Justice Rehnquist
delivered the opinion of the Court.
A municipal ordinance of the city of Camden, New Jersey, requires that at least 40% of the employees of contractors and subcontractors working on city construction projects be Camden residents. Appellant, the United Building and Construction Trades Council of Camden County and Vicinity (Council), challenges that ordinance as a violation of the Privileges and Immunities Clause, Art. IV, § 2, cl. 1, of the United States Constitution. The Supreme Court of New Jersey rejected appellant’s privileges and immunities attack on the ground that the ordinance discriminates on the basis of municipal, not state, residency. The court “decline[d] to apply the Privileges and Immunities Clause in the context of a municipal ordinance that has identical effects upon out-of-state citizens and New Jersey citizens not residing in the locality.” 88 N. J. 317, 342, 443 A. 2d 148, 160 (1982). We conclude that the challenged ordinance is properly subject to the strictures of the Clause. We therefore reverse the judgment of the Supreme Court of New Jersey and remand the case for a determination of the validity of the ordinance under the appropriate constitutional standard.
On August 28, 1980, the Camden City Council, acting pursuant to a statewide affirmative-action program, adopted an ordinance setting minority hiring “goals” on all public works contracts. Ordinance MC 1650, App. to Juris. Statement A36. The ordinance also created a hiring preference for Camden residents, with a separate 1-year residency requirement triggering eligibility for that preference. Ordinance MC 1650 § 1(5), App. to Juris. Statement A38. As subsequently amended, the ordinance requires that on all construction projects funded by the city:
“The developer/contractor, in hiring for jobs, shall make every effort to employ persons residing within the City of Camden but, in no event, shall less than forty percent (40%) of the entire labor force be residents of the City of Camden.” Ordinance MC 1653 §C(IV)(b), App. to Juris. Statement A56.
The contractor is also obliged to ensure that any subcontractors working on such projects adhere to the same requirement. Ordinance MC 1650 § VIII, App. to Juris. Statement A46.
The amended ordinance was submitted for approval to the Chief Affirmative Action Officer of the New Jersey Treasury Department in November 1980. Following brief administrative proceedings, the ordinance was designated as a state-approved affirmative-action construction program. Appellant, an association of labor organizations representing private employees in the building and construction trades in various New Jersey counties, filed a notice of appeal with the Appellate Division of the New Jersey Superior Court challenging the final determination of the Treasury Department in approving the Camden plan. The New Jersey Supreme Court certified the appeal directly to that court to decide all the issues in the case.
Appellant challenged state approval of the resident-hiring quota as ultra vires, and as unconstitutional under the Commerce Clause and the Privileges and Immunities Clause of Art. IV of the United States Constitution and under the Fourteenth Amendment’s Equal Protection Clause. The New Jersey court sustained the Treasurer’s action as consistent both with state law and the Federal Constitution. Citing Reeves, Inc. v. Stake, 447 U. S. 429 (1980), and Hughes v. Alexandria Scrap Corp., 426 U. S. 794 (1976), the court held that the resident quota was not subject to challenge under the Commerce Clause because the State was acting as a market participant rather than as a market regulator. 88 N. J., at 338-341, 443 A. 2d, at 158-160. The court also held that the quota did not violate the Privileges and Immunities Clause because it was not aimed primarily at out-of-state residents. “It almost certainly affects more New Jersey residents not living in Camden than it does out-of-state residents. Because the Camden ordinance does not affect The States^] . . . treatment of each other’s residents,’ ... it does not violate any privilege of state citizenship.” Id., at 341-342, 443 A. 2d, at 160. Finally, the New Jersey Supreme Court held that the 1-year residency requirement did not violate the right to travel protected by the Equal Protection Clause, concluding that only a rational basis is required to uphold a residency requirement for city employment. Id., at 342-343, 443 A. 2d, at 160-161.
