (1981) p.369). However, the theory can be criticized as tautological in nature and as providing no real foundation for the derivation of wage rates. Even under its own paradigmatic reasoning, scarcity is the actual basis of evaluation of the price paid to labour rather than marginal productivity theory. 119 The cyclical nature of the logic behind marginal productivity can be illustrated in the attempt to link, the microeconomic labour theory with macroeconomic conceptions of the labour market At the firm level, marginal productivity analysis is used to derive the demand for labour. The quantity of labour used is calculated as depending on the. value it contributes to total revenue which, in turn, is a function of the price and output demand in the product market.13 The market demand schedule, used to derive the industry wage, is seen to be simply the summation of all relevant firm's labour demand. The interaction of the market supply of labour with the market demand schedule is considered to give the going market wage. However, the underlying cyclical nature of this reasoning becomes apparent in the marginal productivity theory of wages because the market interaction (and resulting wage), in also thought to determine the marginal cost of labour and hence play a key role in the choice of labour demand at the firm level. Not only is this paradox to be found within the derivation of the labour demand schedule, but the neoclassical conception of the labour supply curve suffers from similar problems. The going wage level is proposed as determining the number of hours of labour supplied but the aggregate market supply schedule is, in its interaction with the market demand curve, held to determine the going market wage rate (Ehrenberg, R. and Smith, R. (1982) p.58; Fleisher, B and Kneisner, T. (1984) p.195; Gunderson, M. (1980)). Clark (1984, p.178) contends that the neoclassical paradigm involves the use of a relative measure of value, that of scarcity, as measured by market prices, to define the worth of workers. Marginal productivity theory would be useful in determining the quantity of labour required at the firm and aggregate levels but the wage level paid, as the actual measure of its contribution to output value is rejected by most radical theorists. Even given the operation of a free market in the determination of the price "Clark (1983b) found that the price of labour (wages) was not the most important determinant of short-run labour demand in the U.S. 120 of labour as with any other commodity, neoclassical theory attributes a rather trivial and secondary role to the supply curve. The supply curve would, in fact, be characterized by a certain amount of rigidity reflecting the necessity for labour to participate in the capitalist economic system simply in order to sustain comforable living standards, or, at worst worker health and life. Although actual participation rates and total hours supplied may be influenced by wage levels, cultural attitudes, and technological factors, the population (and hence labour force) level would provide some basic level of supply that lias to be offered in the labour market The relationship of this conception of the labour supply curve (in which simple demography provides the base, and, the key role of wage levels is rejected) with the amount of labour required in the economic system would be the source of the wage paid in the "free market" world. The rigidities of the supply curve, from the necessity of labour to sell its time to survive, are largely hidden within the neoclassical marginal productivity analysis. The dependence of labour on capital for the sale of its labour power and economic survival is the foundation of the radical labour process studies and bilateral power relations theorists' view of the structural-dominance of capital over labour (Storper, M. and Walker, R. (1983) p.29). If these criticisms hold, the neoclassical model of the labour market does not serve as a convincing explanation of the value of labour and the process of wage determination but is relegated to the status of a simplistic device for attempting to predict and explain the effect on 1) wages and employment from changes in the supply and demand curve (and their interaction), 2) "exogeneous" influences, and 3) constraints on the ideal conception of the labour market adjustment Critiques of marginal productivity theory can be found in labour economic texts (for instance, see Addison, J. and Siebert W. (1979) p.53-60). However,, this discussion refers primarily to operational difficulties in applying the theory to the real world 121 rather than comprising a fundamental critique as in the radical mode. To David Smith (1977, p.100) the explanation of "who gets what" should be couched in terms of "relative bargaining power" or class struggle rather than marginal productivity. This profound shift in perspective from the neoclassical economic approaches to the theoretical treatment of political economy (as in Marxian theory) is succinctly expressed by Nell (1972, p. 95): Orthodox economics tries to show that markets allocate scarce resources according to relative efficiency; political economics tries to show that markets distribute income according to relative power. Wages are seen to be determined primarily in a political context akin to class conflict (Hicks, J. (1974)). G. Clark (1983b, p.165) sums up the "bilateral power relations" sentiment on wage determination (and consequent income distribution) by rejecting the notion of just supply and demand interaction as setting wages, and instead, proposing that union and collective wage bargaining are the key institutional aspects of the labour market Wages are then seen as a result of a power play-off between labour and capital. The radical school does not accept that the return to the firm, from the sale of output is divided according to the marginal productivity of each of the components of production (such as land, labour, capital and entrepeneurship). The profit to the firm, after detracting basic non-labour factor costs, can be cut into by wage increases without closing down the firm's operation. Profits would then depend on the wages firms have to pay (Heilbroner, R. (1972) p.43). The "slice" of the firm's revenue going to the workers would reflect the relative power of capital and labour in the labour market"1 (Smith, D. (1977) p. 108). In radical theory, the power of labour would depend on aspects such as the size of the unemployment pool.prevailing values and attitudes,political sentiments, overall wealth, social security assistance levels.and the organizational capacity of labour. 