Why are cities growing faster than regional areas in many economies around the world, including in Australia, the US, and UK? Robert Sobyra of Construction Skills Queensland explains his recent research findings to show host Gene Tunny. Robert and Gene discuss what the predominance of high-skilled employment growth in cities means for regional economies, and whether policy measures to address the regional divergence would be desirable.
Links relevant to the conversation
LinkedIn profile: Robert Sobyra
Rob’s LinkedIn article “Why Regions Are Falling Behind – And What To Do About It”
Rob’s research paper: “Unbalanced Growth in the Labourscape: explaining regional employment divergence”
Data mentioned by Gene:
Transcript: Regional divergence: why cities are growing faster than regions w/ Robert Sobyra – EP160
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Gene Tunny 00:01
Coming up on Economics Explored.
Robert Sobyra 00:04
So that agglomeration thing is the real reason why it’s happening so strongly in the big cities, the high skill employment growth because that’s always where it’s happened and so it feeds on itself. So it becomes a cumulative process of self reinforcement.
Gene Tunny 00:20
Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist based in Brisbane, Australia and I’m a former Australian Treasury official. This is episode 160. On regional economic divergence. This is a big issue in many advanced economies, including in Australia and the US. My guest this episode is Roberts Sobyra, Director of Research and Digital with Construction Skills Queensland. Rob recently wrote a great article about why Australian regions are falling behind and what to do about it. And I thought it would be good to invite him onto the show to ask him about his analysis. Please check out the show notes, relevant links, and for details of how you can get in touch. Please let me know what you think about what either Robert or I have to say in this episode. I’d love to hear from you. Right oh, now for my conversation with Robert Sobyra about regional economic divergence. Thanks to my audio engineer Josh Crotts for his assistance in producing this episode. I hope you enjoy it. Robert Sobyra from construction skills, Queensland. Welcome to the programme.
Robert Sobyra 01:30
Hi Gene. Thanks for having me.
Gene Tunny 01:32
Oh, it’s a pleasure. Rob. I read your newsletter regularly, “The Flip Side” on LinkedIn.
Robert Sobyra 01:39
Thanks, you and my mum.
Gene Tunny 01:41
I think you think there might be a few more than that. I think it’s a great newsletter. It’s and in your last newsletter, you wrote about how you had some recently published research that showed jobs growth in Australian big cities. There was over, what was 2.4% annually, on average over the last two decades, and that was compared with 1% in regional Australia. Okay, yep. Yeah, that’s really interesting. And that’s, that accords with what I’ve seen, or the data I’ve seen and what you see if you go out to the regions and versus going to the big cities. I mean, clearly, that’s, that’s the case. And it looks like we see similar trends in countries around the world. So we could talk about that. And the point you make is that the economy creates more high skilled jobs, then middle skilled jobs. And these jobs are, well, the vast majority of them are in big cities. And you’ve done some research on that, that I think is really interesting. I want to chat about that. So yeah, it’s great. You’re on the show. To kick off I’d Yeah, I’d really be interested in I mean, what is the role of Construction Skills Queensland? What do you do here? And what’s your role there specifically?
Robert Sobyra 03:02
Yeah, sure. So CSQ is a pretty strange little organisation, a quasi government body and we collect the levy out of the construction industry. So any project that’s more than 150 grand gets levied .5%, or something like that, something of that order that goes into a fund, a training fund, and it’s our job to reinvest that money into the skills and training of the construction workforce. And, I run the research team here. So my job is kind of twofold. One is to make sure that we’re spending that money where it’s needed most. So where there’s labour shortages, where there’s gaps regionally, in skilled trades, and that sort of thing. And that helps us direct our investment. And, and then on top of that, we sort of do sort of original research that, you know, we’re in a pretty, pretty privileged position here, where we’ve got some revenue that allows us to do some, some research for the good of the industry. And that generally looks at issues around that sort of nexus between construction skills, labour, and forecasting labour shortages, that sort of thing.
Gene Tunny 04:04
Okay, so is CSQ helping people get into apprenticeships? Is that something you’re doing?
Robert Sobyra 04:09
Well, we do a little bit of that. We call that career pathways sort of stuff. So we do a fair bit of work with schools and helping people understand what a career in construction looks like, that sort of thing. But really, it’s mainly focused on existing workers. So if you’re a construction tradesperson, you might be a carpenter, you might be looking to upgrade your skills to say, get your builder’s licence, we can cover the cost of the majority of that training for you, if you’re eligible.