Appellant then filed this appeal raising the same three constitutional challenges to the resident-hiring quota. We noted probable jurisdiction. 460 U. S. 1021 (1983). Since the Council filed its appeal, however, there have been two significant changes in the posture of the case. First, the Court decided White v. Massachusetts Council of Construction Employers, Inc., 460 U. S. 204 (1983), which held that an executive order of the Mayor of Boston, requiring that at least 50% of all jobs on construction projects funded in whole or in part by city funds be filled by bona fide city residents, was immune from scrutiny under the Commerce Clause because Boston was acting as a market participant rather than as a market regulator. In light of the decision in White, appellant has abandoned its Commerce Clause challenge to the Camden ordinance.
Second, in July 1983 Camden amended its affirmative-action plan. The 1-year residency requirement was deleted, thereby mooting appellant’s equal protection challenge based on that durational requirement. Now, a resident of the city of Camden is defined simply as “any person who resides in the City of Camden.” App. to Brief for Appellees Mayor and Council of the City of Camden A-5. Also, the scope of the ordinance was clarified. It now applies to any construction project “which is funded in whole or in part with City funds or funds which the City expends or administers in accordance with the terms of a grant.” Id., at A-4. Finally, the 40% resident-hiring requirement was changed from a strict “quota” to a “goal” with which developers and contractors must make “every good faith effort” to comply. Id., at A-13.
Because of these changes, the only question left for our consideration is whether the Camden ordinance, as now written, violates the Privileges and Immunities Clause. We first address the argument, accepted by the Supreme Court of New Jersey, that the Clause does not even apply to a municipal ordinance such as this. Two separate contentions are advanced in support of this position: first, that the Clause only applies to laws passed by a State and, second, that the Clause only applies to laws that discriminate on the basis of state citizenship.
The first argument can be quickly rejected. The fact that the ordinance in question is a municipal, rather than a state, law does not somehow place it outside the scope of the Privileges and Immunities Clause. First of all, one cannot easily distinguish municipal from state action in this case: the municipal ordinance would not have gone into effect without express approval by the State Treasurer. As the New Jersey Supreme Court noted in discussing the constitutionality of the minority hiring goals:
“By approving the Camden plan, the State Treasurer has established a minority hiring goal for the City of Camden that operates no differently than every other minority hiring goal established by the State Treasurer. . . . The Council’s constitutional challenge to the Camden minority hiring goal must therefore be interpreted as a challenge to the State Treasurer’s general power to issue affirmative action hiring goals.” 88 N. J., at 330, 443 A. 2d, at 154.
The constitutional challenge to the resident hiring preference, therefore, must also “be interpreted as a challenge to the State Treasurer’s general power” to adopt such a preference. The New Jersey court specifically found that the State Treasurer’s approval of the resident-hiring preference was “not ultra vires or an abuse of discretion.” Id., at 329, 443 A. 2d, at 154.
More fundamentally, a municipality is merely a political subdivision of the State from which its authority derives. Trenton v. New Jersey, 262 U. S. 182, 187 (1923). It is as true of the Privileges and Immunities Clause as of the Equal Protection Clause that what would be unconstitutional if done directly by the State can no more readily be accomplished by a city deriving its authority from the State. Memorial Hospital v. Maricopa County, 415 U. S. 250, 256 (1974); Avery v. Midland County, 390 U. S. 474, 480-481 (1968). Thus, even if the ordinance had been adopted solely by Camden, and not pursuant to a state program or with state approval, the hiring preference would still have to comport with the Privileges and Immunities Clause.
The second argument merits more consideration. The New Jersey Supreme Court concluded that the Privileges and Immunities Clause does not apply to an ordinance that discriminates solely on the basis of municipal residency. The Clause is phrased in terms of state citizenship and was designed “to place the citizens of each State upon the same footing with citizens of other States, so far as the advantages resulting from citizenship in those States are concerned.” Paul v. Virginia, 8 Wall. 168, 180 (1869). See also Hicklin v. Orbeck, 437 U. S. 518, 523-524 (1978); Ward v. Maryland, 12 Wall. 418, 430 (1871).
“The primary purpose of this clause, like the clauses between which it is located — those relating to full faith and credit and to interstate extradition of fugitives from justice — was to help fuse into one Nation a collection of independent, sovereign States. It was designed to insure to a citizen of State A who ventures into State B the same privileges which the citizens of State B enjoy. For protection of such equality the citizen of State A was not to be restricted to the uncertain remedies afforded by diplomatic processes and official retaliation.” Toomer v. Witsell, 334 U. S. 385, 395 (1948) (footnote omitted).
