The Spatial Distribution of Employment in Metropolitan Perth, 1991-2011 Matthew Tonts and Paul Plummer Introduction Employment growth and unemployment rates are critical indicators of the performance of local economies. Not only do they provide insights into the capacity of an economy to generate new jobs, but also the extent to which there is spare capacity through people not being engaged in work. It also provides an indication of the nature of labour shortages, which have become a key feature of the Western Australian labour market. One of the features of much of the commentary on labour markets and employment is the focus on broad aggregate measures at the state or national levels. This obscures important local patterns and dynamics. At the heart of this is the so- called spatial mismatch in employment where unemployment rates are often high in areas where demand is low, and vice versa. It also tends to overlook the entrenched nature of unemployment in some localities, and some of the fundamental causes of this. This Bulletin provides a brief overview of employment and unemployment trends in the Perth metropolitan area over the past two decades. It concentrates not only on the aggregate pattern of change, but begins to tease out some of the more local trends and issues occurring across the metropolitan region. Employment Growth Figure 1 shows the change in the total size of the labour force in Perth and Western Australia as a whole for the period 1991-2011. It shows that the state and metropolitan area struggled to generate jobs growth during the recession in 1991/1992, before slowly recovering between 1997 and 2001. The economic impact of the September 11 attacks in the United States and the subsequent geopolitical uncertainty is evident in 2001/02, before a sustained recovery as the mining boom gathered momentum during the mid 2000 s. What is particularly striking about Figure 1 is that the labour force continued to expand during the global financial crisis. Indeed, in the Perth metropolitan area the total number of workers increased from 856,000 in 2007 to 990,000 in mid 2011; a rise of some 134,000 or 15.6 per cent. 1
Figure 1 Labour Force Change in Western Australia and Perth, 1991-2011 (Source: Calculated from DEWR, various issues) In Figure 2, the percentage change in the labour force from year- to- year between 1991 and 2011 is illustrated. This again shows relatively low levels of growth (and even decline) in the period 1992-1997, before a period of more significant expansion between 1998 and 2001. The impact of September 11 resulted in a dramatic decrease in labour force growth, before a sharp recovery in 2003. Since then, the pattern has been one of steady expansion in the labour force, with a peak in the 12 months leading up to 2008, just prior to the global economic downturn. The overall pattern here is one of quite robust recent growth in the labour force. Even in the face of quite dramatic geopolitical and economic upheaval the state and the Perth metropolitan area have demonstrated a capacity to continue to expand. This is consistent with the state s steady population increase across the period 1991-2011, and sustained economic growth. Of course, what these aggregate patterns mask is the considerable variation in the growth of the labour force at the sub- regional and local scales. At these levels, dramatic changes in economic structure, together with urban expansion and demographic change, have meant that the pattern of labour force growth is complex. 2
Figure 2 Annual Percentage Change in the Labour Force in Western Australia and Perth, 1991-2011 (Source: Calculated from DEWR, various issues) To provide a picture of labour force growth within the Perth metropolitan area, Figure 3 shows the increase between 2006 and 2011 at the statistical local area level. The data are somewhat distorted by Perth, which recorded growth of over 225 per cent over this period, though off a relatively small base (2,215 to 7,228). Nevertheless, this points to the success of numerous planning and policy initiatives to increase both the number of people living and working in central Perth. Not surprisingly, other rapid growth areas coincide with areas of population expansion. These include Wanneroo in the north, and Rockingham, Cockburn and Mandurah in the south. The peri- urban area of Serpentine- Jarrahdale also recorded strong growth in the labour force. Outside of these areas, and some of the older inner suburbs, the increase was relatively even, ranging from about 10-20 per cent. This included a number of large middle ring areas, including Stirling, Gosnells, Belmont and Melville. In a number of Perth s suburbs, rates of labour force growth were relatively low. These include some of the inner and western suburbs, such as Cottesloe, Fremantle- inner, Claremont and Bayswater. There are also some surprises here, including Joondalup- South, and the peri- urban area of Mundaring. 3