Gene Tunny 04:34
Oh gotcha. Okay, so you help people skill up. Okay. That’s great. Right. So let’s talk about your research or so it’s in this sort of field of regional economic development. What got you interested in this, this field to begin with are these types of issues?
Robert Sobyra 04:53
Yeah, so it’s broadly I guess you call it economic geography and regional, regional economics and regional economic developments have become a passion of mine. Over the years, as I’ve been working for CSQ, I do a lot of travel to the region throughout Queensland. And I think you know, I grew up in a big city, and like a lot of boys who grew up in a big city, you don’t pay much attention to the regions and, and there is this tendency to forget about them. And even a sort of thinly veiled contempt for regional issues sometimes I find in the big cities and so the more I travelled regionally, the more I realised how much that kind of forgotten places, and yet how much they contribute to the economy. You think about saying mining, for example, all of it comes out of regional Queensland. Yet the big policy discussions, the big planning discussions, almost universally, focus on Southeast Queensland, here in Queensland anyway, so. So my interest came out of a motivation, I guess, to correct that, and to put more of a focus on regions and to start trying to understand why it is that the outcomes in regions so often don’t diverge, or, or there’s so much so often a disparity of outcomes, whether it’s employment income, or whatever, between regions and big cities.
Gene Tunny 06:13
Okay, so you talked about economic geography, there’s a field of economic geography. And am I right that this is about the location of economic activity? How can we describe what economic geography is about broadly?
Robert Sobyra 06:26
Well, basically, the starting point is that, you know, there’s no such thing as a national economy, there really isn’t such a thing as a national or even a state economy, you know, economies happen in very particular places. So economic geography is really just recognising that and just just bringing the place back into the economy, rather than those sort of national abstractions that we get in the in the national accounts, you know, that smoothed over a lot of variation, and a lot of unevenness in terms of where, you know, real human beings actually live in work. So it’s about getting back down to that, to that to the roots of where economic activity really happens.
Gene Tunny 07:04
Okay, and so, one of the propositions and it accords with what is what the data tells us, or what real life tells us is that the regions are different, they don’t necessarily converge to the same industrial structure or level of income and output. So I thought, that’s one of the points I think you make in your paper that we’re going to talk about that there can be this divergence. So absolutely keen to chat about that. Now, have you done a PhD? Are you doing a PhD?
Robert Sobyra 07:35
Just in the examination phase at the moment. So all but done.
Gene Tunny 07:39
Okay. And is this what your PhD is on, this type of Research? Right. Okay. Terrific. And that which, which school is that?
Robert Sobyra 07:50
That’s at UQ, The University of Queensland, School of Earth, environmental sciences, with the human geographers there.
Gene Tunny 07:57
Okay, that’s great. And because it’s got a real economic aspect, this and I know you do a lot of economic analysis in your job here. We’ve presented at the same conference in Rocky.
Robert Sobyra 08:09
Rocky as it was last year.
Gene Tunny 08:13
Yeah, that’s right. Major enterprises conference. So absolutely. Excellent. Okay. So can you tell us about your paper? Please, Rob, what did you find in it? What? What were the main findings? How did you go about it? What was the techniques and then after that, we can talk about what it means even just tell us a story about the paper, please, that’d be great.
Robert Sobyra 08:34
Sure. So the, the original idea from the paper really came about, because up until around the turn of the century, there was quite a lot of interest in this area of regional economic divergence, and trying to understand, particularly in Australia, why it is that certain regions are outperforming others, particularly big cities are outperforming smaller regions. And, and sort of even just describing that, and mapping, that landscape was a big deal in the 80s, and the 90s. And then it kind of all went quiet around the turn of the century, and academic interest in this just really waned off, and we really got that almost singular focus on the national economy. And, and even even today, when the Reserve Bank talks about regions, it’s actually talking about states and territories, when you look at the stuff they produce, you know, and so, I was never comfortable with that, because, because just my observation of working across regions is that the outcomes can vary so much and the experience the lived experience on the ground of firms and workers in regions can be so variable. So I wanted to bring a bit of that place back into the, into the, into the discourse. So so my, my objective was to sort of update the record in the first instance and say, Alright, in the two decades since the turn of the century, what’s happened, and what I observed is that the patterns that had been picked up in the 80s and the 90s have actually been been continued, not only continued but intensified. And that’s broadly when it comes to employment. That’s my, my sort of main area is employment growth. The trend has intensified. And we’ve seen this sort of widening of a gap in outcomes in terms of employment growth between big cities and regional Australia.
