Economic Development in the Canton of Basel-Stadt

Globalisation, along with technological and demographic change, are among the megatrends that are at the root of profound changes in the future economy and labour market of the Canton of Basel-Stadt. At present time, the attempt to provide a detailed forecast about their actual impact would seem preposterous. But a review of the Canton’s industrial development in past years may yield some valuable points of reference for future developmental scenarios.

27‘000 new jobs since 2000

Since the year 2000, the number of jobs in the Canton of Basel-Stadt has increased from 167‘000 to 194‘000. In the same period, growth of gross value added (GVA) in the Canton was on average 4% p.a. While many developed economies showed clear signs of a shift in share of employment from the industrial/manufacturing sector to the services sector, such a transformation cannot be documented for the Canton of Basel-Stadt. Their share of total employment has mostly remained constant at 20% (industrial sector) and 80% (services) respectively. The reason for this particularity is the strong presence of the life sciences sector and its above-average productivity. Contrasting industry-specific developments of value creation and employment, allows us to identify the following trends:

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Chart shows average growth 2000 – 2017 of real gross value added (GVA) and employment in individual industry sectors of the Canton of Basel-Stadt. Circle sizes represent the share of individual sectors in relation to nominal total GVA in the year 2017.

• Strong and positive average annual growth in life sciences sector on both sides: This sector clearly continues to be the growth engine of the region. In addition, other sectors positioned in the upper right quadrant of the graphic exclusively belong to the services industry.
• Positive average growth rates in health and social services: The effects of demographic change are already clearly visible.
• Positive economic growth and employment development in the aggregated sectors of professional activities and scientific services and other business services: Reasons for this trend include globalisation and the related intensification of international competition, motivating companies to augment their outsourcing efforts, guided by rationales such as cost reductions and integration of external know-how. Another reason for the growth of the aggregated services sector is a significant increase in part-time employment.
• In the insurance industry and trade sector reduced employment rates and a simultaneous increase in value creation indicate productivity growth, which most likely originates in technological change (i.e. digitalisation).
• Losses in industries such as construction, financial services, transportation and storage, as well as chemicals, are owed to a diverse range of short- and long-term challenges: Outsourcing, expansion into new business models due to digitalisation, financial crisis etc.

Growth drivers are skill-intensive/knowledge services

Studies suggest a general shift of employment into technology-heavy, skill-intensive sectors following technological change in general. An explanation for this phenomenon is a generally complementary relationship between new technologies and human labour in these sectors. Within less skill-intensive services sectors on the other side, where human labour is rather substituted by technology, we generally assume a decrease in employment.

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Figure 2 confirms these conjectures on the basis of current data from the Canton of Basel-Stadt:

• In 2017, approximately half of the labour force was employed in skill- and knowledge-intensive services and in sectors of skill-intensive production at high-tech level. It should be noted that with a steady 4% share of total employment the skill-intensive production sector at high-tech level is of secondary importance.
• With a growth contribution of 13%, the field of skill-intensive services (e.g. IT services, research and development, health (incl. hospital/clinical) is an essential driver of employment growth.
• Moderate growth of less skill-intensive services sectors (e.g. janitorial/building maintenance, hospitality): Approx. 900 additional jobs created since 2000 (share of employment growth equals 1%).

Megatrends are interdependent: They can reinforce, but also neutralize each other. Accordingly, this creates a degree of uncertainty about their impact on the economy and labour market.

Through analysis of the industrial developments in the years since 2000, we were able to identify the following indicators for future development trends: Given the impact of technological and demographic change, we anticipate positive rates of employment and value creation growth in the life sciences as well as in skill-intensive services sectors. Simultaneously, we consider a decrease of employment in the less skill-intensive services sector a likelihood.