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OCR for page 11
T1 ~
ne Economy
ant cities
INTRODUCTION
Cities reflect the economy and express the culture of a nation. Urban
areas create demands for technology and are in turn shaped by it. The
mill towns of the Industrial Revolution were distinctive in form, dense
and compact so workers could reach their jobs on foot or by horsedrawn
public transportation. Business activity was centrally located to facilitate
transactions. The city was limited by its technology for transportation,
communications, building, and disposal of waste. The replacement of
water power with coal and the development of railroads and public sanitary
systems increased options for industrial location, expanded markets, and
made feasible larger and more dispersed factories and urban settlements
(Tarr, 19841.
Later, major innovations in industrial technology electricity, petro-
leum, chemicals, and, ultimately, the automobile were matched by new
urban technologies steel girder construction, the elevator, the electric
streetcar, and the bus and fostered further changes in the way cities
were built and functioned (Eberhard, 19661. The rise of the business
corporation, the industrial trust, national and regional financial insti-
tutions, private philanthropy, labor unions, free public education, and
the municipal civil service represents the beginnings of the modern
service sector. Initially, business services were often appended to local
industrial parents; gradually they expanded to serve industrial empires,
11
OCR for page 12
12 Rethinking Urban Policy
a region, or an industry. ~ As cities and the industrial economy matured,
their economic, political, and physical relationships changed. New meth-
ods of production, distribution, and marketing as well as improved per-
sonal mobility and inexpensive suburban housing contributed to the dispersion
of urban areas at the same time that metropolitan economic and social
opportunities attracted waves of rural and foreign immigrants.
Now a new generation of computer, energy, communications, bioengi-
neer~ng, and other technologies, complemented by the internationalization
of business institutions and markets and by substantial demographic shifts
and cultural developments, is again transforming cities to meet the needs of
an advanced economy.2 The economically advanced nations are experiencing
similar changes in their economies and in their cities, although there are
significant differences among them based on each nation's stage of indus-
tnalization and urbanization. With the mechanization of agriculture early in
this century, workers moved from fanns to cities to work in factories and
stores. In more recent years the important shifts in the United States, Canada,
and Europe have been from the extractive and transformative sectors toward
services (Renaud, 1982; Singelmann, 19781. This shift accelerated during
the 1970s in the 24 countries belonging to the Organization for Economic
Cooperation and Development (Renaud, 19821.
Projections of the labor force distribution in seven major industrial
nations to the end of the century, shown in Table 1, suggest that this
process of change is not over. Some industry analysts suggest that pro-
jections based on past trends do not adequately account for the disconti-
nuities in technology, the organization of work, and the internationali-
zation of capital and labor markets. They expect that soon after the turn
of the century, manufacturing employment in leading industrial nations
will decline almost to the levels that agricultural employment in the United
States reached by 1950 less than 10 percent of the labor force (Drucker,
198 1:2371.
In a general sense the same technological, institutional, and demo-
graphic forces that have contributed to the restructuring of the national
~ Several major financial institutions, such as the Morgan Guaranty Trust, the Chase Manhattan
Bank, and the Mellon Bank, were started as means of providing banking and holding company
services for the industrial organizations of their founders (Collins and Horowitz, 1976; Nevins,
1976; Sinclair, 1981; Trescott, 1982).
2 Throughout this report, we have used the term advanced economy rather than postindustrial
economy (Bell, 1973) because the evidence indicates that manufacturing will continue to play a
major role in the future economy but in a different way and in different places than in the past
(Knight, 1977, 1 982b). A more accurate, although also more cumbersome characterization would
be an advanced industrial-service economy.
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The Economy and Cities
TABLE 1 Labor Force Distribution, by Industry Sectors for Seven
Industrialized Countries, 1970 and Projected to 2000
England
United States and West France and
and Canada Germany Italy Japan
13
Industry Sectors 1970 2000 1970 2000 1970 2000 1970 2000
Extractive 7 5 5 4 19 10 20 5
Transforrnativea 32 28 47 40 41 35 34 40
Distributive
services 23 20 17 16 15 15 23 20
Producer
services 8 12 5 10 4 10 5 10
Social services 21 30 18 25 15 25 10 20
Personal services 9 6 ~ 5 7 5 ~ 5
NOTE: Percentages may not add to 100 because of rounding. For a description of industry
sectors, see Chapter 2, footnote 5.
aIncludes most manufacturing industries.
SOURCE: Adapted from Singelmann (1978:Table 3.1).
economies of advanced nations have also led to changes in the location
of economic activities and therefore to substantial alterations in the size
and density of urban areas. Contrasting the current situation with the earlier
period of industrialization and urban concentration, one observer of urban
development has concluded that "there now appear to be negative returns
to urban scale: larger urban areas are either increasing much more slowly
than smaller ones or are actually declining" (Hall, 1981:1~. This obser-
vation should be tempered by the fact that the advantage of scale depends
on the kind of activity located in an urban area. The nonulations of m~nv
~( t~ ~ 1 ~~A~ ~ ~ __ ~ 1 ~ _-
V1 L11~ lilts 111~1~11~11 ~5 are still increasing, although at a much
slower rate. Even though individual areas are growing more slowly or
even contracting, the proportion of the total population living in all met-
ropolitan areas q and even in ones of a million n~.nul~. or more r~ntinll-c
· ~ -- r - -or ^- Ad- ^~^—~ _~1& ~1~_~
to remain nearly constant due to the graduation of slightly smaller areas
into larger population-size classes (Thompson, 1980:31-331.