Gene Tunny 10:21
Right. And so this is this statistic that all these stats that I mentioned before, Australian big cities have been growing at 2.5% trend term per annum over the last two decades. Yep. In trend terms versus 1%. In the regions, okay. And that’s going to over time that’s going to lead you know, the cumulative impact of that is huge, isn’t it?.
Robert Sobyra 10:44
Yeah. Yeah. And so. So that was sort of, I guess, the threshold question, or do we still have this thing called regional divergence and tick we do and, and it is, neoclassical economics holds that that should converge over time. So this, this, this divergence should actually shrink and we should find a sort of a nice equilibrium where outcomes equilibrate. But actually, we’re observing, and we’re observing this right across the world that outcomes seem to be diverging more and more. So my next question was trying to explain that. So why is it that we’re observing this phenomenon over cumulative pattern of regional divergence? So it’s ongoing and it’s compounding over time the wedges opening up? Why should that be the case? When, when neoclassical models suggest that the opposite should be happening?
Gene Tunny 11:35
Right? And that’s because if there is this divergence, then there’s obviously going to be that the available land available to people without jobs in these regions have massive investment opportunities. And so capital and labour should migrate?
Robert Sobyra 11:54
Yeah, that’s the theory, right? If you have excess supply in one area, then that should encourage firms to move there to exploit the lower rents, etc. And then, over time, that should equilibrate. Yeah. But that’s clearly not happening. It’s not happening here in Australia. It’s not happening in the US. It’s not happening in the UK, we’ve got this sort of observed pattern in most developed countries. So it’s, it’s been, I guess, my project has been to try to contribute to our understanding of what that’s all about. And there’s been some series in the past with some ideas around, you know, amenity. So one popular idea. The early noughties was that well, the reason why big cities are outperforming is more people want to live in big cities, just because, you know, the culture is better, apparently, you know, the food and the wine and everything is better in big cities. So that’s obviously why people are moving to big cities. And I never really swallowed that argument. And actually, it hasn’t stood up to any academic scrutiny in the last couple of decades. But that was a popular theory to begin with. But I really focused on the structure of the labour market, and just observing how, how our economy has been changing quite considerably in some pretty fundamental ways over the last couple of decades will really since the 80s, to be frank. And maybe there’s something in this that’s driving this divergence, you know, and I’ve really leveraged this concept of job polarisation, you’re familiar with this idea of job polarisation, where you’ve got you’ve got some high skilled jobs growth, and you’ve got some low skilled jobs growth, but the middle is getting hollowed out. Right. So middle skill employment is really shrinking. And low skill employment is growing and high skill employment is growing.
Gene Tunny 13:47
So what would you mean by middle skilled? So let’s say higher skilled, I’m guessing you mean tertiary educated professional jobs, middle skilled, is that the trades.
Robert Sobyra 14:00
They are middle skilled, but it’s actually broader than that. So, my favourite example is the finance industry. Okay, so once upon a time bank branches littered the landscape, yeah, and those bank branches were full of clerks, middle skill clerks, you know, my mum was one of them, sort of paralegal type person, did a lot of conveyancing, that sort of thing. Not tertiary qualified but you know, had the equivalent of a TAFE qualification. And anyway, you know, these were, these were thick across the landscape back in the 70s, and the 80s. And over time, what’s happened is a lot of those jobs have evaporated as, as you know, banking has become more digital. And that’s created a whole new set of occupations and skills. But all of those occupations and skills are mainly concentrated in big cities. Now they’re not in bricks and mortar branches across, across the state.
Gene Tunny 14:55
Yeah, exactly. Okay. And so what analysis did you do, Rob, how did you? In what proposition? Did you prove you, prove that there was this? There’s divergence and you’ve been able to prove what’s causing it isn’t right.
Robert Sobyra 15:12
Yeah so basically, it comes down to this, this job, polarisation theme. Okay, so what’s happening is effectively high skill employment growth is growing. Yeah, low skill employment growth is growing. But whereas low skill employment is uniformly distributed across the landscape, employment is not all of the high skill employment is basically accruing to the big cities. So they’re getting a dividend, they’re getting a sort of a growth premium. That’s not available to the regions. Because, you know, high skilled jobs just don’t land in regional centres, they land in big cities. And so there’s this extra increment of employment growth that you’re getting through this high skill economy. And that’s accruing disproportionately to the big city. So in aggregate terms, you wind up with overall, more employment growth in the cities than you do in the regions.
