What’s happening with suburban jobs in Melbourne?

Density of employment in Melbourne, 2006, in one km wide circular bands by distance from CBD (jobs/km2)

The first exhibit shows the popular view of the geography of urban employment in Australia’s largest cities. It is commonly assumed the great bulk of jobs – and certainly virtually all “good” jobs – is located in the CBD.

This is an understandable view given the first exhibit shows the spatial distribution of employment density in Melbourne in 2006. It indicates the density of jobs in the Central Business District (CBD) – the first one km radius ring around the town hall – is an order of magnitude higher than anywhere else in the metropolitan area. It closely aligns with the cluster of high rise office buildings that define the CBD in the popular imagination.

Share of metropolitan employment in Melbourne in one km wide circular bands by distance from CBD, 2006 (%)

But is this is an adequate representation of the geography of employment in Australia’s second largest city? The second exhibit highlights that density is not the same as the number of jobs. It shows how employment is really distributed within Melbourne – the CBD is easily the largest single concentration of employment, but it nevertheless has only 15% of all metropolitan jobs. In fact only 28% of metropolitan jobs are located in the inner city – i.e. lie within a 5 km radius of the town hall – and 50% are located within 13 km radius.

This dispersed pattern is not recent. Melbourne was compact and dense up until the end of the nineteenth century when the appearance of mechanised transport – primarily trams and trains – enabled middle class residents to escape the crowding and congestion of the centre for the space and amenity of the suburbs. This trend was boosted dramatically after WW2 when increasingly widespread car ownership democratised access to affordable land on the urban fringe.

Firms followed a similar pattern. Initially, manufacturing and distribution firms moved to the outer suburbs so they could escape congestion in the inner city, exploit new space-intensive horizontal production methods, and be closer to the suburbanising workforce. The suburban population generated increasing numbers of jobs to service its consumption needs, amplified by the increasing level of outsourcing from the home. More recently, some higher order activities have moved from the CBD to near-CBD and inner city locations and some back office functions have moved to the suburbs.

By 1981, only 35% of Melbourne’s jobs were located within 5 km of the centre. The “average job” was 12.4 km from the centre and the “centre of mass” of employment was 5.9 km away. The trend to the suburbs was very strong over the succeeding 25 years. By 2006 just 28% of jobs were within 5 km radius and the ‘average job’ was now 15.6 km from the centre. The centre of mass had moved 2 km further outwards to the vicinity of Tooronga, 7.9 km from the CBD.

Proportion of jobs in each industry sector located in suburbs vs inner city, 2006 (%)

This pattern of dispersal held for all industry sectors with one significant exception. While over 80% of Retail and Manufacturing jobs were located more than 5 km from the centre, Commercial Services jobs were split roughly 50/50 between the inner city and the suburbs. This sector consists mainly of finance, insurance, business services and property services jobs. Those located in the CBD and inner city include major financial institutions and-high level producer services jobs servicing corporate clients.

Those in the suburbs however tend to service the resident population – they are firms like real estate agents and personal financial advisers. The net result is the industry composition of the suburbs and the inner city are quite different. While they have much the same proportions of Community Services jobs, the suburbs have a significantly higher proportion of Manufacturing & Transport and Retail jobs. The inner city, on the other hand, is dominated by the Commercial Services sector – it accounts for nearly half of all jobs.

Proportion of jobs in inner city vs suburbs occupied by a graduate or higher, 2006 (%)

It may surprise, but most high human capital jobs – that is jobs filled by a worker with a Bachelor’s Degree or higher – are located in the suburbs. The inner city has a higher density of graduate jobs, but the sheer size of the suburban job market means that in absolute terms it has more jobs filled by graduates. These high human capital jobs are located in suburban hospitals, universities, schools, local government administration and increasingly in manufacturing and warehousing.

Commercial Services is the exception – two thirds of the high skilled workers in this sector work in the inner city.

With 28% of all metropolitan employment in 2006, the inner city was an important job market for residents living in the central municipalities of Melbourne, Yarra and Port Phillip. However the inner city accounted for less than 10% of the metropolitan population, with the other 90% living in the suburbs. Around a quarter of workers who lived in the middle suburbs but less than 10% of outer suburban workers commuted to the inner city. Clearly, the great bulk of workers in Melbourne work in the suburbs.