Advantages from the agglomeration of similar economic activities that
formerly were important functions are no longer as significant for certain
kinds of manufacturing and other activities, such as routine office functions
(Sternlieb and Hughes, 19751. Increasingly, such functions can be located
in the suburbs, in smaller nonmetropolitan areas, or even in other coun-
tries. That these activities can be dispersed in order to take advantage of
lower land costs, lower labor costs, less labor-intensive production pro-
cesses, and better market access has also accelerated the decentralization
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14
Rethinking Urban Policy
of other sectors of the economy, such as retail and distribution centers.
None of these trends is absolute. They are matters of degree and are
affected: by types of industries, relative wage levels, transportation sys-
tems, changes in styles of living, and many other factors.
Concentration Amidst Decentralization
Although urban settlements are generally becoming more decentralized,
it is a mistake to assume that all economic activities benefit from decen-
tralization. Some appear to continue to benefit from a high degree of
concentration and from location in the largest urban areas. Thus, at the
same time that manufacturing, retailing, back office operations, and dis-
tribution centers are decentralizing, the headquarters functions of the econ-
omy are becoming more highly concentrated in a relatively small number
of urban areas, albeit not always in traditional central business districts.
Ironically, the internationalization of business has contributed to increased
agglomeration of world and national corporate headquarters and the ser-
vices on which they depend (Cohen, 1 979b). The development of corporate
strategy requires a concentration of highly specialized services in banking,
law, accounting, advertising, and economic analysis. Urban areas in which
both corporate headquarters and such advanced service firms are concen-
trated have become "more than just centers for a widely dispersed network
of production operations. They have become . . . centers of corporate
planning and strategy formulation for large corporations" (Cohen,
1979b:451; see also Conservation of Human Resources, 19771. As this
new concentration of headquarters and strategic services has evolved, some
of the places that once contained nationally significant concentrations of
specific industries have diminished in importance, and others, such as Los
Angeles and Houston, with a major base of such services, are emerging
as important international centers (Cohen, 1979a:4671.
Demography and Urban Change
Several important changes in national demography complement and
reinforce the impact of changes in the economic structure of urban areas.
The slowing of population growth and the consequent aging of the pop-
ulation, the increase in women's participation in the labor force, smaller
households due to declining birth rates, delayed marriages, the increased
number of divorces, and greater longevity have affected cities in several
ways. The population density of the older urbanized areas has declined
in both central cities and close-in suburbs.
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The Economy and Cities
15
There has been an apparent movement in recent years to nonmetropolitan
areas. Again, this process is not unique to the United States. It is closely
associated with the changes in the economic system, such as improvements
in transportation and communication, the technological and space require-
ments of industry, and the growth of services that are not bound to central
locations (Long, 19811. This current trend in Reconcentration of urban
areas and of the population nationally is different in character from prior
great migrations, such as the rural-metropolitan migration of the mid-
twentieth century in which people changed their basic style of living as
well as their places of residence. In many respects the current dispersion
is a continuation of the urbanization of the population, rather than a return
to rural or small-town life as such. It should be viewed as an organizational
adaptation to changes in technology, the economy, and social organization
(Long, 1981:35, 99~.
One important difference in current and past demographic trends is the
slight overall decline in intermetropolitan mobility for all age groups
(Bureau of the Census, 19821.3 This decline has occurred even though
there has been considerable Reconcentration in the population at the same
time. While mobility for all age groups has declined, younger and more
educated people continue to be the most mobile (Bureau of the Census,
19821. Because the population is aging, the generations that will replace
the postwar baby boom generation are smaller, different regions and urban
areas have substantially different age profiles and fertility ratios, and
significant differences are developing among the labor forces of urban
areas and regions of the country (Berry, 1981; Jackson et al., 19811.
Another demographic factor that reinforces the economic forces restruc-
turing the economy is increased levels of education. Higher educational
attainment accelerates the capital intensification of work by increasing
pressure for higher wages and for "more interesting" work by a larger
proportion of the labor force (Drucker, 1981~.
While these trends indicate the general tendency of population changes,
it is important to remember that the averages do not tell the entire story.
Although the population in general has been dispersing and cities are
becoming less dense, the concentration of the poor, minorities, and im-
migrants in central cities has been increasing (Bureau of the Census, 1978,
1981; Greenwood, 1980), reflecting the greater ability of more prosperous
~ Mobility within metropolitan areas, however, apparently increased between 1975 and 1980.
An analysis of Current Population Survey data on interhouse moves from 1970 to 1975 and
1976 to 1980 shows an increase of 1 percent for all age groups. There is also a considerable
difference in mobility among different regions of the country (New York Times, March 2, 1983).