Gene Tunny 16:10
So is this because all the knowledge workers need to be co-located there are these agglomeration economies or whatever, and there’s also this Richard Florida stuff on the creative class, and they want to, they want to live in the cities to enjoy the bohemian lifestyle in the cities. But there’s also benefit, there’s benefits from them co locating. So I’m trying to, I thought that point you made at the beginning was interesting that there were these theories that people move to cities, because their lifestyle was better. I think Richard Florida was getting at that. But then he also recognised that there are benefits from the clustering together.
Robert Sobyra 16:46
Yeah. And that’s really the more important fact. And to put it in simple terms, birds of a feather flock together. Yeah. And that’s really what’s been happening. So it’s not new, that high skilled jobs concentrate in big cities, they always have. Yeah, the problem is when you high skilled jobs get created, they go to where there’s already existing agglomerations of high scale occupations, because it’s just easier if you’re setting up a business and that business requires a lot of data scientists, you’re going to go to where the data scientists are, you’re not going to go necessarily to wherever you think your customers might be, you’re gonna go to where your workforce is, if you don’t need to serve your customers directly. Like in the bank. Yeah. In the banking industry, right. So that long duration thing is the real reason why it’s happening so strongly in the big cities, the high skill, employment growth, because that’s always where it’s happened. And so it feeds on itself. So it becomes a cumulative process of self reinforcement.
Gene Tunny 17:49
Yeah. Well, one thing I was concerned about, say, eight, maybe seven or eight years ago was that when the interstate migration, the Queensland dropped off, it looked like a lot of professionals, a lot of the professional jobs were going to Sydney and Melbourne. So jobs in finance and, and we weren’t getting as many of them up here. But I think now, things have turned around a little here and within the people moving up here, so Queensland is picked up quite a bit, which is good. So I guess, the major cities you’re talking about where these professional jobs are growing in Australia, Sydney, Melbourne, Brisbane, Perth, Perth, really? Because of mining?
Robert Sobyra 18:33
Yeah, or just Yeah. And it’s just a growing agglomeration in general. You know, Perth, it’s the only obviously the only big city on that side of the continent. Yeah. So yeah, now what’s Melbourne, Melbourne, Sydney, Brisbane, Perth, actually, Sydney, Melbourne, Brisbane, Perth in that order, are the big growth centres.
Gene Tunny 18:51
Right. Yeah. And so in your view with this, this is the major factor. I mean, this explains the bulk of this divergence in outcomes between regions and in cities and regions, why cities are doing so much better because that’s where the, the employers of high skilled labour are, well, we’ve got governments, we’ve got administrations, we’ve got corporate HQ. And so that’s where the jobs growth is occurring.
Robert Sobyra 19:17
Well, that’s where that’s where the existing stores of human capital are. Okay, for that kind of work. So yeah, to take a live example. All the big miners as you’re probably aware of are automating all their fleets of trucks in their mines, right, so those miners historically would operate out of Mackay. You know, a lot of activity out there that truck drivers used to be essentially based in those sort of big regional centres and then they go out and drive the trucks on the mines. Now as they move away from driven trucks to driverless trucks, they set up these remote operation centres. Now those remote operations centres need to be staffed by a completely different category of worker not truck drivers anymore, obviously white collar professionals and where do you find those white collar professionals? In Brisbane? So where are they setting up the remote operation centre? In Brisbane?
Gene Tunny 20:10
Yeah, there’s a similar story in agriculture too, isn’t there? So, built over the years, agriculture has become more mechanised with these John Deere, cotton picking machines and things like that. And that’s reduced the labour requirement on the land. So yes, yep, similar story. And that’s affected the viability of a lot of these, these regional towns, many of which had more people in 1950 than they do today. That’s really extraordinary. Not the sort of major centres but in the regions. But yeah, if you drive through regional Queensland or regional New South Wales, plenty of towns like that, you get the sense that they were thriving much more 50 or 60, 70 years ago than today. Extraordinary.
Robert Sobyra 20:54
Yep. It’s, you know, the jobs numbers are one thing. So I focus on the quantity of the jobs that are being created. But there’s also an income element here, because high skilled jobs are higher income jobs. And so all of these higher income jobs are concentrated in the big cities, rather than the region. So it creates an income divergence, not just an employment growth divergence, which then has, obviously, feedback loops to the local economies. So the region ends up falling behind in income terms, not just in, you know, gross numbers.
