Impact Of Housing On Urban Development: An Economic Perspective

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Harris-Todaro Model of Rural-Urban Migration: An Economic Perspective

The global economic scenario has experienced considerable changes and modifications over the years, owing to the domestic as well as international dynamics in the social, political, demographical as well as economic aspects. Due to these multi-dimensional dynamics of different aspects of the countries as well as of the world itself, various issues have cropped up in the global economy. One of the considerably significant issues of concern in the global economic framework in the contemporary periods has been the issue of migration of people to and from all parts of the world.

The concept of migration from one country to another has been existent for centuries but the same has aggravated to enormous extent in the last few decades, much of which can be attributed to the international economic phenomena like Globalization and liberalizations of the industrial sectors of the different countries across the world. The same has also been facilitated by the technological and infrastructural development across the world, which has made travelling from one country to another easier and more convenient with time. Although the traits of migration are multilateral and variant with time, yet one common trend has been observed in this aspect. The migration mainly takes place from the resource constrained poor less developed or developing countries to the developed ones. This trend is observed mainly due to the fact the most of these migrations, especially the permanent or long-term ones take place in search of jobs, higher education, higher career scopes and an overall better standard of living.

The increasing burden of migration has however led to several crucial economic problems affecting the economic conditions and the populations countries where most of these traffic is channelized as well as the migrant population. Keeping this into consideration the concerned essay tries to assess the popular and widely used economic model of migration, known as the Harris-Todaro Model of Rural-Urban Migration, in the light of the ongoing international migration crisis, emphasizing particularly on the metropolitan cities of the developed Australian economy, especially Sydney and Melbourne, where the considerable amount of migration has led to the creation of several issues of concern, thereby hampering the lives of both the residents as well as the migrant population.

The word migration, in sense of the term itself refers to the movement of people in general from one place to another (which can be over long distances from one country to another as well as from one part of the same country to its another part) with the intention of settling in the new location, temporarily or permanently. Although there remain various reasons for migration of people, in the recent times the migration, especially the inter-country migrations usually take place primarily due to economic, social and political issues, with more and more people shifting from politically instable and economically lacking countries to economically, politically and socially prospering ones, in search of a better living.

Todaro Paradox

There have been various models and theories in the economic conceptual framework, which try to explain and interpret these trends in the global migration from an economic perspective. The most popular and widely used model in this aspect is the Harris-Todaro Model, which tries to interpret migration of people in the rural-urban perspective.

The primary assumption of this model is that there are two regions in an economy, the rural and the urban region, each of which has their special attributes. The model assumes that the primary factor contributing to the decision making of the labours in the economy in the aspects of migration is their expected income from different places. The rural sector is assumed to be the subsistence sector with the wages (Wr) being low but flexible such that there is no unemployment in this sector. On the other hand, the urban sector is assumed to have an exogenously set higher level of wage (Wu). This wage is set in such a way that the unemployment in the urban sector prevails at the equilibrium.

The model also assumes that there is a continuous presence of a particular number of people in the work force (N), of which Nr live in the rural areas and Nu live in the urban areas. As there is no unemployment in the subsistent wage in the rural areas, therefore, the total number of people in the workforce is equal to the total number of people who are employed in the rural area: Nr = Lr (Lr showing the number of people employed in the rural areas).

On the other hand, in the urban areas there is some extent of unemployment. Therefore, the total workforce is divided into the number of people employed and the number of people eligible to work but are not employed: Nu = Lu + Uu (Uu showing the number of people who are present in the urban workforce but are unemployed).

