The tidal movements of spatial labour markets: perturbation and resilience

ABSTRACT

Labour market impacts are often the first to arise and notice in the wake of major fluctuations in the spatial economy. In an era marked by insecurity, the quest for understanding the tidal movements of labour markets became more salient than ever. To this aim, this special issue exploits the resilience framework to provide a more holistic view on the causes and effects of labour markets perturbations, as well as to find ways of buffering shocks while easing adaptation and recovery. The papers included in this special issue look at different types of shocks (multi-shock) manifested in various geographical areas (multi-spatial), at different territorial scales (multi-level), while employing more methodological algorithms (multi-method) to provide a more refined understanding of labour market resilience.

KEYWORDS:

• resilience
• labour market shock
• resistance
• recovery

JEL:

• H1
• J08

1. PERTURBATION AND RESILIENCE IN LABOUR MARKETS

Labour markets frequently show the first signs of economic perturbations in the spatial economy. Over the past few decades, spatial labour markets have shown many tidal movements, which have induced many research and policy questions on the genesis, impacts and (dis)equilibrium trends caused by local, regional and national shocks or perturbations (Krebs, 2007; Storesletten et al., 2001; Stough et al., 2018). The concept of resilience has played a major role in this debate (Hartal et al., 2023, in this issue).

Resilience has become a concept ‘en vogue’ over the past decade, being adopted as a new ‘buzzword’ in academia (Martin & Sunley, 2015). Its gain in popularity was mainly prompted by at least two factors with wider and complex implications. First, the Great Recession (2008–09) emphasised that the welfare gains from globalisation and economic integration also brought about various additional risks. The experience from the global financial crisis has shown that the contagion effects make it harder to contain the effects caused by shocks. Aside from economic risks, globalisation has increased the health risks as well. As also evidenced by the COVID-19 pandemic, migration flows, tourism and trade flows may facilitate the spread of infection. And, consequently, in the second place, amidst the uneven impacts of the Great Recession evident across the EU territories (Capello et al., 2015), policymakers became more preoccupied with helping systems to withstand health shocks or adapt to change, sometimes referred to as the ‘new normal’. For instance, in the aftermath of the COVID-19 pandemic, the EU designed the Recovery and Resilience Facility¹ to help countries ‘emerge stronger and more resilient’ following the pandemic.

In line with the two above-mentioned tendencies, several disciplines have tried to come up with analyses or solutions to cushion the impact of shocks, boost recovery, and anticipate and prepare for eventual future shocks. Thus, the resilience concept has made its way into more disciplines, such as management and organisational studies (Herbane, 2019); regional and urban planning (Botezat et al., 2021; Glaeser, 2021), regional science and economics (Fröhlich & Hassink, 2018; Sensier & Devine, 2020), or political science (Rouet & Pascariu, 2019; Tocci, 2020). Under the regional development umbrella, the soaring resilience literature has mainly addressed two major issues. A first stream of literature was dedicated to the conceptual framework of resilience and related topics such as vulnerability or adaptiveness, by designing different metrics for measuring it (Alessi et al., 2020; Faulkner et al., 2020; Pontarollo & Serpieri, 2020a). Whilst adopting one of these metrics, the second stream of literature has put the emphasis on explaining the resilience performance of different regions, by testing various key drivers (Ezcurra & Rios, 2019; Fratesi & Perucca, 2018; Geelhoedt et al., 2020; Mazilu et al., 2020; Nijkamp et al., 2022).

With the economic dynamics being generally under focus in the aftermath of different kinds of shocks, as a reflection of their economic burden, but also in order to find resources to attenuate their effects, labour markets have been prominently amongst the investigated economic systems. Labour markets do not function in a spaceless vacuum, but are sensitive to both internal and external shocks. They are affected by the functioning of complex economies in a spatial context, ranging from national to local. Therefore, for several theoretical and practical reasons, labour market dynamics was under scrutiny by studies that assess regional economic resilience (Giannakis & Bruggeman, 2020; Pontarollo & Serpieri, 2020b; Sensier & Devine, 2020; Stough et al., 2018). In theoretical terms, labour market volatility has a more direct effect on inhabitants’ well-being compared with other macroeconomic measurements (Fratesi & Rodríguez-Pose, 2016). Unlike output, the employment plunges following a shock have also been shown to be more persistent (Sensier et al., 2016), with some of the countries in Southern Europe displaying a jobless recovery (Fratesi & Rodríguez-Pose, 2016). In addition, the labour market is also more sensitive to shocks, being one of the main adjustment mechanisms for firms to reduce costs (Fingleton et al., 2012). What is more, it captures the net impact of demand and supply by incorporating the effects of other different factors, such as early retirement or migration (Kitsos & Bishop, 2018). However, it might be less useful for assessing economic variation in countries with higher institutional rigidity (Cellini & Torrisi, 2014) or when shocks cause a transition to part-time work arrangements. In practical terms, unlike other macroeconomic indicators, such as gross domestic product (GDP) or gross value added (GVA), some of the labour market-related variables (e.g., employment, unemployment, wages) are also more precise metrics and readily available at lower territorial levels, which is fundamental for policy interventions. Labour markets essentially embrace their place characteristics such as labour composition, economic structure, culture, history or institutional quality (Storper, 2013). It thus follows that policy initiatives need to be designed in a very different labour market context and respond to particular challenges (Clasen & Clegg, 2011). This is particularly important in the aftermath of different shocks when a more attentive formulation of the policy, attuned to local conditions, can enable a faster return to work in distressed communities (Bartik, 2020; Organisation for Economic Co-operation and Development (OECD), 2012).