Gene Tunny 21:30
Good point, I might just read out some of these stats that I found today when I was looking this up, because I had a sense that this was happening all over the world. Or at least urbanisation, we know that the world’s becoming more urbanised and might have been a few years ago, I remember when it when the stat came out, it was quite striking that for the first time in history, a majority of people live in urban areas, maybe it was 10 years ago, or whenever, whenever it happened, or remember when it was reported. The UN, or sorry, the World Bank, it has a world urbanisation Prospects Report 2018 and in 2018 55% of the world was urban. And that’s projected to get to 68% by 2050. It was 30% in 1950. Yeah. And so I think I mean, one of the big contributors to this growth is obviously China, or the people moving from regional areas to the bigger cities. And this is, this is, this is part of their economic growth story. Because, because people are less productive on the land, and they’re in cities. So to an extent, this is, this is a great thing that, you know, there is this there is this, this movement to the cities, because you can be more productive. But yeah, it’s, it can be hard if you’re in one of these communities and your communities are not not thriving, whereas there could be a lot of good things going for many of these regional communities’ livability, for example, have you thought about what’s happening? I mean, you mentioned in your piece that with COVID, there were some people looking at relocating to the regions, is this happening? Or do we know what’s going on there?
Robert Sobyra 23:13
Yeah, it doesn’t seem to be happening as much as many people think it’s happening. So there was a big uptick in net migration to the region net, an internal migration out of capital cities. But it seems like the main factor behind that lift in net migration is actually fewer people leaving the regions to come to cities rather than more people leaving cities to go to the region’s. I mean, I think that definitely is a bit of a trend in that area. There’s certainly an appetite for it. The regional Australia Institute did a really interesting survey. And they found that 20% of the people they surveyed just normal workers in big cities would be open to moving to a region if you know their work and lifestyle would allow it so I think that clearly is an appetite for it and this idea this sort of Floridian idea this Richard Florida kind of idea that you know, people only want to live in big cities these days, because that’s where all the best bars and museums are. I don’t think that stands up to scrutiny. I think for every person you come across who loves the big city buzz, there’s someone else who’s just aching for the peace and quiet and you know, the chill over regional sort of move and I personally know people have made the move.
Gene Tunny 24:28
Well, if you go if you’re close enough to a regional centre doesn’t have to be a big city. It could be a place like Bundaberg or, or somewhere that size. A city that doesn’t have any more than, what, 60,000 people but it’s got some great bars there. There’s the, yeah, there’s that beautiful beach Bargara and then there’s the Bargara beer company, the craft brewery which has a great place.
Robert Sobyra 24:56
Gene Tunny 24:59
But there’s a lot going on over many of these regions. Yeah. Big shout out to Bundy. Bundy. And one thing I noticed too is that this movement to the regions some of it is to regions that are there close to the capitol or they’re sort of part of the same you could argue part of the same conurbation. Yeah. I’m trying to remember if in some of those states Gold Coast is considered regional
Robert Sobyra 25:28
Yeah, so in my research I absolutely did include Gold Coast Sunshine Coast in this broader metropolitan economy. I operationalize a big city as any region area four regions, sorry, but any any region within 100 kilometres of the inner city GPO. Yeah. So that that takes us to the Sunshine Coast, that takes us to the Gold Coast.
Gene Tunny 25:57
That makes sense, because I know that there have been, you know, if people do move to the regions or outside of Brisbane, the metro area, it’s, it’s often too, and they come from Interstate, it’s often to either Gold Coast or to Sunshine Coast and know Noosa and Peregian, they’ve done really well recently, but that’s sort of part of the whole 200 kilometre city. So I would think that’s really, in that urban area. And it’s those other regions that are further away, that don’t have the big corporate employers, the HQ, they don’t have state government or federal government offices. And one of the points you make is that there’s one strategy that governments could adopt to try to promote the regional moving offices, offices of particular agencies to regional cities.
Robert Sobyra 26:51
Yeah, I played with this idea a little bit. I was really interested to see if you remember, I think it was a year before last, Barnaby Joyce, when he was Minister for Agriculture. Yes. decided to move the Australian pesticides and veterinary medicines association to a regional, can’t remember where
Gene Tunny 27:08
Was it Armadale ?
Robert Sobyra 27:09
I think it was. Yeah. So move it from Canberra to Armidale. And he just did it by fiat. He just said, you know, he was now going to be in Armadale. And goodness, there was an uproar. It was so much pushback. So I think he did it, he still did it, but not without losing a fair bit of skin. So I think forcing it on people is problematic, you know, particularly when, let’s say you’ve worked in Canberra in this agency for 20 years and being told you got to uproot Armidale. It would be pretty confronting, and so they shed a lot of staff in that process. I think it’s, it’s problematic to force people to move, but I think governments can be doing a lot more to just open the option up and allow people to move if they would like to, you know, yeah, you and I, we both worked in government, we know what it’s like, yeah. It’s not many jobs, really in government that has to be done from William Street, you know, from Brisbane. Yeah. Lots and lots of those jobs could, could be done quite comfortably remotely from any part of Queensland.
