The emergence in London’s Labour market of occupational as well as income polarisation

The term “global City’, which is first thought to have been coined by Saskia Sassen in her book ” The Global City” in reference in New York, Tokyo and London stands for countries which have a disproportionate amount of control of Global business. Most major cities are known to be command centers for any international trading, banking and services the country need. However, in relation to globalization, these cities have a change of functioning, which can be broken down into the processes taken from Sassen (1991):

1. Extremely concentrated points of command in the functioning of the world economy.

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2. Having had manufacturing replaced by specialized services they now serve as main locations for banking and finance

3. Renowned sites for the production of innovations, in these leading industries they serve as sites of production.

The aspiration of most developed countries in this age is to reach the status of a “Global-city” however, only a limited number of these cities manage to develop into internationally recognized transnational locations and as stated by Susan. S Fainstein there is no convincing evidence that “shows that the inhabitants of global cities and their surrounding regions fare better than the residents of lesser places.” (Susan. Fainstein, pg 112). If anything evidence provided implies that such cities are prone to extremes in inequality (Friedmann 1986) with the argument that cities of Global-City status tend to have huge levels of polarization.

As stated by Friedmann, “class polarization has three principal facets: huge income gaps between transnational elites and low-skilled workers, large-scale immigration from rural areas or from abroad and structural trends in evolution of jobs” . Sassen (2001) also defines occupational polarization as the increase in the number of highly paid and low-paid workers and to the decline in the number of middle-income workers, both of which result from the shift from manufacturing to financial and business services which is seen as particularly marked in Global cities.

Sassen brings forward the argument that ” two other developments in global cities have also contributed to economic polarization. One is the vast supply of low-wage jobs required by high-income gentrification in both its residential and commercial settings.” (Sassen 1991, pg9 ). This referring to the fact that for example as more bankers are produced; the increase in income means an increase in the spending of luxury goods, services and expenditure in general. Therefore more workers are needed in the “expensive restaurants, luxury housing, luxury hotels…boutiques” (Sassen 1991, pg9 ) all of which are low-wage service jobs. Sassen goes on to explain, ” A second development that has reached significant proportions is what I call the downgrading of the manufacturing sector, a process in which the share of unionized shapes declines and wages deteriorate while sweatshops and industrial homework proliferate.” In this she is describing the process of which what ones was a middle-wage earning role is now downgraded to a lower-age earning occupation.

An important point which I strongly agree with in Sassen’s work is the argument she made of how modern technology has affected the occupations. Sassen states “technology has shifted a number of activities that were once part of manufacturing into the domain of services. The transfer of skills from workers to machines once epitomized by the assembly line has a present-day version in the transfer of a variety of activities from the shop floor into computers” (2001, pg 10). Sassen goes on refer to the “locational concentration” of most specialised services, with the growth for the need of advanced services for firms, where “…specialized firms benefit from and need to locate close to other firms who produce key inputs or whose proximity makes possible joint production of certain service offerings.” (Sassen, 2001, pg 11)

The high concentration also arises out the want of the high-income workers who are attracted to the amenities and lifestyles that larger urban centres offer and are therefore more likely to reside in such central areas rather then in rural locations. Sassen concludes that “the occupational structure of major growth industries characterized by the locational concentration of major growth sectors in global cities in combination with the polarized occupational structure of these sectors has created and contributed to growth of a high-income stratum and a low-income stratum of workers” (Sassen,2001, pg 13). She believes this is done in two ways, one direct way which is due to the structure of “major growth sectors” and indirectly through the jobs that are created in need of the servicing of the “new high-income workers” .

Another role global cities perform is social polarization in the occupational and income structure, As a majority of the jobs in the service sector are lower-income jobs or in the two highest earnings classes and “a large share of manufacturing workers were in the middle-earnings jobs during the postwar period of high growth in these industries in the united states and the united kingdom” (Sassen, 2001 pg9) as the manufacturing industry declined so did the number of middle-class earners and overall creating the shift towards a “two tiered society”. Manuel Castells (1989) refers to these global cities of social polarization as ‘dual cities’. Those who work in the organizations and institutions that sustain global city status constitute a well educated, socially mobile, and earn high incomes. Global cities tend to have “large, dense groups of very poor people…” and in accordance with Sassen, “the particular industrial and occupational structure of global cities produces a bifurcated earnings structure that in turn creates the outcome of the ‘disappearing middle'” (sited in Benner and Keil, 2006, pg112).

Therefore, the debating question to ask is, is the middle class really shrinking in London? Various researchers and recently produced reports have predicted a decline of middle-income earners, which has caused public concern. The difficulty of polarization is it could lead to problems such as political and social conflict stemming from a ‘two-tiered society’. In addition, it could reduce the possibilities of advancement and career progression opportunities for those on the lower ranges of the earnings ladder. In the long run there would be an economic disaster as the great purchasing power of the middle class declines. In this essay I will be exploring the theories of occupation and income polarization that is alleged to now be apart of London’s new labour market.