Against this backdrop, the concept of resilience offers a new and challenging perspective on urban or regional development with respect to decision-making processes, in a time when the number of transformative shocks and uncertainty drivers grow from one day to another. With the labour markets being among the most sensitive economic systems (Stough et al., 2018), the investigation of their resilience capacity calls for in-depth evaluations of place-specific consequences across different types of shocks, while simultaneously integrating the analysis of consequent resilience stages. Assessing the resistance, adaptation and transformation of territory (considering different scales from local to regional, national or continental) with respect to these inherent perturbations, while employing different empirical strategies, may help to reach an academic consensus on the theoretical and empirical framework which forms the basis of resilience.

2. SCOPE AND INTERPRETATION

In an era marked by insecurity, the quest for understanding the disequilibrium forces acting on labour markets is more salient than ever. Clearly, labour market policy (ranging from general stimuli to place-based incentives) may play a key role in the adaptive capacity of regions and cities against the background of labour market dynamics. To this end, this special issue sheds further light on the causes and effects of perturbations on regional labour markets, as well as finding ways of resilience capacity-building. The papers included look at different types of shocks (multi-shock) manifested in various geographical areas (multi-spatial), at different territorial scales (multi-level), while employing different estimation techniques (multi-method) to provide a more refined understanding of labour market resilience.

A main contribution of the special issue derives from the variety of perturbations investigated which provides a more holistic view on how labour markets can react to disrupting events. Thus, in this issue, while some of the studies focus on economic and financial crises (Borsekova & Korony, 2022; Caro & Fratesi, 2022; Gheasi et al., 2023; Lopez-Tamayo et al., 2023; Reveiu et al., 2022), other assess the impact of natural disasters (Fabling et al., 2022; Fantechi & Modica, 2022) or health-related shocks (Borsati et al., 2022; Grabner & Tsvetkova, 2022).

The special issue covers diverse geographical areas, as well as different territorial scales, which provides a more refined understanding of labour market resilience, while also accounting for the specificity of territories. In terms of spatial focus in this issue, while some contributions examine the wider EU area (Borsekova & Korony, 2022; Caro & Fratesi, 2022; Reveiu et al., 2022), others rely on applied case studies in Europe, such as Germany (Gheasi et al., 2023), Italy (Borsati et al., 2022; Fantechi & Modica, 2022), Spain (Lopez-Tamayo et al., 2023) and Romania (Pavelea et al., 2023). In this issue, zones outside Europe have also been in the spotlight, such as New Zealand (Fabling et al., 2022) or the United States (Grabner & Tsvetkova, 2022). When it comes to the territorial level, whilst some of the studies in this issue carry out analyses at an aggregated regional level (NUTS-2/-3) (Borsekova & Korony, 2022; Caro & Fratesi, 2022; Gheasi et al., 2023; Reveiu et al., 2022), or for metropolitan areas (Grabner & Tsvetkova, 2022; Lupu et al., 2023), others use more fine-grained data at the municipality level (Borsati et al., 2022; Fantechi & Modica, 2022) and even individual survey data (Fabling et al., 2022; Lopez-Tamayo et al., 2023).

