One of the themes emerging from Theresa May’s short time as Prime Minister has been the need to create not just more jobs, but more better-paid jobs – a clear acknowledgement that the huge employment growth seen under David Cameron has largely been coupled with stagnant wages. To achieve this, May will have to ask two questions – where are these jobs likely to be created, and what should policy do to support their creation?
Following the trends of recent years, the UK is likely to continue to specialise in ever more knowledge-based activities, such as law, finance and software development. These jobs could, in theory, locate anywhere. But they don’t. In 2014, 70 per cent of Britain’s jobs in these sectors were based in cities, despite them accounting for just 8.5 per cent of land.
This is particularly acute for city centres. The city centres of Britain accounted for around a third of all knowledge-based services jobs in Britain in 2011, despite accounting for 0.8 per cent of land. And this has become increasingly the case in recent years.
This shift has occurred in an era when telecommunications technologies have become ever more sophisticated. But instead of bringing in the ‘death of distance’, the geography of jobs has become ever more concentrated. This is because of the importance of face-to-face interaction, which research has shown to be most significant for better-paid services jobs.
It’s for this reason why so many of these jobs can be found in Central London, despite the exorbitant costs of locating there. There were over 600,000 knowledge-based services jobs in Central London in 2011, accounting for 43 per cent of all jobs in the area. And this isn’t just a London thing – similar patterns can be seen in places like Manchester city centre too, which create jobs for residents across the city region (1 in 10 Manchester city centre workers live in Stockport).
Crucially though, not all city centres have performed well in recent years. The growing importance of city centres in the national economy has been led by large cities. Meanwhile the majority of city centres of small and medium-sized cities have not been the drivers of growth in their cities, and in a number of cases they have gone into reverse. They have been unable to attract the better-paid jobs that are increasingly choosing a city centre location, with the result being that their cities have fewer high paid job opportunities overall.
So if Ms May wants to see both the growth of better-paid jobs, and the growth of smaller cities as well as large (as she said in her single campaign speech), then her policies will need to have a much greater city centre focus than government policies have had to date. No more subsidising of out-of-town business parks. No more enterprise zones on the fringes of cities. Instead policy needs to pay greater attention to reducing costs in our most successful city centres to allow then to continue to grow, and make our less successful city centres more attractive places to do business (through planning, skills and transport interventions, for example).
Our specific briefings on Brighton, Birmingham, Wakefield, Hull and Middlesbrough have more information on the policy approaches required in these cities.