As is the case with a number of indicators, Cities Outlook 2023 shows that most cities trail the national average for the wages their jobs offer. Just 16 outperform the national benchmark, and on the face of it this calls into question the principle that cities are places of prosperity generation.
Both the theory and the evidence tell us that the UK is an outlier amongst developed nations in this regard. The underperformance of large cities outside London pulls down the size of the national economy overall.
Despite this, while most cities trail the national benchmark, comparing them to their regional averages shows that, in the context of their region, many do play the role of prosperity generators within their wider areas (see Figure 1).
Figure 1: A number of struggling cities are still the strongest performers in their regions 
Source: ONS
The North East – the region with the lowest workplace wages in the UK – is a good example of this. While wages in Newcastle are £59 per week lower the national average (ranking it 37th out of 63 cities), it is the best performing place in a weak regional economy. Wages in Newcastle are £18 per week higher than the North East average.
As discussed last week in the context of Blyth, this spreads wider than the city. Around 80 per cent of Northumberland’s out commuters work in Newcastle. Looking at data on incomes of residents (which is available at a lower level than wage data on a resident basis), Figure 2 shows how firstly, most towns and villages in Northumberland have higher incomes than Newcastle residents, and secondly how their average incomes increase as their shares of commuters to Newcastle increase.
Figure 2: Places with larger flows of commuters to Newcastle have higher incomes
Source: ONS
The problem for the North East (and the national economy) is that Newcastle underperforms. While it does bring some degree of prosperity to the region, it should be bringing much more. It shouldn’t just lead the regional average. It should lead the national one too.
To do this it needs to grow, and in particular grow the number of high-skilled jobs in the city. In 2011 (the latest available data) Newcastle had 5 per cent more jobs than Bristol, but Bristol had 14 per cent more high skilled jobs than Newcastle. As Figure 1shows, Bristol leads the national average for wages, ranking 10th out of 63 cities.
If Newcastle did see this growth the implication would be that it would generate a much greater number of opportunities, not only to residents living within the city, but to places like Blyth and Morpeth too. If this was the case, both the Newcastle and North East wage figures would be further to the right in Figure 1.
Despite their poor national performance, there are several underperforming cities that play an important role in their regional context. However, it is this underperformance that explains why their wider region lags. To bring greater prosperity to the latter, policy needs to deal with the former.
Leave a comment
Be the first to add a comment.