Gene Tunny 28:10
Yeah, and I mean, what we’ve learned during this COVID period, is that there’s a lot more work that can be done remotely where you don’t, you don’t see each other personally in person for weeks or months. You just interact over zoom, if you’re in the same city, so it can work.
Robert Sobyra 28:27
It turns out the world still goes round. Yeah, I think that was another key lesson that, you know, the culture of presenteeism was really challenged during the pandemic, and actually people are productive when, when left to work on their own from home.
Gene Tunny 28:43
Yeah. So there could be some scope for governance to relocate or have some of their offices, satellite offices or, or even move the head office of an agency to a regional centre. That’s a possibility. I remember I once floated the idea that you could move Work Cover to Townsville. That’s, you know, that’s one thing I’d, I’d propose that that’s a possibility. And when you think, think about what you could move in, as I think in New South Wales, they moved the Word Cover head office, their Word Cover to Gosford or something like that North of Sydney, if I remember correctly. If not, I’ll correct that in the shownotes. What else can be done? Rob? If this is a problem? Well, one, do you think it’s a problem? And if it’s a problem, a policy problem, what should be done about it? What are the levers? What could governments do?
Robert Sobyra 29:37
Yeah, well, the The challenge, of course, is you know, we’re a free market dominated by private businesses. Yeah. We’re not, We’re not Russia or China. We’re not going to tell them where to go.
Gene Tunny 29:47
To Siberia. Yeah. Economic development of Siberia. So they go.
Robert Sobyra 29:53
Exactly. So it’s all about nudging and incentives which is always a little unsatisfactory. But certainly I think the framework or the mental model needs to change here, when it comes to state government and local governments in particular, when they’re thinking about what they need to do to generate jobs growth. So often I hear when I go to a region that, you know, the mantra is, well, we need to keep our kids here, we need to keep them here, stop them going to Brisbane to study and find work and stuff. And I feel like that’s a bit the wrong way around the mental model should be we need to get the jobs here. And then the kids will stay, if the jobs are here, you know, if the opportunities to, to forge a career in a professional sort of career path, or local, I think you’ll find people stay local. So for mining, the policy focus, and I don’t know what the right solutions are, but the policy focus, the principle needs to be on attracting high skilled jobs to regions. And I think the government can play a role in, in showing the way there by, as you say, setting up jobs or making regional jobs more available to public servants. I think that’s a real option available to governments that would be very low cost and very feasible, and would send a strong signal to the private sector that this can be done, and it can be done productively.
Gene Tunny 31:26
Okay, we’ll take a short break here for a word from our sponsor.
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Gene Tunny 32:00
Now back to the show. Is there scope for measures or support for regions to, to boost the amenity to boost the livability of the regions? I mean, one thing you’d want is good broadband, you want to make sure that your broadband is okay, so remote workers can locate there. I think in Australia, I don’t know. I mean, I think I know there are some black spots with all of these things. But I think generally, internet, I think it’s pretty good in most parts of Australia, because we’ve had we’ve got this National Broadband Network and they tried to roll it out as far as possible across Australia, so but I’m just wondering what if that’s an area that should be looked at the livability making it attractive investing and beautifying the streets? Yeah, I don’t know. I mean, there’s the investment climate too. You want to make sure you got low, low rates, you want to be as friendly to business as possible to make it easy to get development approvals. Yeah. Do you know?
Robert Sobyra 33:02
Yeah, I think all that is really important. I mean, the amenity side of things. I feel like local councils actually do quite well, throughout Queensland. Most of the places I go to in Queensland, there’s a huge focus on beautifying places, public realm, that sort of thing. I feel like that’s kind of in hand. I think the risk is that we kind of become that one trick pony. And we think that that will solve all our problems. But the more important things are those latter things you just mentioned, how do you attract investment to your region, and not just the investment, but the high quality jobs that come with that investment. So whatever settings, governments can put in place, local government can put in place to, you know, expedite building approvals and other you know, the state government, payroll tax, etc, things like that. Yeah, yeah.