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16
Rethinking Urban Policy
people, including minorities, to move from central areas, leaving the poor
behind. It also appears to be related to the loss of jobs in manufacturing
and their replacement, if at all, with some service jobs that require higher
levels of skill (U.S. Department of Housing and Urban Development,
1982) and other service jobs that employ different workers, such as women
instead of black men. The result has been a simultaneous increase in rates
of unemployment, nonparticipation in the labor force, and welfare de-
pendency for central city minorities (Kasarda, 1982), raising concerns
about the development of an urban underclass that lives outside the main-
stream of economic life (National Research Council, 1982a).
There are also other selective countervailing trends to the general de-
concentration of the population. Particularly in those cities in which head-
quarters functions are concentrating, a growing number of single-person
and other small households with few children have been attracted back to
the central city, producing gentrification in close-in, architecturally in-
teresting neighborhoods that have good access to transit and work, good-
quality housing, and a varied physical and social environment (Berry,
1982).
This brief look at what has happened shows that cities have already
made many adjustments to shifts in economic structure and demography.
To understand the full significance of the adjustments and of the capacity
of cities to make them successfully, we need to examine more closely
two fundamental structural changes that are likely to continue well into
the next century. The first is the shift in the principal source of employment
from the extractive and transformative industries to service industries. The
second is the shift from blue-collar to white-collar jobs in almost all sectors
of the economy.
THE SHIFT TOWARD SERVICES
Understanding how these prospects affect cities requires a closer ex-
amination of the services themselves. While more and more people will
be employed in services, the future of all services and of employment in
them is not the same. The differences among the services have important
implications for urban areas and urban policy.
Classifying Service Industries
Detailed study of the service sector is relatively recent. It is impeded
somewhat by the way in which statistical information about industries and
occupations is classified and reported. One of the most serious gaps in
knowledge has been the lack of a satisfactory system for the classification
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The Economy and Cities
17
of service industr~es.4 Two reasonably comparable systems have been
developed in recent years.5 The list on page 18 indicates how the standard
industrial classification (SIC) codes have been reorganized in the most
recent of these systems, which is used in this report.
Distinguishing among the different types of services is valuable to the
development of urban policy for several reasons. Close examination of
the characteristics of each class of industries can lead to clues about the
4 Various attempts have been made to classify industries into a manageable number of broad
categories in order to trace changes in the distribution of employment and income over time.
One of the most widely used industrial classification systems was devised by A. G. B. Fisher
(1935) and Colin Clark (1940). Their model distributed industries among three sectors: (1) primary
industries agriculture, forestry, fishing, mining; (2) secondary industries manufacturing, con-
struction, utilities; and (3) tertiary industries commerce, transportation, communications, ser-
vices. The Fisher-Clark model has limited usefulness in studying trends in service industries
because it lumps all services together in the tertiary category. The industries in this category,
however, are quite heterogeneous, differing as to size, capital requirements, output, productivity,
and location in cities and regions.
Despite the model's shortcomings, most empirical studies of the labor force have continued
to use the three-sector scheme with only minor variations, such as the separation of transportation
and communications from other services. Where more detailed information is needed, it is usually
restricted to the 10 groups of the standard industrial classification (SIC) developed by the U.S.
Department of Commerce, Bureau of Economic Analysis: (1) agriculture, forestry, fishing;
(2) mining; (3) construction; (4) manufacturing; (5) transportation, communications, public util-
ities; (6) wholesale trade; (7) retail trade; (8) finance, insurance, real estate; (9) services; and
(10) government. While this classification system is an improvement, the services class remains
heterogeneous.
5 The first of the new systems, developed by Browning and Singelmann ( 1975), uses the traditional
classification for the first two sectors, which they call extractive and transformative industries.
They divide services into four classes: ( 1 ) distributive services transportation, communications,
wholesale and retail trade (except eating and drinking places); (2) producer services finance,
insurance, real estate, professional and business services; (3) social services health, education,
welfare, government; and (4) personal services domestic, lodging, repair, entertainment. Dis-
tributive services reflect the next stage (after extraction and transformation) in the development
of goods as they move "from the most undifferentiated primary form to their distribution to the
ultimate consumer" (Singelmann, 1978:30). While the other sectors do not follow this sequential
flow, they do comprise distinctive groups of industries.
Producer services mainly include industries that provide services to producers of goods or that
are concerned with property matters. Like distributive services, the industries in this category
provide intermediate services between the extractive and transformative industries or between
them and other sectors. Social services include public, private, and nonprofit "collective" goods
or services, while personal services are characterized by their orientation to the individual
consumer.