The various papers in this issue also stand out as an important addition to the methodological frameworks aimed at assessing resilience. Amidst the lack of consensus in terms of how to measure labour market resilience and its effects, employing different estimation techniques may help to test whether similar conclusions hold true. In this issue, the diversity of empirical approaches includes policy-impact evaluation methods (Fabling et al., 2022), different panel data estimators (Borsati et al., 2022; Grabner & Tsvetkova, 2022; Pavelea et al., 2023), including spatially adjusted panel techniques (Gheasi et al., 2023; Lopez-Tamayo et al., 2023), as well as a self-organising map (Lupu et al., 2023) and machine-learning algorithms (Borsekova & Korony, 2022; Fantechi & Modica, 2022; Reveiu et al., 2022). What is more, various measurements were employed for assessing labour market dynamics which advance the understanding of its subsequent mechanisms. Thus, whilst some of the studies focus on metrics based on single indicators referring to employment (Caro & Fratesi, 2022; Fabling et al., 2022; Reveiu et al., 2022), unemployment (Gheasi et al., 2023), wages (Gheasi et al., 2023; Lopez-Tamayo et al., 2023), job postings (Grabner & Tsvetkova, 2022) and population fluctuations (Borsati et al., 2022; Fabling et al., 2022; Fantechi & Modica, 2022), others rely on composite indices (Borsekova & Korony, 2022; Lupu et al., 2023; Pavelea et al., 2023).

Overall, given the width and the depth required by the various resilience approaches in regional studies on labour markets, this special issue brings solid and new theoretical, methodological, and empirical insights so as to understand the real contribution of resilience debates to regional studies, to increase the added value of modern approaches, and to connect more profoundly emergent theoretical views to a more policy-oriented perspective.

3. POLICY RELEVANCE

This special issue has articulated the need for a thorough analysis of local and regional labour markets in a period of rising uncertainties, against the backdrop of many scientific discussions on the (dis)equilibrating forces of spatial economies.

In a world economy more connected and, at the same time, more prone to shocks, the need for resilience studies stems from identifying the features responsible for resilience capacity-building, including a proper ‘legal toolkit’ which may act as a bulwark against future disturbances of spatial labour markets (Gialis et al., 2020; Kakderi & Tasopoulou, 2017; Matyas, 2021). The results brought out by the studies included in the special issue confirm that the impact of major shocks has not been spatially neutral. Place-specific policy actions aimed at fostering labour market resilience need to account for the local specifics. The workforce composition is highly important, as the native and foreign population may be differently affected during economic shocks (Gheasi et al., 2023, in this issue). This also holds true for natural disasters, with the foreign-born population facing more severe employment plunges (young and prime-age migrants), which makes them more prone to leave disaster-struck regions (Fabling et al., 2022, in this issue). Aside from migration, gender composition and wage flexibility also appears to be decisive to cushion shocks. Despite the fact that female employment was initially hit harder than male employment (Fabling et al., 2022, in this issue), higher gender balance employment and higher levels of female participation are shown to display a greater chance of a successful recovery (Borsekova & Korony, 2022, in this issue; Fantechi & Modica, 2022, in this issue). It also appears that wage flexibility may be an important mechanism to spur employment recovery in the aftermath of shocks (Lopez-Tamayo et al., 2023, in this issue). In addition, open and inclusive communities and higher cultural capital levels are also shown to be among the set of helpful characteristics for a more resilient labour market (Fantechi & Modica, 2022, in this issue).

Another important finding in this issue relates to the confirmation of the capacity of the EU Cohesion Policy to cushion crises and rebuild regional economies (Caro & Fratesi, 2022). However, it is necessary to mention that there are also important regional differences to be accounted for, as it is not necessarily the most assisted regions which are also more resilient. An important aspect that is considered is the digital capital embedded at the regional level, as technological development was confirmed as an important predictor of regional resilience (Reveiu et al., 2022, in this issue). Aside from the direct effects of potential productivity, digitalisation can prepare regions to be more resilient by enhancing teleworkability (Grabner & Tsvetkova, 2022, in this issue). This may act as a buffer against different labour market perturbations, such as these caused by pandemics or natural calamities. In the same vein, when looking at the metropolitan areas in Central and Eastern European countries, characteristics considered to define a smart city appear to be associated with more resilient urban labour markets (Lupu et al., 2023, in this issue). In essence, these findings call for a strong commitment of the Cohesion Policy to facilitate the digital transition.

Spatiality is also an important factor that needs to be accounted for in policy actions meant to spur labour market resilience. The level of connectedness with neighbouring regions may have an important role in the transmission of spatial spillover effects (Gheasi et al., 2023, in this issue). This also became clear during the COVID-19 pandemic when municipalities acting like central nodes within a network of commuting flows seem to have experienced higher excess mortality due to higher diffusion speeds of the virus (Borsati et al., 2022, in this issue). During the Great Recession, in order to cut costs, part of the economic activity moved from cities to the communities in their immediate vicinity, which drastically affected urban resilience (Pavelea et al., 2023, in this issue).