After a period of long decline, job numbers started to grow vigorously in absolute terms in the CBD and inner city from around the middle of the 1990s. Averaged over the period 1996 to 2006, inner city jobs grew at much the same pace as suburban jobs, meaning that the relative share of metropolitan jobs claimed by the inner city and suburbs did not change. It seems likely however that the share of jobs in the CBD and surrounds has increased since 2006.

Major suburban centres (defined by density and number of jobs), 2006

While the great bulk of Melbourne’s jobs are in the suburbs, most of them are dispersed rather than located within major centres. There were 31 major activity centres in Melbourne’s suburbs in 2006, which collectively accounted for 20% of all suburban jobs. Some of these centres cover a substantial geographical area. None of the centres approach the CBD in either size or density. Apart from the top four – which together account for more than half of all jobs in suburban centres – most are in fact relatively small.

Of the 31 major activity centres, 30 are specialised in at least one industry sector and many have multiple specialisations. Commercial Services is the only sector in which no suburban centre specialises – that is the domain of the inner city and especially the CBD. Specialisation suggests that firms seek to avoid the burden of size and/or density associated with diverse centres, instead preferring lower cost centres with the sorts of firms with which they do business.

This brief review of the geography of employment in Melbourne provides insights that are relevant to policy. It is clear that most jobs are in the suburbs and so are most industry sectors. Moreover most of Melbourne’s high human capital jobs are also now located in the suburbs. Most suburban jobs aren’t located in major activity centres, rather they’re at low densities in smaller centres or in stand-alone developments. Suburban centres are themselves relatively low density areas when compared to the CBD. Finally, centres tend to specialise in a limited number of industries because most suburban firms incur higher costs but few benefits from locating with unrelated firms.

Thus the suburbs are the major job arena in Melbourne. This is also true of other Australian cities like Sydney although there are local variations between cities. Density is not a strong locational driver of most suburban firms. This is partly because cars enable firms in a suburban setting to enjoy the benefits of agglomeration without high density. It is also partly because many suburban firms serve consumers directly (rather than other firms as is more likely the case in the CBD) and thus prefer relatively small centres which are easily accessible to their customers.

The key challenge for policy suggested by this analysis is how to provide efficient and sustainable mobility for workers and businesses in a low density environment. The suburban geography favours private transport over public transport. Policy-makers ought to give attention to making private vehicles more efficient and sustainable. This suggests policies like pricing road space and pricing carbon.

This is an edited version of an article, Suburban employment trends: a Melbourne case study, I wrote for the August issue of M/C Journal. The main difference is the journal version has more exhibits.

8 Comments on “What’s happening with suburban jobs in Melbourne?”

  1. Oz says:

    As always, a great thought provoking article. However, we should remember that the vast majority of our urban population is not in the workforce. For our cities to remain stimulating they need to be “commercially” sustainable and therefore freight movements need to be built into any discussion on urban activity location including employment model patterning and forecasting.

  2. The key challenge for policy suggested by this analysis is how to provide efficient and sustainable mobility for workers and businesses in a low density environment. The suburban geography favours private transport over public transport. Policy-makers ought to give attention to making private vehicles more efficient and sustainable. This suggests policies like pricing road space and pricing carbon.

    Whilst I certainly agree that “policy-makers ought to give attention to making private vehicles more efficient and sustainable”, this is only a small piece of the pie. If the goal is to produce best outcome, reducing automobile dependency is a bigger piece of the same pie.

    The current suburban job distribution is a result of planning, or more precisely a lack of planning controls. The same can be said of the low density housing that characterises most of Melbourne. There are plenty of planning frameworks that have stricter controls over where jobs are located, and thus jobs are concentrated more closely, which in turn makes planning public transport that is efficient (i.e. carries more passengers per vehicle, at lower costs) easier.