Stanback et al. (1981) have slightly modified Browning and Singelmann's scheme. They
divided the nonservices into two categories: agriculture and extractive and transformative in-
dustries. Their six classes of services are (1) distributive services transportation, communi-
cations, wholesale trade; (2) retail services, which are separate because they have different
locational characteristics from the other industries in the distributive services; (3) producer ser-
OCR for page 18
18
Rethinking Urban Policy
Sectors
SIC Codes
Nonservices
Agriculture
Extractive and transformative
Mining
Construction
Manufacturing
Services
Distributive services
Transportation, communications,
utilities (TCU)
Wholesale services
Producer services (including headquarters)
Central administrative office
Finance, insurance, and real estate (FIRE)
Business services
Legal services
Membership organizations
Miscellaneous professional services
Social services
Nonprofit services
Health
Education
Retail services
Consumer services
Hotels and other lodging places
Personal services
Auto repair, services, and garages
Miscellaneous repair services
Motion pictures, amusements, and recreation
services
01, 01, 07-09
10-14
15-17
20-39
40-49
50-5 1
From each of the 10 basic SIC codes
60-67
73
81
86
89
83
80
82
52-59
70
72
75
76
79, 84
Private households 88
Government and government enterprises 91-97
SOURCE: Adapted from Noyelle and Stanback (1983).
kinds of places in which they are most likely to locate. Understanding the
differences in their growth rates and occupational composition is also
important in formulating economic development strategies, in forecasting
the performance of local economies, and in identifying opportunities or
problems for the growth of particular industries or sectors.
By using this system of classification, the structural changes that have
already occurred and can be expected to continue to take place can be
vices (virtually the same as Browning and Singelmann); (4) nonprofit services, established as a
separate category from government-provided social services because it allows a closer look at a
variety of activities, particularly health services; (5) government and government enterprises,
which contains the remainder of Browning and Singelmann's category of social services; and
(6) mainly consumer services, a category that corresponds to the personal services class of
Browning and Singelmann. For a full discussion of the system and the reasoning behind it, see
Noyelle and Stanback (1983:Ch. I).
OCR for page 19
The Economy and Cities 19
more readily understood. Figure 1 illustrates what has happened since
1948 to the share of total national employment in each sector of the
economy. What is immediately clear, beyond the common generalization
of the continuing shift away from extractive and transformative industries,
is that there are substantial differences in the performance of the different
service sectors. The shares of jobs in some sectors, such as distributive
and retail services, are stable or declining. Consumer services, which are
often assumed to have grown rapidly in response to the increased affluence
of American consumers, have not in fact done so, although some growth
is projected for this sector in the 1980s (Personick, 19811.
Nonprofit and Government Services
The growth of nonprofit services reflects the rapid expansion of edu-
cation services in the l950s and 1960s. That trend slowed in the 1970s,
and an increase in the rate of growth for medical services occurred. Ed-
ucation and health services are particularly susceptible to demographic
trends, which in the current period tend to be mutually offsetting. A decline
in the numbers of school-age children tends to reduce growth in education.
Health services, however, can be expected to grow in the United States
because of an aging and more health conscious population. Even faster
growth should occur in other parts of the world as both advanced and
developing countries develop or modernize their health systems (Ginzberg
and Vojta, 1981:511.
The share of employment in government services dropped in the last
decade. When they are combined with nonprofit services, one can see a
slowing of the rate of growth for services aimed at collective consumption.
It is debatable whether the decline in government services is the beginning
of a long-term trend. To the extent that it reflects a reduction in the numbers
of education employees due to smaller public school enrollments, the
trend probably is long term. Some jobs could also shift from government
to private sectors as a result of the "privatization" of some public services.
Government involvement in an increasing range of complex problems,
however, suggests that some growth in this sector remains a possibility,
especially if the private sector cannot maintain full employment in an
advanced economy.
As the economy of the nation and its urban areas has been restructured,
the significance of government has increased, especially as a regulator of
the economy, even though government plays a smaller role in the total
gross national product (GNP) than it did in 1950 (Ginzberg and Vojta,
1981), and there has been no increase in employment. Most of the growth
of government employment in recent decades has been due to the expan-
OCR for page 20
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OCR for page 21
The Economy and Cities
21
sion of state and local governments, not the federal government. Through-
out the economy, and particularly in the urban economy, government is
not only an employer but also the provider of a wide range of services
on which other sectors depend (Knight, 1980~. Education and health ser-
vices are particularly dependent on government financial assistance. If we
view the urban economy in a slightly different way, government and other
nonprofit services are an important part of the local sector those parts
of the economy that serve local residents and businesses as contrasted
with the traditional export sectors that send their goods and services else-
where and bring money from other markets into the local economy. Like
many producer services, nonprofit and government services produce in-
come and provide amenities that are essential to the health of the export
sectors (Business Week, 198 la; Ginzberg and Vojta, 1981~. Where gov-
ernment is the principal activity, as in the case of Washington, D.C., and
a number of state capitals, it acts as the export industry. Taxpayers in the
rest of the state or nation "buy" its services. Government expenditure
levels act as a multiplier in the economy, creating markets for other
services, construction, and some manufactured goods.