Municipal residency classifications, it is argued, simply do not give rise to the same concerns.
We cannot accept this argument. We have never read the Clause so literally as to apply it only to distinctions based on state citizenship. For example, in Mullaney v. Anderson, 342 U. S. 415, 419-420 (1952), the Court held that the Alaska Territory had no more freedom to discriminate against those not residing in the Territory than did any State to favor its own citizens. And despite some initial uncertainty, compare Travis v. Yale & Towne Mfg. Co., 252 U. S. 60, 78-79 (1920), and Blake v. McClung, 172 U. S. 239, 246-247 (1898), with Douglas v. New York, N. H. & H. R. Co., 279 U. S. 377, 386-387 (1929), and La Tourette v. McMaster, 248 U. S. 465, 469-470 (1919), it is now established that the terms “citizen” and “resident” are “essentially interchangeable,” Austin v. New Hampshire, 420 U. S. 656, 662, n. 8 (1975), for purposes of analysis of most cases under the Privileges and Immunities Clause. See Hicklin v. Orbeck, supra, at 524, n. 8; Toomer v. Witsell, supra, at 397. A person who is not residing in a given State is ipso facto not residing in a city within that State. Thus, whether the exercise of a privilege is conditioned on state residency or on municipal residency he will just as surely be excluded.
Given the Camden ordinance, an out-of-state citizen who ventures into New Jersey will not enjoy the same privileges as the New Jersey citizen residing in Camden. It is true that New Jersey citizens not residing in Camden will be affected by the ordinance as well as out-of-state citizens. And it is true that the disadvantaged New Jersey residents have no claim under the Privileges and Immunities Clause. Slaughter-House Cases, 16 Wall. 36, 77 (1873). But New Jersey residents at least have a chance to remedy at the polls any discrimination against them. Out-of-state citizens have no similar opportunity, Austin v. New Hampshire, supra, at 662, and they must not “be restricted to the uncertain remedies afforded by diplomatic processes and official retaliation.” Toomer v. Witsell, supra, at 395. We conclude that Camden’s ordinance is not immune from constitutional review at the behest of out-of-state residents merely because some instate residents are similarly disadvantaged. Cf. Zobel v. Williams, 457 U. S. 55, 75 (1982) (O’Connor, J., concurring in judgment).
Application of the Privileges and Immunities Clause to a particular instance of discrimination against out-of-state residents entails a two-step inquiry. As an initial matter, the Court must decide whether the ordinance burdens one of those privileges and immunities protected by the Clause. Baldwin v. Montana Fish and Game Comm’n, 436 U. S. 371, 383 (1978). Not all forms of discrimination against citizens of other States are constitutionally suspect.
“Some distinctions between residents and nonresidents merely reflect the fact that this is a Nation composed of individual States, and are permitted; other distinctions are prohibited because they hinder the formation, the purpose, or the development of a single Union of those States. Only with respect to those ‘privileges’ and ‘immunities’ bearing upon the vitality of the Nation as a single entity must the State treat all citizens, resident and nonresident, equally.” Ibid.
As a threshold matter, then, we must determine whether an out-of-state resident’s interest in employment on public works contracts in another State is sufficiently “fundamental” to the promotion of interstate harmony so as to “fall within the purview of the Privileges and Immunities Clause.” Id., at 388. See also Canadian Northern R. Co. v. Eggen, 252 U. S. 553, 560 (1920); Blake v. McClung, 172 U. S., at 248.