From the above two equations, the total number of unemployed people can be shown as follows:

Uu = N – Lu -Lr

Thus, the total rate of unemployment in the economy can be written as follows:

Unemployment rate = Uu/(Uu + Lu) = (N – Lu – Lr)/(N – Lr)

Therefore, the probability for a worker to find a job in the urban areas can be shown as follows:

Pu = Lu/(Lu +  Uu) = Lu/(N – Lr)

Theoretical model

Now, given the above equations it can be stated that though the urban wage is greater than the rural wage, however, there remains a probability of being unemployed in the urban areas after migrating to the same from the rural areas. Thus, the decision of the rural workers, regarding migration from urban to rural place is not only based on the wage rates at these two places but also on the probability of getting an employment in the urban sector. The workers in the rural areas, according to the model, will only decide to migrate if:

Wu[Lu/(N – Lr)] > Wr

Given that the above condition holds, migration will continue from the rural areas to the urban areas till the equilibrium point is reached in the economy, where:

Wu[Lu/(N – Lr)] = Wr

This fundamental condition stated by the model is often found to lead to a paradoxical situation, where it can be seen that with the increase in the number of jobs in the urban sector, there is also an increase and not a decrease in the urban unemployment, which is known as the Todaro Paradox and can be attributed to the induced effects of the migration of rural workers to urban areas in search of better paid jobs.

In the urban sector, when one additional job is created, it induces Wu/Wr to migrate from the rural areas to the urban areas and as by the assumption of the Harris-Todaro Rural-Urban Migration Model, Wu>Wr, therefore, Wu/Wr>1. This in turn implies that with one additional unit of job creation in the urban areas, more than one worker tend to migrate from the rural areas to the urban areas, thereby increasing the level of unemployment in the urban areas, which in turn explains the Todaro Paradox.

Thus, the assertions of the Harris-Todaro Model can be shown with the help of the following figure:

Figure 1: Harris Todaro Model of Rural Urban Migration

From the above figure, when the urban wage rate is m, then the level of urban employment is O_ML_M and the level of employment in the rural sector is given by O_AL_A. In such case, L_AL_M is known as migrant pool and consists of those workers who are either unemployed in the urban sector or are engaged in the low skilled activities or in the informal sector in these areas.

From the above discussion of the above theoretical model, it can be seen that in the rural-urban migration scenario, there remains a tendency of creation of unemployment in the urban sector even with the increase in the level of employment. This in turn leads to a worse off situation for the unemployed workers in the urban sector, who in turn resort to informal employment or low-quality jobs or remain partially unemployed. This in turn indicates towards the creation of crisis situation in the migration aspects prevailing in the global scenario.

As discussed above, migration has been becoming one of most concerning issues in the contemporary global scenario, with more and more people migrating usually from the underdeveloped regions with lower wages and subsistence employment (which can be compared to the rural sector in the Harris-Todaro Model) to the highly developed and high-wage countries (which can be compared to the urban sector as has been asserted in the same model). The increase in the global migration in the current years can be seen from the following figure:

Figure 2: Age-wise international migration over the years

As can be seen from the above figure, the number of international immigrants has consistently increased over the years, with the number being 244 million in 2015. There has been increases in all the age groups of immigrants. However, the most notable age group of immigrants has been the age group of 18-64 years, the numbers in which has also increased with time. By 2015, there has been nearly 183 million international immigrants in the global scenario who belong to the age group of 18 to 64 years.

Of the total immigration traffic, a significant portion of the immigrants tend to migrate to Australia over decades. This is primarily because of the robust economic development and growth of the country over the years and the consequent increase in the industrial activities, commercial prosperity as well as increased employment scopes which in turn has resulted in the creation of a better living standard for the residents of the country, thereby attracting people from all parts of the world, especially from the underdeveloped and under-privileged regions to migrate to the country in search of better living.

Over the years the number of immigrants in Australia has increased considerably, which can be seen from the following figure:

Figure 3: Changes in the number of immigrants and total population in Australia over the years

However, the migration in Australia is not only characterized by international immigrants. Over the years, considerable extent of internal immigration has taken place in the country, with the residents born in Australia itself, migrating from one place to another, especially from the low developed areas to the resource rich and economically active urban areas. The migration status in the country, till November 2016, can be explained in detail with the help of the following figure:

Figure 4: Dynamics in immigration statistics in Australia (Till November, 2016)

It is evident from the above figure, that apart from the international immigration, Australia is also experiencing considerable increase in the number of internal immigrations with time. Most of these international as well as internal immigration takes place to the highly developed metropolitan and urban areas of the country, especially in Sydney, New South Wales and Melbourne.

