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‘intermediate labour markets’, which create waged work experience for people who have had
long-term unemployment, can also prove valuable;
In addition to improved schooling, retraining of long term unemployed would have similar results;
Whether the problem is to deliver effective education to children or retrain adults, the solution
will increasingly come through the information technology revolution. Personal computers linked
to the internet can provide highly effective self-teaching programmes at ever-lower cost. This will
transform the character of education at every level from nursery school to university, and from the
least to the most developed city worldwide. But it will have its greatest potential effect in the poor
areas of rapidly-growing cities.
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Urban economies and urban systems in cities in more complex economies demand new skills. Even
highly-educated people now find it difficult to start a successful career, to adjust to new conditions in
the labour market, to keep learning new skills or to build up new networks as old networks dissolve.
Young people in cities have to overcome high thresholds to participate successfully in continually-
changing labour markets. All urban systems consist of production and service networks, which are
constantly undergoing change and rearrangement. Urban systems demand that people know how to
become insiders, to find the clients or partners necessary for their skills to become effective. This
needs two kinds of ability: professional or technical knowledge and the knowledge or ability to
function within different urban networks, and within both formal and informal information systems.
Cities can help to build supportive networks which help to prepare people for successful urban life.
Creating systems which are open, competitive and transparent can make life easier for newcomers,
especially migrants and young people. Over-regulated insider systems become defensive and
exclusive, create rigid insider markets and reduce necessary flexibility. Public policy in all areas
should become more enabling, more catalytic. The traditional protective welfare state solution, which
reduces risks and provides minimum guarantees, will have to remain in part; many people will
continue to need help and assistance. But it is vital that it be supplemented by the new innovative
approach.
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5.4 New Labour Market Problems in the Mature Cities
In mature cities, which are often over-regulated, it can be helpful to deregulate labour markets so as to
increase opportunities for low-skilled workers lacking formal qualifications. But low-skilled workers
often experience adverse labour market conditions in which wages are too low to earn a decent living.
One reason is high taxes, especially social security taxes which drive a growing wedge between gross
and net wages. In consequence wages are too low to finance a basic livelihood and savings for old
age. Thus, there is a paradox of the welfare state: taxes to support the financing of public goods may
exacerbate the very problems they try to solve.
Many cities experiment with welfare payments which are used to increase income of the working
poor. In other countries social security taxes for low wage earners are paid out of the budget.
Technically these payments could be organized in different ways; the easiest is probably a payment to
firms hiring low-skilled workers unable to earn a living above a tolerable poverty line.
Combined educational and labour market strategies and instruments, which increase the urban
population’s skill and social integration, can only be successful if supplemented by flanking
developmental strategies and programmes.
Greater investment in public transport in urban areas should be encouraged to enable easier access
to employment by those without private means of transport;
The wider urban environment must be sufficiently attractive to both new and existing employers.
For this reason there has been a growing emphasis on the necessity for the physical regeneration
of decaying or derelict older urban industrial areas;
Many older Western cities have seen extensive programmes of urban regeneration to improve
their physical environment and equip them to retain and attract new forms of employment. City
governments have realized that it is necessary to transform industrial land to post-industrial uses
to create an attractive urban environment. This requires the establishment of a variety of urban
development or regeneration agencies.
The risk involved in urban regeneration strategies is very high. Modern buildings or upgraded
buildings improve the appearance of a neighbourhood. But such upgrading can easily mark the
beginning of gentrification. The poor move on to other unattractive areas, forming new pockets of
deprivation and poverty.
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The renewal agencies should upgrade the tenants and not the buildings.
(A tenant living in an upgraded building in Freiburg, Germany)
Of course such ‘human upgrading’ is much more difficult than the upgrading of buildings. Therefore
we observe a natural – but ultimately counterproductive – tendency to concentrate resources on the
upgrading of buildings.
A more sophisticated strategy would avoid the bricks and mortar emphasis in favour of integrated
social and physical strategies. Most would probably agree with this position, which is however easy to
formulate but difficult to implement. In recent years, experiments have been started in several
countries (France: Quartiers en crise; UK: Single Regeneration Budget; Germany: Social Urban
Renewal). Common elements in these programmes are empowerment, self-help, integration of
employment measures with physical upgrading, or a combination of retraining and social measures.
From the original slum clearance activities to complex urban regeneration is a big step. It should not
end there. Complex regeneration schemes are compensatory strategies after immigration or non-
functioning labour markets have led to concentrations of poverty and unemployment, of crime and
decay. In a truly well-managed city, immigration would not lead to unemployment. School-leavers
would be qualified to compete in labour markets. Sustainable urban development requires
precautionary strategies in the social field, similar to those developed in environmental policy.