Finally, accounting for place specificity may also provide some crucial insights for designing effective policy interventions. For instance, increasing wage flexibility may act as a mechanism to help labour markets to achieve faster recovery from economic shocks. However, such policies proved to be less effective in some of the poorer regions, where, despite the high wage elasticity, unemployment remained high (Lopez-Tamayo et al., 2023, in this issue). This strongly argues for place-sensitive policies that also account for the characteristics of local labour markets which may be strongly differentiated.

4. FUTURE DEVELOPMENTS

Economic activities rely on tumultuous processes driven by markets. The increasing connectedness between the worldwide economies over the last decades has made them even more susceptible to shocks, despite the clear welfare gains. Against this backdrop, the resilience concept has made its way into policy discourse and contributes to explaining uneven regional development. To this aim, instead of being independently investigated this concept needs to be embedded in the wider development process (Martin, 2018). Despite the avalanche of studies focusing on measuring and explaining regional economic resilience, only a few account for the timing of regional economic cycles when assessing resilience to asymmetrical shocks (Beqiraj et al., 2020; Duran & Fratesi, 2023). While most of the studies rely on the national or supranational turning points when measuring resilience, failing to comply with the assumption of synced regional cycles might bias results and cause misleading policy initiatives. This might suggest that additional work is still needed before reaching a consensus on how to measure resilience and base regional policies on a specific resilience metrics.

In addition, one also needs to recall that standardising shocks by always comparing them with other shocks in the past also comes with important limitations (Taleb, 2014). This assumes that future shocks will be similar to these in the past, and that the same solutions can be used to tackle them. This is not necessarily true, and such an approach might weaken the system even further instead of improving its resilience capacity, by diverting attention as well as resources, from alternative potential risks that may be even more likely to occur and cause more severe consequences. A similar issue occurred during the COVID-19 pandemic (Hynes et al., 2020), with the health system being exposed by the reorientation of resources pursued during the Great Recession. Consequently, given that it might be hard to anticipate the origin of future shocks, future studies might consider a wider and long-term perspective in order to identify transversal features that might improve the reactions of systems to a broader spectrum of shocks and stressors (e.g., human capital, institutional quality). In line with what is called the ‘prosilient’ approach, designing proactive policy initiatives that may help systems prepare for future potential challenges before they actually happen, without remaining locked in the past experience (Aroca et al., 2021; Hoopes, 2017). For instance, one might prepare for any potential disrupting effects of artificial intelligence technologies, while encouraging its use in ways that enforce markets, boost competitiveness, and empower workers and citizens (Acemoglu, 2021). One may also anticipate structural shifts in the labour markets and put in place policies designed to workers likely to be in ‘at risk’ positions (Arntz et al., 2016).

Finally, alternative conceptual frameworks argue that excessively focusing on learning from past experiences and even trying to anticipate future disruptions, both aiming to suppress randomness and volatility, may further vulnerabilise systems in the long run (Taleb, 2014). Whereas in such a complex economic systems optimisation is hard to achieve, systematically suppressing small risks and shocks may actually make larger ones more probable. Therefore, policies aimed at attaining ‘antifragility’ – a superior state which allows systems to thrive even in times of disorder and uncertainty – should be preferred to those aimed at reducing any risk of shocks (Taleb, 2014). However, this might remain an ambitious objective for future work. Despite the vivid debate regarding the ‘resilience’ concept which has captured the academic and political discourse, there does not yet seem to be a consensus on a theoretical or empirical framework for measuring it. This is still hindering any attempts to monitor the efficiency of policies employed to strengthen resilience, while also making it hard to turn the debate towards a further state of antifragility.

ACKNOWLEDGEMENTS

The guest editors thank Professor Arnoud Lagendijk, Ms Jenny Case and the editorial office of Regional Studies for all their support in publishing this special issue. We are also extremely grateful to the referees for their valuable suggestions and to the authors for their commitment to improving the quality of the manuscripts.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Additional information

Funding

We acknowledge the support of the Ministry of Research and Innovation, as some of the studies included in the special issue were granted by the Unitatea Executiva pentru Finantarea Invatamantului Superior, a Cercetarii, Dezvoltarii si Inovarii (CNCS-UEFISCDI) [project number PN-III-P4-ID-PCCF-2016-0166], within PNCDI III project ‘ReGrowEU – Advancing Ground-Breaking Research in Regional Growth and Development Theories, through a Resilience Approach: Towards a Convergent, Balanced and Sustainable European Union’.

Notes

1. For more information about this facility, see https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility_en