    The UK provides an interesting case study of these sorts of controls. The UK had many strict planning controls in for a long time, then Thatcher appeared on the scene, with her neoliberal ideologies, loosened some controls and finally jobs started spreading throughout the region away from denser cores. Part of the result were many “main streets” dying out, industries suffering and an increase in automobile dependency. Even Thatcher realised the problem, and towards the end of her time in power new controls were brought in. Councils were to designate areas that they wanted jobs concentrated in, and new businesses were essentially told they had to move into these areas, unless they had a very good reason to go elsewhere or they couldn’t get planning permits (this is different to “being encouraged” as is the approach in Victoria). A few decades later (and these sorts of controls always take decades to be realised) and once again job concentrations are starting to increase, which in turn has helped reduce automobile dependency.

    Whilst alternative fuel vehicles may help alleviate issues of petroleum dependency and rising carbon emissions from transport, there are many other problems with automobile dependency that won’t be solved by technical innovations surrounding the car. Automobile dependency is inequitable, plenty of people can’t drive and never will be able to short of self driving cars. Additionally road congestion absolutely always will be a problem in cities, there isn’t a city in the world that has managed to build enough roads to solve congestion, but there are plenty that have “allowed people to travel despite congestion” (to paraphrase you Allen) by creating environments that are more harmonious to other transport options. Both approaches need to be taken simultaneously.

    Finally, whilst it is true that private vehicles are a more attractive transport option for large portions of the city, this too can be changed in many cases by simply fixing our absurdly unplanned bus network.

    • Alan Davies says:

      While of course some are in “stand-alone” buildings, jobs that aren’t in the 31 major activity centres I’ve identified tend by and large to be in smaller centres and smaller industrial estates. Melbourne has a plethora of such smaller centres, some consisting of only a handfull of businesses.

      • I’m not quite sure your point here. I didn’t suggest jobs are spread in stand-alone centres, simply that they are more dispersed then is sensible. A smaller number of stronger cores would be a better approach than many smaller centres. Planning controls would help facilitate this.

        • Alan Davies says:

          As pointed out in the article, a key reason in Melbourne that suburban firms eschew larger centres (and actually they’re not that large anyway, apart from the top seven) is because most of these firms provide consumption services to the suburban population. They want to be near their customers and they don’t want the unnecessary overhead (e.g. high rents, congestion) of a large centre. In Melbourne’s case, the sorts of firms that benefit from density and scale tend to stay close to the centre.

          • Again I didn’t suggest that cores cant be located in suburban areas. But lowering overheads of businesses by allowing them to locate away from stronger cores that allow for better infrastructure provision is poor policy. It may benefit individual businesses to a certain degree, but only by creating external costs on employees and the community at large. If lowering rental overheads is such a problem, it would be better to tackle that issue directly.

            Not all businesses should be located in these cores of course, certain businesses are more suited to be scattered throughout the population more evenly, but a large portion of businesses and jobs could and should be located in activity districts (and I’m using a definition more closely aligned with Melbourne @Million rather than Melbourne 2030, which seems to indicate a milk bar, fish and chip shop and cafe counts as an Activity Centre).

  3. Alan Davies says:

    Clarification: when I say the CBD has only 15% of metro jobs, I’m talking about the “extended CBD”, that includes Southbank, Docklands, inner part of Fitzroy, etc. The traditional CBD – the Golden Mile bounded by Spring, Flinders, Spencer and La Trobe streets – only has 10% of metro jobs.

  4. TomD says:

    Your oft stated data on suburban employment realities should always be noted by planners for its important planning implications.

    As a general side comment to another issue you raise – of resident opposition to higher density development and more intense commercial development – I think there is an additional unmentioned issue of significance at work here, in both the local and wider Australian context.

    And that is the issue of poor design and seeking higher standards in this regard.

    There must be many ways to use true excellence in design (and the related excellence in planning that should accompany this) to alleviate a lot of fears over development.

    Truly good design and good planning should actually offer local people potential benefits in terms of their quality of life if approached far more imaginatively and sensitively than it normally is in Australia. (This is not to say that higher traffic densities, etc are still not one of the potential downsides that locals might still wish to avoid as possible by-products.)

    Would be very interested to see you examine the role of higher standards of design (and related planning) in such contexts of development approaches and options. Particularly where higher density is being advocated for potentially sensible reasons.

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