The Growth of Producer Services
The most important finding from this examination of the changing
structure of the economy is that producer services play a major role in
the expansion of the service economy. Producer services include those
industries that provide intermediate services to firms producing goods or
other services. Such services include the planning, management, financ-
ing, marketing, legal, and accounting services that are essential to large-
scale business enterprise and to government. An important development
in the expansion of producer services is the growth of international markets
for services that once relied primarily on domestic demand. International
demand for banking, insurance, and telecommunications is expected to
outpace domestic demand in the next decade. Producer services' share of
the labor force has grown by over 50 percent since 1959. The share has
grown faster in the last decade than that of any other sector and by 1990
will account for 38 percent of the net increase in the share of total em-
ployment by all services (Personick, 1981; Stanback et al., 19811. The
nonprofit sector has been responsible for a larger share of the shift, but
while the rate of nonprofit growth is projected to almost stabilize, the
producer services sector is the only one projected for more than a 10
percent increase in the current share of employment by 1990 (Personick,
19811. There is some evidence to suggest that producer services are already
OCR for page 27
The Economy and Cities
27
however, the ratio of nonproduction to production workers is increasing
in almost all goods-producing industries. And there are some disturbing
signs that technology could indeed eliminate many kinds of service jobs
that have previously been taken for granted, particularly in clerical oc-
cupations (Schwartz, in press).
Segmentation of the Labor Market
As employment shifts to services, the structure and behavior of the
labor market of the service industries become increasingly important. Not
only do services employ fewer craftsmen and operatives than manufac-
turing industries, but also lower-level jobs in services tend to pay less and
be less sheltered (for example, they lack retirement plans and union con-
tracts) than lower-level jobs in manufacturing (Stanback and Noyelle,
19821. A much higher proportion of them are part-time jobs, as shown
in Table 4, and a very large proportion are filled by women. As one moves
toward the bottom of the occupational hierarchy, service jobs are increas-
ingly filled by black women (Treiman and Hartmann, 19814. Nonwhites
generally have had more success in finding employment in certain services
(for example, food service, education, public administration), but even
in these industries they are not well represented in the higher-level oc-
cupations. A particular problem for those concerned with the implications
for urban areas is presented by the fact that while black female participation
in the labor force has been increasing, the participation rate of black men
has been declining and will probably continue to decline slightly unless
the economy enjoys a period of extremely high growth (Fullerton, 19801.
Table 5 projects growth in each occupational class from 1978 to 1990.
While the overall profile of occupations is projected to remain fairly stable
during the decade, the greatest rates of growth are expected in professional,
technical, and related occupations and in service workers. Operatives and
laborers, the traditional entry points to the labor market, show the least
growth. These trends, particularly when read together with the occupa-
tional structure of the services that seem most likely to experience high
future growth rates, suggest that a dual labor market could be emerging,
"with a growing separation between relatively good jobs and relatively
bad jobs" (Stanback et al., 1981 :So).6
6 For further discussion of this problem, see Beck et al. (1978), Berger and Piore (1980), and
Bluestone (1970). For an extensive discussion of the debate among labor economists about the
existence of a dual labor market, see Cain (1976).
OCR for page 28
28
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OCR for page 29
The Economy and Cities
TABLE 5 Percentage Distribution of Civilian Employment in Occupations
With 25,000 or More Workers
29
Actual Projected Change
Occupation 1978 1990 1978-1990
Professional, technical, 16.0 16.7 30.3
and related (15,570) (20,295)
Managers, officials, 9.0 8.8 21.3
and proprietors (8,802) (10,677)
Sales workers 6.6 6.7 25.4
(6,443) (8,079)
Clerical workers 18.3 18.6 26.37
(17,820) (22,519)
Crafts and related workers 12.0 12.1 25.6
(11,679) (14,668)
Operatives 14.6 13.7 16.8
(14,205) (16,584)
Service workers 14.8 15.8 33.3
(14,414) (19,220)
Laborers 6.0 5.8 19.9
(5,902) (7,078)
Farmers and farm workers 2.8 2.0 - 16.3
(2,775) (2,327)
Total, all occupations 100.0 100.0 24.4
(97,610) (121,297)
NOTE: Numbers in parentheses represent thousands of workers. Percentages may not add to
100 because of rounding.
SOURCE: Carey (1981).
This problem can be illustrated by the medical and health occupations,
which have been among the fastest growing services and are expected to
continue to expand rapidly during the next decade (Carey, 1981; Sekcen-
ski, 1981~. There is a clear separation of the market levels of pay and
degree of shelter between credentialed professionals (doctors, nurses, tech-
nicians) and paraprofessionals (nurses' aides, practical nurses) and service
workers (orderlies, food and laundry workers).7 This structure offers little
chance for mobility between occupational categories and very short career
ladders within each occupational group. That may not differ markedly
from the situation in manufacturing in which few shop workers ever
7 During the last decade, the proportion of professional and technical workers in the health
industries increased. Clerical workers also increased, but the proportion of service workers
declined. Women make up 75 percent of all workers in health services, but throughout the
industry they earned less than men in equivalent occupations. About 20 percent of all health
employees work part time (Sekcenski, 1981).
OCR for page 30
30
Rethinking Urban Policy
become executives. The difference is that shop jobs are paid well and
have fringe benefits, security, and protection from unfettered managerial
discretion. By contrast, many health service jobs have low pay, few fringe
benefits, and little security.
It could be argued that health services have traditionally had a highly
segmented employment pattern and are not typical of the occupational
structure of the services. There is at least tentative evidence from early
research on banks and department stores in New York City that these
industries, which traditionally offered long career ladders that progressed
from sales or teller positions into the management hierarchy, are increas-
ingly developing two separate career tracks. Entry into the management
track depends on college or higher-level professional education prior to
entry. Sales and clerical positions are viewed as being on a separate track,
with little opportunity to move into a management position unless one
enters these positions as a college trainee.8 Thus increased college at-
tendance by minorities has been important in offsetting the tendency to-
ward a dual labor market.
