Ok, I have made some experiments, and taken the opposite route to gooch (some may consider it cheating but hey, it's an experiment).
Most of the cities in my recent games (last 2 years) have only readily built themselves low-density housing. The existing 'hovels' have not been replaced unless I demolilsh them. I have done this and replaced with higher density housing in areas near to a couple of steelworks that were chronically short of staff. One in particular had good transport links across the city without effect. Building extensive flats, tenements, etc arouons the steelworks - to the point taht perhaps 3x or 4x population to jobs exist (maybe more), the steelworks have been able to recruit enough workers [and you can see them pouring in and out on foot :-) ].
I guess the moral is not all your city population are working in 'employment' : there are children, retired folks, homemakers, unemployed, self employed, etc. as well as those in employment, so it makes sense that well under 1/4 of the true population are avaialble to employ at one factory.
So there you have it: just need enough population that people want to work in a hard job at the steelworks.
Now, the upshot of this should feed into the city growth algorithms, and maybe industtry placement needs to trigger population growth. Should labour-intensive factories in turn trigger high-density housing nearby? Or jsut make cities gros to provide the employees - even if by transfer of population from other cities. This might lead to the concept of 'empty' and derelict housing, or even industry. I know taht the number of coders avaialble is limted, so we'll have to wait for this to get to the top of James and others' lists, but now we have some answers anyway...