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It is often stressed that being in work is the best way to escape poverty. But while this is undoubtedly true, does the type of jobs cities generate matter to their ability to support people with few or no formal qualifications?
When it comes to creating jobs for low-skilled people, cities have two options.
The first is to directly attract low-skilled ‘exporting’ businesses to their local area. Given that these businesses sell to regional, national and international markets, they could, in theory, locate anywhere in the country, but choose to be based where they do due to the benefits places offer to them. In particular, cities that are able to offer access to large pools of low-skilled workers and relatively cheap land are the favourite location for low-skilled exporting activities. This is why the headquarters of ASOS is in London, while its distribution activities are in Barnsley, for example.
The other option is to create low-skilled jobs indirectly – attracting in higher skilled exporting jobs generates demand for (and so jobs in) local services. Cafes, restaurants and hairdressers all pop up close to where people have money to spend. This is why the performance of the high street varies across cities.
As the map below shows, how cities create low-skilled jobs differs across the country. Cities in the Greater South East mostly generate low-skilled jobs in local services. Around eight out of 10 low-skilled jobs generated in cities like Reading and Brighton are in local services and the share is even higher in London and Cambridge. In contrast, in cities in the North and Midlands, the composition of low-skilled jobs is more skewed towards exporting businesses. In Burnley for example, local services account for approximately 60 per cent of all low-skilled jobs, while almost 40 per cent of all low-skilled jobs are in exporting businesses.
The extent to which cities generate one type of low-skilled job over another wouldn’t matter if employment outcomes for individuals with few or no formal qualifications were the same across the country. Yet, what we see is that the employment outcomes for low-skilled people are better in cities which mostly generate low-skilled jobs indirectly in local services. Low-skilled people in Middlesbrough are twice as likely to be unemployed than if they lived in Exeter, and in Doncaster 44 per cent of low-skilled people are working in higher-skilled occupations, compared to 59 per cent of low-skilled people in Reading.
And this speaks nothing about the sustainability of such jobs. Low-skilled jobs in exporting industries are in particular vulnerable to both offshoring and automation. The recent decisions by Nissan to move production of some of its models away from the city act as a case in point.
Sunderland has a strong track record of attracting foreign investment, and foreign companies employ more people than almost any other British city. While this has created many job opportunities, much of this has been in lower-skilled activities. The outcomes are that:
While creating any jobs is, at least in the short-term, better than creating no jobs at all, cities should be mindful of the limited role low-skilled exporting businesses can play in providing long-term sustainable employment outcomes for people with few or no formal qualifications.
Rather, if places want to improve economic outcomes for everyone, they should focus their inclusive growth strategies towards attracting more of the high-skilled exporting businesses that we see are able to drive economic growth and create job opportunities not just for high-skilled workers but for low-skilled people too.
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