In contrast to manufacturing and construction jobs, which in the past
provided entry into the labor market for a large proportion of workers,
entry-level jobs in the services today tend to be poorly paid and poorly
sheltered and to offer less opportunity for future income and occupational
progress. These lobs are often Dart time and are more likely to emolov
minority women than minority men (Stanback and Noyelle, 19824.
~ ~ ~ - 1 J
Intermediate-level jobs are not necessarily drying up; they are, however,
changing. Access to them from lower occupations is not as common as
it was in the past in the manufacturing industries or in many of the
traditional service industries, such as retailing, distribution, and banking.9
The one sector in which career ladders have been long and open is gov-
ernment. Public employment traditionally has been important in the oc-
cupational mobility of minorities. For the short term, however, the reduction
in the growth rate of public sector jobs may reduce the access of minorities
to middle- and higher-level occupations (Harrison, 1972; Jones, 19791.
~ Progress report on research, presented by Thomas M. Stanback, Jr., at the meeting of the
Committee on National Urban Policy, Woods Hole, Massachusetts, July 25, 1982. Also see
Bluestone (1981).
9 In some cases, this results in the imposition of higher skill or knowledge requirements than
some jobs actually require, because of the rising educational levels of much of the population
(Berg, 1971).
OCR for page 31
The Economy and Cities
31
Summary
The complex shift from blue-collar to white-collar occupations reflects
not only the shift of employment from manufacturing to services but also
important changes in the nature of the work being done in all industries.
An increasing proportion of the jobs in manufacturing requires education
and training acquired before entry or acquired off the job. There are fewer
jobs for low-skilled manual laborers. At the same time that the average
level of knowledge required for employment is increasing, some jobs are
being broken into components that demand less skill or are being routin-
ized, while the knowledge requirements for other jobs are increasing. In
many of the services there also appears to be a tendency for the labor
market to divide between occupations that require higher education or
special training and those that do not. The higher-level occupations offer
better incomes and opportunities for advancement and are sheltered in
other ways. The lower-level occupations tend to be part time, less sheltered
than either the high-level service jobs or traditional manufacturing jobs,
and filled by women.
These changes in the structure of employment produce problems, both
of entry into the labor market and in career advancement for those who
are poorly trained or educated. In light of our history of racial, ethnic,
and gender-based discrimination, they pose special problems for the em-
ployment of minority men and for the equality of women in the labor
force. The number of intermediate-level jobs is not necessarily declining,
but the requirements for access to those jobs are different in an advanced
economy than they were in an earlier time. An economy based heavily
on services seems less likely to offer unskilled workers the same expec-
tations of rising incomes and benefits that were once common in growing
manufacturing industries. Thus there is some possibility that an advanced
economy could produce sharper class distinctions than have existed in the
post-World War II period.
THE CONTINUING IMPORTANCE OF MANUFACTURING
In discussing fundamental structural shifts toward services and white-
collar employment it is important to keep in mind that while the trans-
formative and extractive industries will employ a relatively smaller pro-
portion of the work force, their contribution to the gross national product
will not necessarily decline correspondingly. As Figure 3 shows, the share
of GNP of the nonservice sectors has fallen over the last 30 years but at
a much slower rate than their share of employment. The Bureau of Eco-
nomic Analysis long-range projections even show a gain in the nonser-
OCR for page 32
32
ACTUAL
1948
Services
Nonservices
1968
Services
Nonservices
1 978
Services
Nonservices
PROJECTED
1 990
Services
Nonservices
2010
Services
Nonservices
2030
Services
No nserv ices
Rethinking Urban Policy
............... ,, _
...................................................................... .~
, ................................... ......... .
..........................................................................................................................................
......................................... . . .......................................... .. .. ............
.......
,
, - - - ~
....................................................... ........................................... ... ........................
.................................................... . . j . .
.. ........ .........................
....................................................................................................................................................................
. .............................................................................................
, ................. ..
~ .....
.... ...
................................................... -.-
::::::::::::::::::::::::::::::: :::::-:: ::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::::::::-:-::::::::::::::::::::::::
::::::::::::::::::::: :::::::::::::::::::::::::::::::::::::-: :::: :::: :::::: :::::::: ::::: :::::::::::::: ::::::::::: ::: :: ::::::::::::: ::::::: ::: ::::::::::::::::::::::::::::::::::::::::::::::::
· ''''''' ''''''' ''' '''I'''''''" '''' 1''''''''''''''''''''''''' '''' '''''' '''''
1 1 1
0 20 40 60 80 1 00
PERCENTAGE OF GROSS NATIONAL PRODUCT
FIGURE 3 Shares of the gross national product for services and nonservices, 1948-
1978 and 1990-2030. SOURCE: For 1948 and 1968, Ginzberg and Vojta (19811; for
1978 and projections, Bureau of Economic Analysis (1981~.
vices' share of the economy in 2030. This implies that the earnings per
worker in manufacturing will rise faster than average; thus, those people
and places that can survive in the contracting manufacturing sector will
be well rewarded. Also, while the proportion of the labor force employed
in manufacturing can be expected to decline, the absolute number of jobs
in manufacturing industries may increase slightly (Bureau of Economic
Analysis, 1982; Personick, 1981:38-391.~°
~° Even the low-growth scenario of the Bureau of Labor Statistics projects actual growth in all
major sectors except private household employment (Personick, 1981:38). We caution again,
however, about reliance on projections. There is need for closer study of changes in the workplace
and of the behavior of firms and employees as new technology is introduced.
