Creating jobs is essential to level up, but the type of jobs created also matters if we are to level up pay across the country.
It takes sixteen months for the average UK worker to earn what the average Londoner makes in a year. In 44 out of the other 62 largest urban areas across the country it takes even longer than that and, at the extreme, it takes almost two years for the average worker in Burnley to earn the average Londoner’s annual salary.
While this year’s Cities Outlook revealed stark inequalities in accessing job opportunities across the country, and how the pandemic has made this worse, it is clear these inequalities go well beyond access and also affect earnings.
Much of these differences are down to differences in industrial structure. As our City Monitor shows, London and Burnley are also at the extremes when looking at the share of knowledge intensive private-sector jobs. In London almost a quarter of all jobs are in this category, compared to just over 5 per cent in Burnley. And this applies more widely too: cities with a larger share of these knowledge intensive jobs tend to have higher wages (see figure below).
Figure 1: Cities’ average weekly workplace earnings compared against their share of jobs in knowledge intensive industries.
Source: ONS 2020, Annual Survey of Hours and Earnings (ASHE), average gross weekly workplace-based average gross weekly workplace-based earnings, 2019 and 2020 data. Own calculations for PUA-levels weighted by number of jobs. Earnings data is for employees only. ONS 2020, Business Register and Employment Survey, 2019 data.
The downside of this is however that higher earnings in strong and successful economies are also closely linked to higher house prices. Continuing with the Burnley-London comparison, with the average house price in London being just over £630,000 you can buy almost six houses at the average price in the northern city.
This is a crucial point for the Government to consider as it prepares its economic recovery strategy, as it suggests that, beyond the immediate short-term crisis, different places need very different policy responses if we are to ‘level up’ the country once the pandemic ends.
In the short-term the main challenge in every part of the UK is to get people who have lost their job during the pandemic back in the labour market. After all, any job is better than having no job at all.
In the longer-term it is the type of jobs that are created, rather than the quantity, that will determine the ability of places like Burnley to, not just bounce back, but also to level up. To do so, less economically prosperous places need to become more attractive to knowledge-intensive businesses. Practically, this means less reliance on retail, hospitality and other local services for employment and more on the higher skilled-private sector.
For this to happen, the Government needs to combine its short-term focus on saving jobs and businesses with longer-term policies for levelling up. When it comes to attracting more high-knowledge businesses, this can only happen through investment in skills, improving office and co-working provision in city centres, improving city-region transport infrastructure, R&D spending, and more devolution to local areas.
This is a very different approach to that needed to ensure strong economies can continue to be prosperous in the future. In places like London and other large cities and towns in the South East of England, ‘levelling up’ is a much different challenge: it is about reducing inequalities between better off and poorer households by managing the costs of growth that have made them such expensive places to live in recent decades.
Only by acknowledging and addressing these twin challenges will the Government be able to ensure every part of the country will prosperous after the pandemic ends.
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