Cities in their traditional roles, with hierarchical management, high functional specialization, driven
and limited by strict rules and legal requirements, will find it hard to adjust to the new urban
environment. Too often, solutions become problems. The most obvious case are the outer housing
estates, built with the best of intentions, which so often have become the most deprived areas. The
welfare state, providing dysfunctional solutions, can actively stigmatize its clients. Cities must begin a
continuing search for more integrative solutions which do not treat their clients as carriers of
entitlements, but as human beings who need assistance to develop their own talents, to take control of
their own lives, or to integrate into a socio-economic system which because of its very nature
demands more educational qualifications, more special skills, more knowledge and more social talents
to achieve success.
5.5 Anti-Poverty Strategies in Hypergrowth Cities
In cities with high population growth, skill-oriented policies and policies to improve the housing
situation and infrastructure will improve the basis for economic development. Social development and
economic development, especially in the informal sector, overlap to a considerable extent: lack of
resources or of income is the dominant cause of social problems. This is quite contrary to the position
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in the mature cities with stable and ageing population, where the relevant causes are the complexities
of the educational, the economic or the political process, and the inequality tolerated by the political
system.
Special difficulties arise in cities where population is growing at rates of 4-5 per cent per annum or
more, where yet more migrants will arrive if poverty is reduced because nearly limitless reservoirs of
labour exist in the rural areas. Here, ‘solving’ the problems of the poor is no solution: it simply
attracts more people, who bring with them new difficulties in the form of increased labour supply,
with the result that wages cannot grow. This neo-Malthusian condition – large-scale migration, of
people looking for even a bare minimum urban income – exists in many African and some Asian
cities. Cities like Johannesburg and Nairobi cannot solve this problem in isolation. They can try to
promote rapid growth of the labour market, but its growth potential will always be lower than the
migration potential.
Thus, only concerted efforts by all cities in a given region of the world can reach results in the war
against poverty. Anti-poverty programmes in the form of transfer programmes will be no solution in
cases of highly elastic migration. Poverty can only be overcome by winning the race between
productivity growth, growth in the number of jobs and population growth. Solutions should aim to
push productivity up as fast as possible and to reduce population growth. Again education has a key
function, because it improves labour market participation and reduces the number of children. More
investment in people with low incomes is probably the only true equalizing policy, because it does not
reduce the chances for higher growth of productivity; in fact, it improves them.
5.6 Support from the National Level
Distributional policies should as far as possible be financed out of central resources. If they are
financed locally, the result will be more inequality: poor areas, threatened by weak industries which
need restructuring, will have low revenues and high social demands, a financial burden which cannot
be borne.
In consequence, most distributional problems should be solved at the national level. In most cases
there is, however, an important exception: people without (adequate) sources of income need a
minimum of welfare payments or services in kind, and cities are the most adequate providers of such a
minimum standard of living. This apart, financing welfare payments out of local taxes places a high
burden on local authorities and local taxpayers in regions experiencing economic crisis and high
unemployment. Their ability to promote economic development will be severely hampered if local
welfare payments have to be financed out of local taxes.
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6.
Housing Policy
6.1 Providing Decent Housing: An Enabling Strategy
Housing policies in the twenty-first century should concentrate on enabling strategies. Massive
accumulated experience demonstrates the risks and costs of policies which try to substitute markets by
public programmes. They are extremely costly and end too often stigmatizing their clients. Any
successful enabling strategy has to develop functioning housing markets with flexible supply
mechanisms – especially a flexible supply of land and a wide range of price quality levels in housing
supply to suite people of different income and preferences. Creating strategies which enable markets
to function adequately is often more important than fulfilling targets of subsidy programmes.
Enabling does not mean that governments abdicate. Enabling has to be seen as a special form of care
which concentrates on the ability for self-help and not primarily on the need for subsidies. Needs are
almost unlimited. Subsidies and assistance are scarce goods. Successful enabling strategies increase
the leverage effects of public assistance and create more shelter. Enabling strategies represent an
attitude which does not concentrate public sector resources on a few areas and groups, hoping that
through imitation they will replicate and grow. Enabling concentrates its assistance on areas and
groups which are active and are prepared to mobilize their own resources. Enabling does not make
promises without demanding community cooperation and participation in building or provision of
infrastructure.
As the history of housing programmes has demonstrated, any policy to provide formal supply for low-
income households requires substantial resources, which most cities cannot afford. The successful
examples (Hong Kong, Singapore) are rare. Housing requires 3-5 per cent of GDP. Cities as major
investors have to channel an high percentage of their resources into housing if they want to provide
housing, either directly or indirectly, for large parts of the poorer population. There is a structural gap:
even under favourable conditions – a non-corrupt and efficient bureaucracy, community participation,
the latest state of technology – programmes become expensive, because clients’ incomes are too low
to afford even low-cost formal-sector services. For those living in an extremely cash- and income-
poor world, formal-sector planning, financing, or provision of infrastructure is a luxury. The core of
any viable housing solution for the poor is to economize on formal services
Urban housing strategies should provide more than shelter. The housing type, the character of
residential area, the land-use mix and the spatial distribution of housing influence:
The quality of neighbourhoods and the way people live in a community;
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