“Levelling up” is a political slogan with its own department, recognition for the role it played in winning the Conservatives the 2019 election. Tackling the blight of regional inequality was dubbed as the Tories’ “defining mission”. But data released this week shows successive Conservative prime ministers have failed that task in one key way. The Institute for Fiscal Studies finds a widening geographical wage gap in the last three years – driven by income increases for well-paid workers in London which mask real wage cuts elsewhere.
Mean wages for employees living in the capital had increased by 5%, after adjusting for inflation, to £4,400 a month before tax. This is almost double the average national increase of 2.7%. Those living in London’s commuter belt saw pay increases of 4.5%. But many workers were now between 1% and 4% worse off than they were before Covid-19 arrived. Ministers have chosen year after year to set the price of labour in education and public administration at levels that ensure workers suffer real pay cuts. The jobs market is not just about demand and supply. Labour shortages have been most acute in low-paid sectors. Health and social care settings are struggling to fill roles. But real pay growth there is just 2.5% – below the UK average rise. Industrial action continues because workers find themselves unable to bargain for better pay.
Geography appears to be wage destiny. Nearly a third of jobs in finance, professional services and IT are based in London, which accounts for less than a fifth of all jobs. City workers, on average monthly wages of £7,425, have enjoyed a pay rise of 7.6% above inflation since February 2020. Meanwhile, employees in manufacturing, which is concentrated in the Midlands, the north of England and Wales, have seen real pay shrink. A third of Britain’s workforce in 1951 was employed in industry. That was hard to maintain over time. But the UK today does not even have a share of good jobs in manufacturing comparable to our G7 peers, distributed around the country.
The Tories have so far failed to make good on their promise of a post-Brexit “high-skill, high-wage labour market”. There’s probably no time before the next election to redeem the party’s 2019 pledge. High-skill jobs attract high-skill workers, which partly explains why graduates make up roughly half of the working-age population in London and Brighton, compared with less than a fifth of working-age adults in places such as Doncaster, Mansfield and Grimsby. Given the reported lack of skills in regions outside London, it is therefore self-defeating to see spending on adult further education and apprenticeships set to be 25% lower in 2024/25 than in 2010/11.
There are many dimensions to geographical inequality. Unscrupulous companies can offer insecure, low-paid work where there is no alternative. Wherever they live, people should be able to spend time outside work doing things they love. A working life with good benefits, responsibilities and advancement may prove more important than pay. So might a serious diminution in differences in health and life expectancy across the country. Globalisation has hollowed out traditional skilled and middle-class jobs, especially in post-industrial regions. A more active state could solve this by privileging a better work-life balance, or with an industrial strategy that made investments in businesses and infrastructure to offset the self-reinforcing advantages of England’s south-east. But these, unfortunately, have not been on this government’s agenda.