14Smith acknowledges that conflict over "value surplus" would involve various interest groups within the overarching capital-labour struggle. 122 Therefore, the difference between the wage, and the Marxian perspective of the true value of the marginal product of labour, would be contingent on the particular historical and cultural context or form of the capitalist mode of production. When the supply of labour is considerably greater than the demand required (and government regulation and labour contracts do not exist), a minimal wage could be paid to labour because the working-class is conceived as having little option but to sell its labour to capitalists (Badcock, B. (1984) p.63). The basic subsistence wage paid to the worker in the times of the industrial revolution (in a situation of abundant labour) would be presented as a case in point The basic contention of the radical and (related) • institutional labour theorists is that the determination of wages and employment is largely an institutional matter,' based on social convention, rather than the result of a free market for labour (Clark, G.L. (1978) p. 26). Some Marxists embrace this principle over a far wider theoretical domain and insist that the creation of value is a function of the whole ensemble of social relations of production (Bluestone, B. and Harrison, B. (1982)). In summary, the radical theorists perceive the price paid to labour (wages) as the result not only of the relationship between supply and demand, but as contingent upon productivity levels and the overall surplus generated by the economic system, the state of technology, and the power of labour relative to capital. The power of labour is, in turn, dependent on the technical relations of production, the organization and structure of firms and other social and political aspects of the particular historical context (such as prevailing attitudes and government policy). B. mii RELATIONSHIP BETWEEN SOCIAL PROCESSES &NJQ THE ORGANIZATION OF SPACE Before attempting to summarize the radical perspectives on the "evolution" of the capitalist mode of production and its relationship to the spatial structure of industrial 123 activity (in the following section), it is necessary to provide a brief outline of the radical geographers' conceptions of the nature of the relationship between social processes (and structure) and the spatial structure of the humanized environment Once again, this is a difficult task in the light of the internal conflict and variety of viewpoints which tend to undergo modification over time. However, Marxian analyses, involving the spatial dimension, all show a clear divergence from positivist spatial science where the organization of space is seen to have a separate structure formed by intrinsically spatial processes. Instead, space is portrayed as inextricably linked to, and a product of, societal processes (Badcock, B. (1984) p.4 ; Castells, M. (1977) p.8). This view also stands opposed to aspects of the urban managerial thesis of Pahl (1975) who identifies certain independent spatially-determined urban problems thus suggesting local solutions and policy changes. Harloe (1977, p.5) argues that spatial relations and forms can only be socially determined. Over the broad encompass of Marxian thought, the major viewpoints on the relationship between social relations and the spatial structure range along a continuum depending on the degree of primacy attached to (non-spatial) social determinants and vary in accordance with their fundamental conceptualization of space. At one extreme of the spectrum, space is seen as simply the material "debris" formed by social processes (basically capital accumulation) thus condemning spatial theory to vacuity (Slater, D. (1975)). In many respects, this view is consistent with the bulk of Marxist political economic theory which is characterized by a deep tradition of anti-spatialism (Johnston, R.J. (1983) p.112). This could be interpreted as meaning geography would have little to offer to add to the insights yielded by dialectical materialism (Badcock, B. (1984) p.52). However, Marxist geography, by definition requires some justification of its spatial theme and even the more structuralist and deterministic perspectives do accept 124 that the observed organization of space can reveal something about the social structure and processes of the economic system. These more rigid structuralist works attribute a major role to capital in determining the spatial structure (Hayter, R. (1983) p.160). Consistent with Marxist urban theory, the city is seen as first and foremost a product of the capitalist mode of production which requires a spatial organization which facilitates the circulation of capital, commodities and information - hence reducing the indirect costs of circulation and consumption to speed up the rate of circulation of capital (Cojkine, J. (1976) p.127). Scott (1984, p.24) calls for a return to the concept of the city as a structured outgrowth of stubborn social and property relations of capitalist society. His