Dhaka, Bangladesh
Jobs boom in some northern cities masks real inequality

Jobs boom in some northern cities masks real inequality

By Luke Raikes

People have very different experiences of the economy depending on where they live and work. New research from the Resolution Foundation is a timely reminder of quite how different that experience is: it shows that some northern cities have seen large increases in employment rates, and that London accounted for a third of net employment growth since 2008. But while some low-employment areas have also caught up, there are some new divides emerging - in rural areas especially. Our own research at the Institute for Public Policy Research has shown that real weekly pay has fallen at different rates across the country since 2008: in the north by £21; but in Northern Ireland it actually rose (from a relatively low level) by £8. These differences may have passed people by, as politicians tend to talk about national level statistics. But it is these local and regional statistics that more accurately reflect the real-life economies people experience. Central government rarely spends time focusing on the major differences between places, or thinking about how a regional economy works as a whole. Take London - the site of a jobs boom that no other region can hope to match. Why is it, then, that London has the highest rates of poverty and inequality? Why are Londoners more likely to report low wellbeing or high levels of anxiety? A large part of the answer to this is, of course, London's unique housing crisis. But this crisis doesn't occur in isolation from the labour market: it is closely linked to the jobs growth the capital has seen. In contrast, there are many areas outside the capital that saw a decline in jobs during the period - where the rate of deprivation is similar to London's but with a fundamentally different cause. Often it is the case that industries have declined, and Westminster has done little to help - at times in the past, governments have actively encouraged this process. It is important to consider these two different economies together and understand why their paths have diverged so dramatically. And it becomes clear that central government has boosted London's economy, with a cost to industries and people in the rest of the country. But what often isn't discussed is that this has also cost people living in London. Fundamentally this highlights how inadequate central government has been at managing our economy over the last few decades. Westminster tends to focus on those things that regions have in common and that need to be resolved across the country: our regions share the same regulations and laws, so zero-hours contracts, poverty pay and other issues related to job quality are often the focus. But other countries have a completely different approach. The north of England is similar to the Rhine-Ruhr valley in Germany: it also has a history of heavy manufacturing and coal mining. But here the similarities end: this region of Germany has taken a very different path to the north of England. Now the Rhine-Ruhr region has rates of productivity that far outstrip almost all northern regions. The north of England is left with rates of productivity that compare to East Germany: an area that has a very different and much more challenging economic history. One of the major reasons for this is that the Rhine- Ruhr's economy isn't managed solely by Berlin as northern England's economy is by London. The state of North-Rhine Westphalia has significant economic power, and a high degree of tax-setting autonomy, too. That means it has been able to set out an industrial strategy of its own, and helped to adapt and modernise its industrial base. Thankfully, policy in the UK is moving in the right direction, albeit very slowly. There are local industrial strategies being drawn up across the country, with Greater Manchester, the West Midlands and the Oxford-Milton-Keynes-Cambridge corridor receiving extra attention from central government. This is an encouraging development. But it needs to go much further if the UK's regions are to adapt to the significant upheavals coming in the future. Local industrial strategies must be backed by real devolved power - above and beyond the small packages of powers already devolved. Greater Manchester and other city and county regions should be able to support their industries with more significant budgets and powers over transport, education and skills. But the other missing link is at the larger tier of geography. Some areas of economic policy - innovation, trade and investment, and inter-city transport - are most effective if they are held at larger, regional geographies: North-Rhine Westphalia is a region of 18 million people; Greater Manchester has only 2.8 million. England's regions need to work at a larger scale better and more often, so industrial strategies for the "northern powerhouse" and the Midlands engine regions are needed, too. Westminster needs to urgently adjust to the reality of the economy as people experience it in different areas across the country. When they do so, they should realise that they need to offer not just national solutions, but real devolution so that communities can solve their own problems and build their own strengths.

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