Certainly, the pursuit of a common calling is one of the most fundamental of those privileges protected by the Clause. Baldwin v. Montana Fish and Game Comm’n, supra, at 387. Many, if not most, of our cases expounding the Privileges and Immunities Clause have dealt with this basic and essential activity. See, e. g., Hicklin v. Orbeck, 437 U. S. 518 (1978); Austin v. New Hampshire, 420 U. S. 656 (1975); Mullaney v. Anderson, 342 U. S. 415 (1952); Toomer v. Witsell, 334 U. S. 385 (1948); Ward v. Maryland, 12 Wall. 418 (1871). Public employment, however, is qualitatively different from employment in the private sector; it is a subspecies of the broader opportunity to pursue a common calling. We have held that there is no fundamental right to government employment for purposes of the Equal Protection Clause. Massachusetts Bd. of Retirement v. Murgia, 427 U. S. 307, 313 (1976) (per curiam). Cf. McCarthy v. Philadelphia Civil Service Comm’n, 424 U. S. 645 (1976) (per curiam) (rejecting equal protection challenge to municipal residency requirement for municipal workers). And in White, 460 U. S., at 211, n. 7, we held that for purposes of the Commerce Clause everyone employed on a city public works project is, “in a substantial if informal sense, ‘working for the city.’”
It can certainly be argued that for purposes of the Privileges and Immunities Clause everyone affected by the Camden ordinance is also “working for the city” and, therefore, has no grounds for complaint when the city favors its own residents. But we decline to transfer mechanically into this context an analysis fashioned to fit the Commerce Clause. Our decision in White turned on a distinction between the city acting as a market participant and the city acting as a market regulator. The question whether employees of contractors and subcontractors on public works projects were or were not, in some sense, working for the city was crucial to that analysis. The question had to be answered in order to chart the boundaries of the distinction. But the distinction between market participant and market regulator relied upon in White to dispose of the Commerce Clause challenge is not dispositive in this context. The two Clauses have different aims and set different standards for state conduct.
The Commerce Clause acts as an implied restraint upon state regulatory powers. Such powers must give way before the superior authority of Congress to legislate on (or leave unregulated) matters involving interstate commerce. When the State acts solely as a market participant, no conflict between state regulation and federal regulatory authority can arise. White, supra, at 206-208; Reeves, Inc. v. Stake, 447 U. S., at 436-487; Hughes v. Alexandria Scrap Corp., 426 U. S., at 810. The Privileges and Immunities Clause, on the other hand, imposes a direct restraint on state action in the interests of interstate harmony. Hicklin v. Orbeck, supra, at 523-524; Ward v. Maryland, supra, at 430; Paul v. Virginia, 8 Wall., at 180. This concern with comity cuts across the market regulator-market participant distinction that is crucial under the Commerce Clause. It is discrimination against out-of-state residents on matters of fundamental concern which triggers the Clause, not regulation affecting interstate commerce. Thus, the fact that Camden is merely setting conditions on its expenditures for goods and services in the marketplace does not preclude the possibility that those conditions violate the Privileges and Immunities Clause.
In Hicklin v. Orbeck, supra, we struck down as a violation of the Privileges and Immunities Clause an “Alaska Hire” statute containing a resident-hiring preference for all employment related to the development of the State’s oil and gas resources. Alaska argued in that case that “because the oil and gas that are the subject of Alaska Hire are owned by the State, this ownership, of itself, is sufficient justification for the Act’s discrimination against nonresidents, and takes the Act totally without the scope of the Privileges and Immunities Clause.” Id., at 528 (footnote omitted). We concluded, however, that the State’s interest in controlling those things it claims to own is not absolute. “Rather than placing a statute completely beyond the Clause, a State’s ownership of the property with which the statute is concerned is a factor — although often the crucial factor — to be considered in evaluating whether the statute’s discrimination against noncitizens violates the Clause.” Id., at 529. See also Baldwin v. Montana Fish and Game Comm’n, 436 U. S., at 385. Much the same analysis, we think, is appropriate to a city’s efforts to bias private employment decisions in favor of its residents on construction projects funded with public moneys. The fact that Camden is expending its own funds or funds it administers in accordance with the terms of a grant is certainly a factor — perhaps the crucial factor — to be considered in evaluating whether the statute’s discrimination violates the Privileges and Immunities Clause. But it does not remove the Camden ordinance completely from the purview of the Clause.