trilogy of journal articles on industrial organization and the logic of intra-metropolitan location examines the nature of organization and labour demand, together with locational aspects of two case studies, to attempt to provide some understanding and support for the determinacy he attributes to production system dynamics in capitalism. Radical geographers would probably accept the tenet that social processes are registered or "etched" in space and that the city can be considered as a projection of •society on space (Castells, M. (1977) p.115). The emphasis on the study of "causal" social processes or in reading the built landscape to understand the nature of these causal processes would hence follow logically. However, in terms of causality, the reflexive nature of space is widely accepted in radical geography literature. The adoption of the concept of space as recursive upon the social structure has been suggested as hinting at a realist approach to explanation (Badcock, B. (1984) p. 53 ; Johnston, R.J. (1983) p.113). Capital is still usually considered as the principal "architect" of spatial structure under capitalism. Although Harvey accepts the idea of the city as primarily a medium for the circulation of capital in "The Limits to Capital" (1978), he also espouses a recursive view of space: 125 The distinctive role which space plays in both the organization of production and patterning social relationships is ... expressed in [the] urban structure ... And [the] urban structure, once created, affects the future development of social relationships and the organization of production. (Harvey, D. (1973) p.307) Both Peet (1979 ; 1980) and Soja (1980) perceive there to be a necessary reciprocal and dialectical relationship between space and economic, political and ideological forces which shape the organization of space. To Soja (1980), the spatial structure is explained by the "socio-spatial dialectic" in which the social relations of production are both space-forming and space-contingent The socio-spatial dialectic is defined: The structure of space is ... a dialectically defined component of the general relations of production, relations which are simultaneously social and spacial. (Soja, E. (1980) p.208) Peet sees spatial relations as essentially manifestations in geographic space of social (class) relations but proposes: ... neither environment nor space is passive as social relations pass over and through them. Both inject their own ingredients, their own qualities and limitations, into ongoing and overgoing processes ... Class relations become infused with the direct and indirect effects of the contents of regions and environments, previous and "future" movements in the history of a mode of production... (Peet, R. (1979) p.167) The vague and overly-metaphorical verbage of Peet and Soja has been criticized as "irresponsible" and as "mystifying" process (Ley, D. (1982) p.37) and as consisting of a confusing "melange of words" (Smith, N. (1981) p.lll). Browett (1984, p.163) also attacks the spatial and socio-spatial dialectic concepts of Peet and Soja as being ahistorical and riddled with spatial fetishism, recurrent instances of the personification of space, and attributing autonomy to space as an entity. He argues for a re-emphasis in the consideration of people as not merely passive agents of "the 126 structure" and its reproduction requirements but as active classes which, within certain constraints, are able to act back upon and help shape and transform their social world. Hence, in an era of capital restructuring and "crisis", the "crisis" would be seen not as one for "space", for "the region", or "the structure", or for capital, but as a crisis for labour in particular, and people, in general. The literary esoteric of socio-spatial and related conceptions probably masks the more accepted radical geography belief (also accepted by many non-Marxist theorists) that, at any given moment in time, the spatial structure is mainly a product of historical social processes but may also, in the future, affect those social processes (influencing the nature of social formations). For example, the accessiblity to community services of varying quality (such as education) may affect the future development of the form of the class structure. Walker and Storper (1981, p.480) claim that capitalism creates a social landscape or "geography of accumulation" . broadly consistent with the social structure of accumulation but never strictly determined by it The process of partial constitution of class relations in the domain of the spatial structure (Gregory, D. (1978)) is, in many respects, akin to the theory of structuration which represents spatial structure as both a condition and consequence of human action and reaffirms the structuralist-realist orientation of much contemporary radical theory. C. THF, RFSTRUCTIJRTNG OF CAPITAL AND THE SPATIAL STRUCT! FRF. OF  INDUSTRIAL ACTIVITY The purpose of this section is to outline and synthesize the contemporary radical perspectives on the restructuring of capital and the resultant dynamic form of the spatial structure of industrial activity. This task is undertaken in order to acknowledge this growing field of literature pertinent to geography and the observed 127 changes in the labour market and to present the salient bakground for an exploratory examination of the relevance of some of the radical proposals in the context of British Columbia's manufacturing production activity changes in the period 1971 - 1981 (in Chapter 9). It is important to note, at this stage, that the bulk of radical material on the restructuring of capital tends to appease the supposed adoption of a "recursive" view of space by attributing almost complete primacy to capital as the dominant actor in the capital-labour conflict-based relation. This approach represen