Figure 3 Percentage Change in the Labour Force in Perth Statistical Local Areas, 2006-2011 (Source: Calculated from DEWR, various issues) Unemployment in Perth While the total labour force is important in assessing the overall performance of the economy, it is important to note that this includes those people seeking work. Thus, it is equally important to consider unemployment, since this gives an indication of excess capacity in the labour force. From a public policy point of view, unemployment provides insights into issues such as social wellbeing (in cases of high unemployment) and labour shortages (in cases of very low unemployment). 4
Between 1991 and 2011, the unemployment rates in Western Australia and Perth have generally followed a downward trend. From a high around 11.0 per cent at the time of the early 1990s recession, the rate in metropolitan Perth fell to hover between about 7.5 and 9.5 per cent between 1993 and 2000. It then fell sharply as the State s economy gathered momentum on the back of the resources sector, reaching lows of a little over three per cent in 2007-08. The global financial crisis saw rates rise to around 5.5 per cent, with a recovery evident by 2011. Figure 4 Unemployment Rate in Western Australia and the Perth Metropolitan Region, 1991-2011 (Source: Calculated from DEWR, various issues) The downward trend in unemployment rates at the State and metropolitan area level is matched by general decreases at the local area scale (Figure 5). In all areas, unemployment in 2011 was substantially lower than it was in 1991. In a number of areas, 1991 saw nearly 20 per cent of the labour force without a job. Some of the highest rates of unemployment were in Kwinana (20.4%), Victoria Park (18.1%), Fremantle- inner (19.7%) and Mandurah (17.7%). This emphasises the seriousness of the early 1990s recession, and the economic (and often personal) difficulties faced at the time. By 2011, unemployment rates had fallen substantially in these places, often by more than half: Kwinana (10.0%), Victoria Park (3.9%), Fremantle- inner (8.3%), and Mandurah (6.8%). This emphasises not only the improvement in the state s economy, but also the significant demographic and social shifts that have taken place across much of Perth. Urban renewal, gentrification, demographic change and so on have seen major changes in areas such as 5
Victoria Park and Fremantle. As a consequence they have transitioned from high unemployment areas to low unemployment. Figure 5 Unemployment Rate in Perth Statistical Local Areas, 1991-2011 (Source: Calculated from DEWR, various issues) The transition that some of these areas have experienced raises an interesting question: to what extent is high unemployment in 1991 a predictor for high unemployment in 2011? Put another way, have those areas with high unemployment in 1991 remained those with high unemployment, in relative terms, in 2011? Alternatively, have any low unemployment areas become relatively high unemployment areas? This 6
provides insights into the nature of economic and social change within the city, and an indication of the success of policy measures aimed at curbing unemployment and changing socio- economic performance. Figure 6 is a scatterplot showing the relationship between unemployment in 1991 and 2011. A simple Pearson s correlation (r =.687, p=0.00) suggests that there is indeed a strong relationship between unemployment in the two periods. Those places with high unemployment in 1991 had the highest unemployment in 2011, while those with low unemployment in 1991 also had low unemployment in 2011. Figure 6 Unemployment Rate in 1991 and 2011 in Perth Statistical Local Areas (Source: Calculated from DEWR, various issues) In simple terms, the pattern is as follows. Areas that were high in 1991 and remained high in 2011 are those in the upper right quadrant of the scatterplot, and include Kwinana, Perth- inner, Fremantle- inner and Mandurah. So while these places have seen decreases in unemployment in real terms, in relative terms they remain high when compared to the rest of Perth. In the lower left quadrant are all of those areas that were relatively low in 1991 and remained low in 2011. These include some of Perth s more affluent areas, such as Nedlands, Cottesloe, Subiaco and Melville. Perhaps most interesting are those places that have made a transition. In the upper left quadrant are those places that had high unemployment 7