It is evident from the above discussion that the number of immigrants (both international as well as internal) has increased considerably over the years, much of which can be attributed to the increased education and employment aspects in these regions, especially in the economically active cities like Sydney, Melbourne and others. This huge inflow of immigrants has led to the creation of several crisis situations, both for the immigrants as well as for the residents of the country and the economy as a whole. These crisis and issues of concern are discussed as follows:

1. a) Increase in unemployment burden:

Although one of the major reasons for migration in Australia from other countries is the perceived scope of better employability and a better standard of living than their home countries, the same has actually resulted in an increase in the level of unemployment in the countries, especially among the migrants, which can be seen from the following figure:

Figure 5: Increase in unemployment according to sex and types of residency in Australia

As is evident from the above figure, the number of unemployed people in the country has increased considerably, especially in case of women and in case of those who have migrated in the country over the years. As is evident from the empirical data, the rate of unemployment of the recent migrants as well as the temporary residents in the country has increased considerably to 7.4%, while the same rate is nearly 5.4% for those who have Australian citizenship. The unemployment rate is also found to be exceptionally high for migrant women. This can be explained by the fact that migrant women have the responsibilities of managing households as well as take care of their children as child care services in Australia, especially in the urban areas is considerably high and most of the immigrant families cannot afford it.

The cities like Sydney has been already reeling under the pressure of excessive infiltration of immigrants with the population of the city increasing by more than 20% over the last decade and there is the projection of another 87,000 people in one year, which in turn has resulted in unemployment problems in the city, not only for the immigrant population but also for the citizens of the country living in the city as they have been facing increasing competition as well as lack of resources, thereby experiencing a decline in their economic as well as overall quality of life. The problem is same in other cities like Melbourne and others.

The situation can be found to be relevant to the assertions made in the Rural-Urban Model of Migration of Harris-Todaro, where excessive migration in the expectation of employment in the urban sector actually increases the problem of unemployment and underemployment in the urban areas.

1. b) Lack of housing accommodation:

The immense inflow of immigrants over the years in the cities of Australia, especially in Sydney has also resulted in immense crunches in the housing facilities. Over the years, the city has become overtly populated and the house size has decreased to make more places for new houses. The supply has increased considerably but has not been able to keep pace with the huge increase in demand for the same. This has resulted in immense problems of housing affordability over the years, which can be seen as follows:

Figure 6: Increase in house prices in Greater Sydney over the years

As is evident from the above figure the prices, the affordability issues have resulted in settlement of most of the immigrant as well as lower middle class and poor population in the outskirts of the cities and in the low developed urban slum areas.

Figure 7: Income and key occupation group percentage versus the distance from Sydney

As is evident from the above figure, the lower the income of the population, the more distant from the city they settle.

This is also supported by the Harris-Todaro Model which asserts that due to high level of migration induced unemployment in the country leads more migrants to settle for low quality and less secure informal employment and for a lower standard of living.

Conclusion

From the above discussion, it can be asserted that the current situations of migration crisis experienced by the economy of Australia, especially in its developed and urban regions, can be explained with the help of the assertions of the Harris-Todaro Rural-Urban Migration Model and especially by the Todaro Paradox which shows with increase in employment opportunities in the urban areas more than proportionate immigration takes place from the rural to the urban areas, which leads to creation of immigration induced unemployment or underemployment. This leads to other issues of concern like lack of housing opportunities, lower qualities of living, creation of urban slums as well as displacement of low income people from the central region of the cities to the suburb areas of the cities, which is seen to be happening in Sydney and other metropolitans in the country.

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