Gene Tunny 33:52
Do we know anything about educational levels in regions? I remember when I looked at it last and I looked at this idea of a University High School in Townsville, there was one idea is that there would be a James Cook University High School, which would feed into JCU. One of the issues they had at the time, when we looked at it, was that there was already some under utilisation of existing high schools in Townsville. So there wasn’t at that stage at that point in time, there wasn’t the demand for it unnecessarily, but it’s a sort of that sort of thing might be useful in some regional centres because we know that there is a they do seem to have lower rates of retention to year 12. And then and then lower transition rates from high school into university. So if you can really invest in the schooling system, get high quality high schools, University High School where there’s a connection between the high school and the university. So students at the high school could do uni courses. They can interact with lectures, I guess, trade with high schools, too. I know in Townsville that there’s a trade school Tech-NQ ? I think it is. So there’s something like that. That is education, part of the story, improving education so that you’ve got this skilled, highly skilled workforce in the regions that could be attractive to employers to then set up and relocate.
Robert Sobyra 35:33
Yeah, no, I think you’re right. And it’s a bit of a chicken and egg thing here, isn’t that, you know, because the employer is really, really interested in coming to where the workers already exist. They don’t want to have to create a workforce they’re going to find existing labour pools they can tap into Yeah. So in one sense, yeah, we need to have the human capital creation happening before you can attract the industry. But at the same time, why would a university or an educational institution offer a degree in x, y, z, if there’s zero sort of career pathways?
Gene Tunny 36:11
Well, what I’m interested in is this new, this push for hydrogen and then renewables. And the state government here has this new energy plan, and it’s pumped hydro, and then we have to wait and see whether they can actually get these dams built. But, but yeah, there’s a lot of interest in, in energy and a lot of that, in new ways of generating energy. And a lot of that is going to happen in the regions, isn’t it? So is this on CSQ’s radar? Because construction is obviously involved in constructing a lot of this new infrastructure, isn’t it?
Robert Sobyra 36:46
Absolutely and the timing is impeccable, because just a month ago, we released a report examining this exact question, a piece of research, we asked one very simple question. If we want to get to net zero by 2050. If we want a hydrogen industry, how much stuff are we going to have to build? And where will we have to build it? How many solar farms? How many wind farms, and the short answer is a lot. Yeah, just staggering. And for me, as a regional economics sort of scholar, the most interesting finding is that virtually all of this investment lands in regional Queensland, yeah, central Northern Queensland. And, and so there’s a huge amount of demand coming for construction workers to build the renewable transition. You know, I feel like the last decade we’ve spent our whole time thinking about what our targets should be. And now this decade, we’re really going to be focused on how we’re going to deliver all this stuff. Because we’ve got to, we’ve got to build an Olympics, we’ve got to finish this housing boom. And then we’ve got to tackle this, this renewables transition, which will I think, make the mining boom look like a bit of a footnote in the history of this state. That’s the sort of scale of investment that we’re looking at, for renewables in Queensland. And for the region’s, it’s a great opportunity, because our modelling shows that the vast majority of the labour that will be needed to build these renewable projects, low to middle skilled labour. So we’re talking tradespeople and we’re talking sort of unskilled labour, semi skilled labour. So it’s well within the reach of the workforce already in , n the region. So as a structural adjustment sort of story.
Gene Tunny 38:29
This is really, really positive. Yeah, I have to have a look at your report rather than that’s a, that’s an extraordinary claim. I’m not denying it at all and not being negative about it. I just want to look at it. Because to think that it could be larger than mining when we had $70 billion over a few years invested in Gladstone. I mean, are. You remember that? Yeah, that boom, we had a construction boom, nearly 10 years ago now. It’s just incredible. But yeah, if renewables, I guess they want to get to what they, their aspiration is, then yeah, perhaps you do need to build that much. And then you have to ask, Well, okay. Will this actually happen? I know. I’m sceptical but yeah, let me read your report. I haven’t looked at it yet. So I can’t really ask any informed questions on that. Right. Okay. So just to try and wrap this up. So you’ve talked about the last 20 years. And we had COVID, we had the pandemic and we’ve got more people working from home, and potentially who could work remotely? Okay, we haven’t seen as much. We haven’t really seen a lot of huge numbers of people moving to the regions. Is that Is, that what is that? What is happening, that the cities are continuing to grow? That’s where the growth is. You expect this to continue over the next decade or so you don’t know. It’s too hard to say.
Robert Sobyra 39:56
No, I think that’s exactly what’s going to happen. I think let Left unchecked, these forces just accumulate over time. So the skilled cities just get more skilled over time, and the region’s will continue to fall away in terms of employment growth, you know, left unchecked, it’ll, it’ll probably reach some sort of, you know, happy level. But there will be this ongoing gap between the regions and the big cities. I mean, there’s no doubt that the fundamentals of Queensland as an economy is very, very strong, so we’ll continue to attract more employment growth, more population growth, and probably anywhere else in the country. But how that’s distributed across the landscape in Queensland will be very, very uneven. And if all we do is look at those aggregate outcomes, we’re going to miss some pretty important variations across space.
