Housing and Labour Market Developments in a Post Industrial Era – Melbourne, a Case Study.

Gavin A Wood (RMIT University) Christian Nygaard (RMIT University) Alice Stoakes (RMIT University)

Paper Abstract for 2nd State of Australian Cities Conference

30Nov – 2Dec 2005

Contact Details:

Dr Christian Nygaard

Post Doctoral Research Fellow Australian Housing and Urban Research Institute RMIT University GPO Box 2476V, Melbourne, 3001

Tel. 03 9925 9923 Fax. 03 9925 9888 [email protected] According to Sassen (2000) some cities are becoming post-industrial production sites where comparative advantages are obtained by the ability of firms to economise on time; where the efficiency of infrastructure is becoming increasingly important to maintain a competitive edge (O’Connor 2001); and where the ability of employees to utilise knowledge increasingly characterises the post-industrial employee (Reich 1991). Networked production processes simultaneously facilitate the supply of highly specialised and tailored services while allowing economies of scale for individual suppliers by not being restricted to a single contractor. Time and trust (transaction costs) become crucial competitive factors.

The structure of networked production processes has led to the agglomeration of such industries in globally networked cities. Sassen (1998) argues that two, and at times contradictory outcomes, accompany the transition to a post-industrial and globalised city. On the one hand the new economy is able to generate ‘super profits’, on the other hand the need for a substantial supply of low wage labour to service the ‘new economy’ encourages the inflow of people. As such the post-industrial city generates a new geography of centrality and marginality – intra city, regionally, nationally and globally. Planning for and accommodating the global flow of financial resources and people is vital to economic and social sustainability and prosperity.

The post industrial and globalised city economy has a direct effect upon housing and labour markets and the interactions between them. Firstly, the accumulation of capital pools that flow between the global network of cities creates a potential for globalisation of real estate markets (Goldberg & Fullerton 1994). Thus, parts of the real estate market in these cities may become detached from the wider urban economy. Secondly, the earning differentials generated by the new economy (salaries and profit levels) affect the spatial distribution of personal and business purchasing power. Both factors are likely to affect the geographic landscape of housing affordability and labour supply, as widening earnings differentials may exclude substantial segments of the urban population from the benefits of economic growth (Sassen 1998).

This paper examines the effects of structural change in Melbourne’s urban economy on the city’s labour market and housing market geography. Specifically, it asks what effect globalisation and post-industrial development is having on the urban economy? Thus, is increasing social and economic polarisation linked to globalisation? Moreover, what effect is structural change (the transition from an industrial to a post industrial society) having on the geography of economic activity and housing markets?

The paper consists of 3 sections. Section one briefly describes the characteristics of post industrial cities in Australia by comparing state capitals in terms of levels of internet usage, the profit making capabilities of business sectors, employment growth by industry and occupation and the degree of vertical disintegration of the urban economy by sector. Section two analyses the geographical consequences for intra-metropolitan housing and labour markets (primarily Melbourne). This analysis is based on intra-urban unemployment rates, variation in intra-urban house prices using valuer general data and rents using rental bond data and job market and housing market segmentation measures. Section three analyses the consequence for the spatial distribution of income using Australian Taxation Office data. The conclusion triangulates the findings and evidence from the three sections and links the emergence of a post-industrial city to observed housing and labour market outcomes in Melbourne over the period 1995 to 2003.

References Goldberg, M. & Fullerton, H. 1994, ‘World Cities and Local property markets: producers and products of the New Global Economy’, in OECD, Cities and the New Global Economy: Conference Proceedings, Australian Government Publishing Service, Canberra. O’Connor, K., Stimson, R., & Daly, M. 2001, Australia’s Changing Economic Geography, Oxford University Press, Melbourne. Reich, R. 1991, The Work of Nations: Preparing Ourselves for 21st Century Capitalism, Vintage Books, New York. Sassen, S. 1998, Globalization and its Discontents: Selected Essays, New Press, New York. Sassen, S. 2000, Cities in a World Economy, Pine Forge Press, Thousand Oaks