OCR for page 33
The Economy and Cities
33
Several things are important in interpreting this information. First, the
new jobs are not likely to be of the same kind as in the past. Second,
within each industry there will continue to be replacement of blue-collar,
manual-labor jobs with white-collar and other jobs requiring a greater
knowledge. Over 35 percent of all employees in nonservice industries
already are in nonproduction occupations. Third, the slow growth in man-
ufacturing jobs also reflects displacement of labor with robots and other
machines. Thus, a smaller proportion of the work force will be engaged
in actually making things, and a greater proportion will be managing,
planning, selling, and inventing the things that are produced. Fourth, those
aspects of manufacturing that remain labor-intensive will increasingly be
performed by workers in other countries (Drucker, 1981~.'i While the
trend toward overseas production of labor-intensive goods may be retarded
by stringent legislation restricting imports, it is unlikely to be fully pre-
vented.
Clearly the demand for labor is changing in both national and urban
markets. Almost all urban areas have some jobs that the local labor force
cannot fill and some workers who cannot find jobs that can use their skills
(Cetron and O'Toole, 19721. Because of the historic concentration of
specialized industrial production in particular urban areas, the restructuring
of manufacturing produces local labor surpluses, whether the direct cause
is technological change within an industry or product substitution in the
marketplace, as in the replacement of steel with aluminum and plastics
in construction and manufactured goods. Other areas of the country that
house a higher proportion of new or expanding industries may experience
a temporary labor shortage (Ballard and Clark, 1981; U.S. Department
of Housing and Urban Development, 19801. This analysis assumes that
the shift from manufacturing to services will continue at a moderate rate,
in national terms. If imports of manufactured goods increased sharply,
however, the decline in U. S. manufacturing employment could be massive
and could strip many areas of their sources of export types of jobs. New
jobs and skills could not be substituted fast enough to prevent the stagnation
and even significant contraction of some areas. The widespread alarms of
economic collapse, however, rarely are realized. "Doomed" Altoona,
Pennsylvania, for example, still exists. Moreover, in 1980 it still had 97
percent of its 1940 population.
~ ~ For an illustration of this process, see "U.S. Auto Makers Using More Mexico Plants," New
York Times, July 7, 1982, p. I.
OCR for page 34
34
Rethinking Urban Policy
REGIONAL GROWTH AND DECLINE
Structural changes in manufacturing have had their most dramatic effect
in the old-line industrial areas. As factories closed or reduced their work
forces, urban decline began to replace uncontrolled urban growth as the
major concern of public policy (Bradbury et al., 1982; Hanson, 19821.
Even without the recession, structural changes were producing high levels
of unemployment in some industrial areas. Physical deterioration and fiscal
stress in such places are also common (Bradbury et al., 1982; Burchell
and Listokin, 1981).
There has been a tendency to interpret the redistribution of population
and employment among the multistate census regions of the country that
has accompanied these developments as a zero-sum game between Sunbelt
and Frostbelt regions. It has also been suggested that the decline of older
cities and the rise of newer ones are inevitable as the inexorable forces
of change in a postindustrial society work themselves out (Hicks, 1982;
President's Commission for a National Agenda for the Eighties, 1980;
U.S. Department of Housing and Urban Development, 19821.~2
Some important interregional adjustments are taking place. The pr~n-
cipal generator of employment growth in the Sunbelt, however, has not
been the migration of firms from the older Frostbelt cities. The principal
source of new jobs in the southwestern and mountain regions has been
the expansion of existing firms (Armington and Odle, 1982~. The low
rate of job formation in the Frostbelt stems from low rates of large firm
expansion, high rates of large firm contraction, and high rates of firm
death (Armington and Odle, 1982; Garnick, 1978~. Thus the differences
in regional employment growth (or decline) stem principally from differ-
ences in rates of expansion and birth of firms (Armington and Odle, 1982;
Birch, 1981; Norton and Rees, 1979; Rees, 1979a). While firms as such
may not have moved, capital in the form of liquid assets has moved and
has been used to start new firms in new places instead of reinvesting in
older firms and communities (Bluestone and Harrison, 19821.
Another important factor in the decline of manufacturing jobs in many
Frostbeit cities is that older industrial plants located in those places are
often the least productive because of obsolete equipment, manufacturing
processes, and plant designs. When shut down for cyclical reasons, they
~2 Interestingly, The President's National Urban Policy Report, 1982 (U.S. Department of
Housing and Urban Development, 1982) argues that the most serious urban economic problems
stem from structural changes in the economy, but the report recommends that policy rely primarily
on a cyclical remedy: the economic recovery program of the administration.
r
OCR for page 35
The Economy and Cities
35
are the least likely to reopen. If they are modernized, they become more
capital-intensive and do not recall all of the laid-off work force. The key
factor, however, is not regional location but obsolescence, as the shutting
of steel mills in California and Alabama illustrates.