Gene Tunny 40:51
Yeah, exactly. And probably want to wrap up on these points, I may have signaled wanting to wrap up before but there’s some more stuff I want to talk about what’s been happening in the States and, and in the UK. So I had a look at the data for the US. So the World Bank data on the urban population in the US, it’s gone from 70% in 1960. And it’s now up at 83%, in 2021. Okay, so that it’s occurring there. So it does looks like maybe that’s, that’s not as extraordinary as what’s happened worldwide. But worldwide, you had people moving out a lot of people on the land in China or in India, or wherever that’s, but it’s still an upward trend. And I found some data from the office for science, the UK Government Office for science, that trend Dec 2021 urbanisation. And so that’s showing that England’s urban population is growing faster than its rural population. Urban has been growing 6.2% over 2011 to 2019, rural 5.2%. But what you see is, it’s all sort of going to London are a lot of it is in London, 27% out of London 19% growth rate that’s over 2001 to 2019. Cities overall. So cities overal, such as well, other cities other than London cities such as Liverpool, Manchester, Birmingham, that 16%, the town’s 11%. So you’ve got that divergence there in the UK? Is this something you? You’re looking at it as well? I mean, are you, your research? You’ve done this for Australia? But are you? Do you think your findings are relevant to these other countries? Are you thinking of extending your research to these other countries?
Robert Sobyra 42:44
Yeah, it’s a good question. There’s no doubt that divergence is a really common feature of advanced economies everywhere you look. Yeah, we observe it, whether or not my particular explanation of the sort of the job polarising logic of our economy at the moment and how we’re stripping out all those middle skill jobs. And that’s starving, the region’s of employment growth, whether that’s a key driver or a key mechanism in other contexts, remains to be seen. Definitely something I want to look at. But yeah, as far as I can tell, if the economic structures are similar, you should expect similar outcomes. And in this respect, they’re very similar across all advanced economies.
Gene Tunny 43:22
Yeah well, I was thinking about what’s happened in the US. There’s the NAFTA shock, and then there was China joining the WTO shock. And what that meant was it it meant that the US lost a lot of manufacturing jobs and maybe their middle skilled jobs in the heartland in, in the Midwest or in Ohio, and places like that. And that’s had an impact on Well, that’s, you know, had a huge, very negative impact on some of those regions, particularly since they don’t have as good of social security or public health system as we do in Australia or in the UK. And then you’ve got opioid addiction, and yeah, all sorts of problems. And this is possibly fueling the political trouble that you’ve got in the States. And, yeah, all sorts of bad results there. And I know that there was research by David Autor from MIT, he looked at this, I think, did.
Robert Sobyra 44:25
Yeah, he’s one of the first people to observe this, this polarising tendency. And yeah, one factor is the offshoring movement. Yeah, that you mentioned. Another one is just technological automation. So that sort of banking story, you know, the middle skilled clerks have been pushed out by the machines, and now the highest skill, you know, data scientists and whatever, sort of the key workforce for the banking sector. So there are two factors at play that are driving that underlying process. And yeah, in America, it’s very, very acute as you say that so infrastructures are very different in terms of the welfare net, and that sort of thing over there. So it’s a very bad outcome.
Gene Tunny 45:07
Yeah. And so part of this, we’ve talked about job polarisation and talked about divergence between cities and regions. And then in an implication of all of this is this, this must be part of the inequality story or inequality in income and wealth. Now, again, Australia, we’ve had, well, there’s a big argument about whether income inequality is increasing wealth inequality certainly is income inequality, less, less clear. But in the States, certainly that inequality is increased and possibly that is, due this divergence story is part of that. So yeah. Okay. Rob, any final thoughts before we wrap up? This has been great. I’ve really enjoyed the conversation. But any final thoughts?
Robert Sobyra 45:56
No, nothing from me. Appreciate the invitation. It’s been a great chat.
Gene Tunny 46:01
I’ve appreciated it, Rob. Yeah, it’s terrific. And yeah, just hope you can keep up the great research and yeah, hope to chat with you again soon.
Robert Sobyra 46:10
Let’s loop back and talk about renewable sometime. Absolutely. Okay. Thanks, Rob. Thanks, mate.
Gene Tunny 46:17
Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to firstname.lastname@example.org And we’ll aim to address them in a future episode. Thanks for listening. Till next week, goodbye.
Thanks to Josh Crotts for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.
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