Why in the news?

As per the recent Barclays report, the fundamental economic loss was presumably the most considerable from the shutdown of Kuala Lumpur, Manila, Delhi and Mumbai, ranging from $1 billion to ­$1.7 billion per week.

What is meant by the labour market?

  • The labour market is where people and employers come together to bargain for labour and wages or other forms of compensation.
  • The number of people willing to work is based on the level of pay that employers are offering.
  • The higher the wage being offered, the more people will enter the labour market to compete for jobs.

Issue of long travel time to work

  • Labour market: Cities are labour markets where the labour force trades their labour and constructs understanding spillovers.
  • Relation between commute time and productivity: The commute time for the labour force to the workplace plays a vital role in deciding their productivity in cities.
  • The more extended the commute time in a city, the less its effectual labour market and vice-versa.
  • Difference between nominal and effective labour market: While the insignificant labour market of the city directs to all jobs created in the urban area, the effective labour market directs to the jobs available within a specific commute.
  • Importance of effective labour market: The more considerable a city’s effective labour market, the more significant its accumulation economies and knowledge spillovers will be.
  • From the perspective of widening a city’s effective labour market and economic output, it is thus very essential to maintain the commute time short and commuting prices affordable within a city as it keeps boosting in population.

Way forward

  • Urban local bodies (ULBs) directly impact the city’s financial output through their infrastructure.
  • Increase in tax base: Road measurement has a positive impact on the city’s tax base.
  • Motivation to pay taxes: This is because roads lead to the easy entrance of jobs and increased economic exercise; that also delivers the public more confidence and motivation to pay taxes.
  • Municipalities should not consider investing in road webs as an expense rather roads count to the city’s income base which the city can use to enhance infrastructure and public services.


  • Investing in roads not only lowers travel time and broadens effective labour markets of cities and their economic output, but also enhances key to schooling for children as well as healthcare, thus elevating human development.
  • This is the road to the $5 trillion economy along with advancement in human well-being.