The geographic concentration of energy industries and the growth of
military-related employment, influenced by national policies that have
encouraged flows of capital and labor into these industries, have also been
significant forces in the development of Sunbelt cities. 13 Other factors are
also important: the migration of older people with considerable amounts
of retirement income to more benign climates offered by Sunbelt states,
higher fertility rates, lower participation rates for women in the labor force
(although the rates are quite high in some regions, such as the South
Atlantic), and the presence of large numbers of immigrants who provide
a pool of labor at relatively low cost for some kinds of enterprises. ~4
The factor almost uniformly overlooked in the Frostbelt/Sunbelt con-
troversy is that the Frostbelt has consistently captured more than its share
of corporate headquarters and producer services (Stanback et al., 1981 :98-
991. In fact, during the 1970s many of the Frostbelt cities appear to have
reinforced their comparative advantage in producer services. This seems
due in large part to the existence of a strong base for a service economy
because of the historic concentration in the major Frostbelt metropolitan
areas of the most highly sophisticated of those services, such as inter-
national banking, stock exchanges and other financial services, specialized
law firms, accounting headquarters, and advertising and mass media firms
(Stanback and Noyelle, 19821. Part of the reason for overlooking this
phenomenon is the statistical illusion created by the way in which the
service sectors are reported. By combining many producer and consumer
services into one aggregate service category, some of the fast-growing
producer services are offset by the more slowly growing consumer ser-
vices. In addition, the employment data on the manufacturing sector nor-
~3 Much of the new growth in manufacturing in the Sunbelt has also been in new industries,
such as energy, aerospace, and electronics. Perry and Watkins (1977) identify six dominant
growth industries they believe to be primarily responsible for the growth of Sunbelt cities:
agriculture, defense, advanced technology, oil and natural gas, real estate and construction, and
tourism and leisure.
|4 See Jackson et al. (1981:36-46) and Bureau of Economic Analysis (November 1981) for a
discussion of these trends in different parts of the country. The availability of low-wage, low-
skilled labor was found significant in studies of specific Sunbelt labor markets in which there
has been growth in manufacturing and retail employment. See particularly the discussion of
Phoenix in Stanback and Noyelle (1982:102-104).
OCR for page 36
36
Rethinking Urban Policy
many do not break out the internal services from the production work.
Since consumer services tend to follow trends in population growth and
disposable income, the high growth rate for services in Sunbelt cities
disguises major qualitative differences among cities in the kind of service
growth they are experiencing (Stanback et al., 1981~.
There are urban areas in every census region that are undergoing severe
stress from structural changes in their local economies. The problems of
troubled cities in the South, such as Birmingham and New Orleans, and
exceptions to regional decline, such as Columbus and Akron, Ohio (Schri-
ber, 1982), and Boston, suggest that the industrial mix and the diversity
and quality of the metropolitan labor market may be far more important
factors in the capacity of local economies to adjust to structural changes
than is mere regional location (Rees, 19801. All regions have growing,
stagnant, and declining urban areas. Those urban areas that have histor-
ically functioned as national and regional centers for major corporate
headquarters, branch offices, or division offices; as regional distribution
centers; and as centers of banking and information are making a smoother
transition to the new economy, whether they are located in regions that
are growing or declining. In contrast, those urban areas whose economies
have depended more heavily on a single manufacturing industry or a
narrow range of industries are having the most difficult time, regardless
of their region (Noyelle and Stanback, 19831. This is not to say that some
of the most service-oriented cities are without economic problems. They
may rank high on various indices of urban distress. A city with a substantial
base for local expansion of sectors that are strong in national and inter-
national markets is more likely to make the transition to a new set of
functions than a city that lacks such a base.iS
The difficulty in generalizing about cities in census regions is partially
illustrated by Figure 4, which compares the economic performance of
metropolitan areas with the geographic regions within which they are
located. Only in the East South Central region do all cities exceed the
average performance of the region's economy. While some regional at-
tributes are indeed important in the growth and decline of specific urban
areas, it is important not to overstate their significance. In general, where
a city is located seems less significant in forecasting its economic condition
than what it does. It is therefore more useful to define regions as working
urban market areas, rather than as static statistical areas. These dynamic
is Size also makes a difference (Noyelle and Stanback, 1983; Stanback and Noyelle, 1982).
OCR for page 37
The Economy and Cities
100
U)
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37
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FIGURE 4 Economic performance of cities and their regions. SOURCE: Southern
Growth Policies Board (1981:32~.
regions are constantly changing. Once primarily influenced by their trans-
portation networks, they are now experiencing a new set of changes made
possible by the substitution of communications for some kinds of trans-
portation. The economy of an urban area, as subsequent chapters discuss,
may therefore depend for its vitality on invisible relationships that reach
far beyond political boundaries, local markets, and commutation patterns.
Representative terms from entire chapter:
urban policy