rates in 1991, but that by 2011 had transitioned to having relatively low rates compared to Perth as a whole. These include Stirling- coastal, Victoria Park, Belmont and Bassendean. In these places, the combination of gentrification, changes in the public- private housing ratio, new economic activities, and demographic shifts have contributed to quite dramatic changes in their economic fortunes. In contrast, the lower right quadrant points to those places that have transitioned from relatively low unemployment to high unemployment. Only two areas are present here: Wanneroo- south and Wanneroo- north west. The exact reasons for this require further investigation, but might include changes in demographic structure, socio- economic status, housing mix and so on. Importantly, Perth has very few of these areas that have deteriorated substantially, which is in contrast to many other cities where the degree of churn and transition is often higher. More of an issue for Perth is tackling the entrenched nature of unemployment in those places identified in the upper right quadrant. Conclusion The overall picture for Perth is one in which labour growth and declining unemployment have been a feature of the past two decades. It is clear, however, that unemployment rates overall have probably reached a level that is contributing to difficulties in the wider labour market, with labour shortages now a significant problem. Thus, for employers there is no ready reserve army of unemployed that can be called upon to fill labour gaps. This means the emphasis needs to be on either international or internal migration as part of the State s wider economic development strategy. At the sub- regional and local level, the pattern is a little more complex, with areas of higher unemployment still evident. However, to put this into perspective, even in those areas with the highest rates of joblessness the figures are still well down on their highs in the early 1990s. They are also lower than in many other developed cities, including those in parts of other Australian cities. One trait that is apparent is the spatial mismatch between those areas of relatively high unemployment, and areas of jobs growth. In terms of public policy, this is often a difficult terrain, since strategies to try to encourage people to relocate to areas of jobs growth are often unsuccessful or unpopular. Moreover, they often overlook the skills needs of those areas experiencing growth. There is likely to be little value in encouraging relocation amongst people without the requisite skills for growing industries. Here, more locally tailored strategies that link local labour market conditions with development strategies might offer valuable prospects, as would the continued emphasis on retraining and skilling labour. This, of course, raises 8
broader questions about how employment dynamics play out across particular industry sectors and occupations, and how issues such as migration, the ageing labour force etc. are likely to affect the state s and city s economy. These are topics that will be addressed in future Bulletin s in this series. References Department of Employment and Workplace Relations (various issues), Small Area Labour Markets (1991-2011), Department of Employment and Workplace Relations, Canberra. About FACTBase The FACTBase project is a joint venture between the University of Western Australia and the Committee for Perth, an influential member- based organisation driven by a diverse assembly of Perth s leaders. Members collaborate with business, government and community groups to actively improve the liveability of our city, resulting in a real and enduring contribution to Perth and the metropolitan area. One of the only broad- reaching projects of its kind to be undertaken in the southern hemisphere, FACTBase condenses the plethora of databases and studies on the subject of liveability and analyse what s happening in Perth through words, maps and graphs. About the Authors Matthew Tonts is Professor of Human Geography at The University of Western Australia. Paul Plummer is Professor of Economic Geography at The University of Calgary. Copyright This paper is copyright of The University of Western Australia and the Committee for Perth. While we encourage its use, it should be referenced as: Tonts, M and Plummer, P. (2011), The Spatial Distribution of Employment in Metropolitan Perth, 1991-2011, FACTBase Bulletin No. 22, The University of Western Australia and Committee for Perth, Perth. 9
Committee for Perth Research work commissioned by the Committee for Perth is funded entirely through the contribution of our members. Our foundation members are: Alcoa ANZ Bankwest BHP Billiton Ernst & Young Freehills Rio Tinto The West Australian Wesfarmers Westrac Woodside A full list of Committee for Perth members is available at www.committeeforperth.com.au. Contacts For further information on the FACTBase project contact: Marion Fulker, CEO, Committee for Perth 0419 048 665 or marion.fulker@committeeforperth.com.au Professor Matthew Tonts, School of Earth and Environment, The University of Western Australia 6488-2683 or matthew.tonts@uwa.edu.au 10