The history of London’s Economic labour market began around the 1960’s when London’s economy underwent major structural change. Having a severe decline in its manufacturing industry, it experienced the effects of deindustrialization. All its manufacturing firms were affected: many closed, many shedding jobs, and London’s industrial base shrunk dramatically concluding in a “loss of 800,000 manufacturing jobs by 1985″(Sassen,1981, pg 210). By 1990, 30% of London wealth, which was made up by manufacturing shrunk dramatically to under 11% and particularly two thirds of the capital’s manufacturing jobs disappeared within 20 years, leaving only 500,000 Londoners working in the industry. From this in 1984 arose “a new phase of rapid growth based on finance and producer services” “(Sassen,1981, pg 210) with a majority of employment in these services overtaking that of manufacturing by the mid 80’s.

As London became more “highly specialized in services and financial goods” “(Sassen,1981, pg 4) along with the ‘the emergence’ of its ‘Labour market’ it expanded into the “global city” that it is now known as today. It is now very cosmopolitan city and globally recognized with a high rate of well-developed professional and diplomatic workforce. It is now a location full of exceptional wealth and affluence, but it can also be argued that it is also a place full of major disadvantage and deprivation. The pattern emerges that workers who have obtained higher education and enter into the financial world, continue to climb the financial ladder. However, those with low educational attainment or with low skills are either stagnant or progress downwards causing the inequalities to increase.

There is no doubt that London, similar to other Global cities such as Paris and New york, London is a very unequal city, having a large bulk of high income earners and households that command a very disproportionate share of their cities wealth, however it is important to note that this Is not a new phenomenon. For many years, London has possessed the greatest concentration of high incomes in Britain. Hamnett argues, “While these was a sharp increase in inequality in Britain as a whole the earnings of the bottom decile still rose in real terms.” (Hamnett, 2003, pg 80) Which is a very different situation to that of the United States where the real earnings of the lower groups has actually decreased. This “reflects that fact that the labour market in Britain is less flexi bale” (Hamnett 2003). In Hamnett’s analysis of the GHS data for London he reveled that ” there was a massive upwards shift in real earnings, particularly in London, away from all deciles except the bottom one, to the highest decile band.”(Hamnett, 2003,pg 85). This illustrates limited polarization, however as there are more rich and more poor is shows what is referred to as a very “asymmetric form of polarization” .

The data showed there had been an increase in the degree of earnings inequality but very limited earnings polarization in London. Hamnett argues that even while the top income decile increase their share, those of managerial and other professional backgrounds have their proportion of employment numbers increased, whilst those of the lower income earnings (such as manual workers) have a disproportionate decrease in the number of employment numbers, having decreases even within the service sector. It was found by Hamnett that between the year 1979 and 1994 the number of people who could be stated as having a high standard of living had increased by at least 15 times.

Hamnett greatly criticises Sassen’s work in his book “the Unequal city” and refers to some very important weaknesses in sassens polarization thesis. The first main point being the fact that the notion of polarization deployed by Sassen is loaded with ambiguity. This is due to the fact that it is used to refer to both occupational and income polarization and fails to distinguish between the differences of absolute and relative polarization. Sassen focuses predominantly on absolute polarization in relation to the growth in the number of jobs at the high and low income extremes of the labour market. She fails to recognise that polarization may also occur from relative or differential shrinkage, For example, due to the decline in the number of people who are low-paid and unskilled jobs whilst there is an increase in the level of professionalization.

Hamnett argues against the notion that London has become more polarized over the years but rather more professionalized. This he argues is due to the result of “a shrinking manual workforce and a growing new middle-class population associated with the rise of London’s post-industrial economy.” It is important to note that whilst Friedmann and Sassen are “clearly correct regarding the declining importance of manufacturing industry and employment in global cities and the growth of financial and business services and employment…” there are many problems with social polarization thesis. The main point that I believe is the strongest argument is the fact that the thesis is heavily based on “high immigration cities such as Los Angeles and New York” (Hamnett, 2003, pg 60) which have a large pool of low-skilled migrant workers who are ready to be recruited into low-paid service jobs. This is less evident in European cities and it is important to note that Europe has not seen the growth of low-skilled service-sector jobs on the same-scale as America.

To conclude, from my reading of various literature on global cities, I found that they have experienced an increase in earnings and income polarisation as a result of the changes which have taken place in industrial and occupational structure. The growth in highly skilled and highly paid financial and business service occupations has been matched by an increase in lower-skilled and low-paid personal service sector jobs, combined with work in manufacturing and sweatshops. The occupational, earnings and income data for London do not support this thesis. Rather, London has been characterised by an increase in the number and proportion of highly skilled and highly paid professional, managerial and technical workers in the service sector but by a decline in the number of less-skilled workers. The growth of the professional and managerial group has been linked to a marked increase in earnings of this group, particularly those working in the city of London. London has seen a major shift upwards in earning which has dramatically increased the number of high earned and the level of their earnings.

As a consequence, London has been characterised by a sharp increase in inequality between rich and poor. But and this is crucial, it does not appear to have seen a marked increase in the relative size of the poor group which the polarisation thesis predicts. Any increase in polarisation has been asymmetric with a far bigger increase of the top end of the distribution than the bottom. London has become a far more unequal city, and at the top end the double earner professional and managerial house holds form a core group of pose contract to bottom group. To summarise, the direct consequence of the massive inequalities seen in London are due to the leading global role in financial, business and creative services which pay massive salaries generating the massive inequality London experiences.