In sum, Camden may, without fear of violating the Commerce Clause, pressure private employers engaged in public works projects funded in whole or in part by the city to hire city residents. But that same exercise of power to bias the employment decisions of private contractors and subcontractors against out-of-state residents may be called to account under the Privileges and Immunities Clause. A determination of whether a privilege is “fundamental” for purposes of that Clause does not depend on whether the employees of private contractors and subcontractors engaged in public works projects can or cannot be said to be “working for the city.” The opportunity to seek employment with such private employers is “sufficiently basic to the livelihood of the Nation,” Baldwin v. Montana Fish and Game Comm’n, supra, at 388, as to fall within the purview of the Privileges and Immunities Clause even though the contractors and subcontractors are themselves engaged in projects funded in whole or part by the city.
The conclusion that Camden’s ordinance discriminates against a protected privilege does not, of course, end the inquiry. We have stressed in prior cases that “[l]ike many other constitutional provisions, the privileges and immunities clause is not an absolute.” Toomer v. Witsell, 334 U. S., at 396. It does not preclude discrimination against citizens of other States where there is a “substantial reason” for the difference in treatment. “[T]he inquiry in each case must be concerned with whether such reasons do exist and whether the degree of discrimination bears a close relation to them.” Ibid. As part of any justification offered for the discriminatory law, nonresidents must somehow be shown to “constitute a peculiar source of the evil at which the statute is aimed.” Id., at 398.
The city of Camden contends that its ordinance is necessary to counteract grave economic and social ills. Spiralling unemployment, a sharp decline in population, and a dramatic reduction in the number of businesses located in the city have eroded property values and depleted the city’s tax base. The resident-hiring preference is designed, the city contends, to increase the number of employed persons living in Camden and to arrest the “middle-class flight” currently plaguing the city. The city also argues that all non-Camden residents employed on city public works projects, whether they reside in New Jersey or Pennsylvania, constitute a “source of the evil at which the statute is aimed.” That is, they “live off” Camden without “living in” Camden. Camden contends that the scope of the discrimination practiced in the ordinance, with its municipal residency requirement, is carefully tailored to alleviate this evil without unreasonably harming nonresidents, who still have access to 60% of the available positions.
Every inquiry under the Privileges and Immunities Clause “must... be conducted with due regard for the principle that the States should have considerable leeway in analyzing local evils and in prescribing appropriate cures.” Toomer v. Wit-sell, supra, at 396. This caution is particularly appropriate when a government body is merely setting conditions on the expenditure of funds it controls. See supra, at 221. The Alaska Hire statute at issue in Hicklin v. Orbeck, 437 U. S. 518 (1978), swept within its strictures not only contractors and subcontractors dealing directly with the State’s oil and gas; it also covered suppliers who provided goods and services to those contractors and subcontractors. We invalidated the Act as “an attempt to force virtually all businesses that benefit in some way from the economic ripple effect of Alaska’s decision to develop its oil and gas resources to bias their employment practices in favor of the State’s residents.” Id., at 531. No similar “ripple effect” appears to infect the Camden ordinance. It is limited in scope to employees working directly on city public works projects.
Nonetheless, we find it impossible to evaluate Camden’s justification on the record as it now stands. No trial has ever been held in the case. No findings of fact have been made. The Supreme Court of New Jersey certified the case for direct appeal after the brief administrative proceedings that led to approval of the ordinance by the State Treasurer. It would not be appropriate for this Court either to make factual determinations as an initial matter or to take judicial notice of Camden’s decay. We, therefore, deem it wise to remand the case to the New Jersey Supreme Court. That court may decide, consistent with state procedures, on the best method for making the necessary findings.
The judgment of the Supreme Court of New Jersey is reversed, and the case is remanded for proceedings not inconsistent with this opinion.
It is so ordered.
“The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”
The New Jersey Law Against Discrimination establishes a comprehensive affirmative-action program in the awarding of public works contracts. N. J. Stat. Ann. §§ 10:5-31 to 10:5-38 (West 1976). Any contractor, subcontractor, or firm seeking such contracts must guarantee compliance with an affirmative-action program approved by the State Treasurer. The Treasurer is empowered to promulgate specific affirmative-action requirements based on “the percentage of population of minority groups in the
State or areas thereof.” § 10:5-36(a). Alternatively, the law permits municipal and state agencies to adopt and administer their own affirmative-action plans. § 10:5-36(c). Such plans must be submitted to the State Treasurer to ensure that each plan conforms to the statutory and administrative requirements, and “establishes an employment goal which is not lower than the applicable goal established by” the Treasurer. N. J. Admin. Code 17:27-6.5 (1982).
The specific scope of the ordinance was stated as follows:
“Wherever the City of Camden spends funds derived from any public source for construction contracts or where the City of Camden confers a direct financial benefit upon a party, but excluding the grant of a property tax abatement, the fair market value of which exceeds $50,000.00, the provisions of this ordinance shall apply .... The provisions of this ordinance shall also apply to the development and construction of all residential housing of four (4) units or less.” Ordinance MC 1650 § II, App. to Juris. Statement A38-A39.
Appellant argued initially that the final sentence of this section extended the reach of the city’s ordinance to purely private construction in which municipal funds were not involved. Appellees claimed that the ordinance was never so interpreted and has only been applied to projects funded in whole or in part by city funds or funds administered by the city. In light of subsequent amendments, see infra, at 213-214, the scope of the ordinance is no longer in issue.
The Council has at least some members who reside outside New Jersey.
The Council also challenged approval of the minority hiring goals as ultra vires the State Treasurer’s authority and as a violation of equal protection. The New Jersey court rejected both arguments, finding approval of the goal within the clear scope of the State Treasurer’s delegated authority and the goal itself constitutional under Fullilove v. Klutznick, 448 U. S. 448 (1980). 88 N. J., 317, 326-328, 330-337, 443 A. 2d 148, 152-153, 154-158 (1982). The Council has not appealed from that ruling.
See n. 3, supra.
In White v. Massachusetts Council of Construction Employers, Inc., 460 U. S. 204, 214-215, n. 12 (1983), we specifically declined to pass on the merits of a privileges and immunities challenge to the Mayor’s executive order because the court below did not reach the issue.
As noted by the Supreme Court of New Jersey, this case was brought as a challenge to the State’s administrative approval of the Camden ordinance, and not as a direct challenge to Camden’s adoption of it. 88 N. J., at 324, 443 A. 2d, at 151.
The dissent suggests that New Jersey citizens not residing in Camden will adequately protect the interests of out-of-state residents and that the scope of the Privileges and Immunities Clause should be measured in light of this political reality. See, post, at 231-232; post, at 227 (“the Framers had every reason to believe that intrastate discrimination based on municipal residence could and would be dealt with by the States themselves in those instances where it persisted”). What the dissent fails to appreciate is that the Camden ordinance at issue in this case was adopted pursuant to a comprehensive, statewide program applicable in all New Jersey cities. See n. 2, supra. The Camden resident-preference ordinance has already received state sanction and approval, see supra, at 212, and. every New Jersey city is free to adopt a similar protectionist measure. Some have already done so. See Reply Brief for Appellant 41-42, n. 30, and App. A. Thus, it is hard to see how New Jersey residents living outside Camden will protect the interests of out-of-state citizens.
More fundamentally, the dissent’s proposed blanket exemption for all classifications that are less than statewide would provide States with a simple means for evading the strictures of the Privileges and Immunities Clause. Suppose, for example, that California wanted to guarantee that all employees of contractors and subcontractors working on construction projects funded in whole or in part by state funds are state residents. Under the dissent’s analysis, the California Legislature need merely divide the State in half, providing one resident-hiring preference for northern Californians on all such projects taking place in northern California, and one for southern Californians on all projects taking place in southern California. State residents generally would benefit from the law at the expense of out-of-state residents; yet, the law would be immune from scrutiny under the Clause simply because it was not phrased in terms of state citizenship or residency. Such a formalistic construction would effectively write the Clause out of the Constitution.
Under the dissent’s formalistic approach, see n. 9, supra, the “Alaska Hire” statute in Hicklin would have been exempt from any challenge under the Privileges and Immunities Clause if the Alaska Legislature had simply excluded from the hiring preference the residents of one remote county. Yet the discriminatory effect on out-of-state residents, with which, after all, the Clause is concerned, would have been the same.