Britain’s Titanic Struggle - Regional Inequality and Low Pay
I attended two events in London last week. First, I watched Professor Philip McCann, a prominent economic geographer based at the University of Groningen, argue that Britain’s regional inequality problem is the worst in the OECD. Apparently, it is more like what you’d find in the Third World. His lecture was hosted by the Centre for Cities. Next, I attended the launch of the Resolution Foundation’s Low Pay Britain 2016 report. There I learnt that Britain also has a serious ‘bad job’ problem – and again, it’s far worse than other industrialised countries.
These appalling regional and pay problems have festered for decades. They are familiar to me. I discussed them in our position paper, The Good Economy: A Better Future of Everyone. Here are some reflections on the discussions that took place at both events.
McCann thinks we are a ‘space blind’ nation – perhaps that’s because the economists (for whom space is an abstraction) hold sway. Economic geographers like McCann are a rare breed in UK universities. He diagnoses Britain’s low productivity, high inequality performance as a regional problem, rather than a sector problem. Logically it’s a bit of both otherwise we’d have no way of explaining Britain’s idiosyncratic regional problem. I am reminded of Doreen Massey’s article in the Regional Studies journal (1979) entitled “In What Sense a Regional Problem?” She argued that the economic histories of regions and sectors are intertwined and linked to the evolution of capitalist development – geographers refer to ‘the spatial division of labour’.
Professor McCann’s analysis is based on regions defined by the administrative boundaries of the defunct government regional offices. With the Regional Development Agencies consigned to the past, these regions are empty shells. Local Enterprise Partnerships are now the only sub-national economic development agencies. Successive governments have shifted the ‘goalposts’ of economic development, labour market and regeneration policy. The OECD referred to Britain’s problem of ‘institutional clutter’. Devolution will produce yet another geo-political layer – a post-EU landscape of city-states presided over by ‘Metro Mayors’. More shifting of institutional goal posts, but no progress with understanding the true spatial dynamics of the UK economic system – the parameters of ‘functional regions’. Of course economists and geographers don’t have the tools and data to do this. Spatial systems are infinitely more complex than economic systems. I found Professor McCann’s talk (his book is out) a timely and valuable reminder that Britain needs to brush up on its economic geography, in theory, practice and policy. I also enjoyed Professor McCann’s slanted hand movements - the UK tipping over Titanic style, having failed to tackle its “regional problem”.
The Resolution Foundation’s latest Low Pay Britain report is focused on a specific issue, but nevertheless one that opens up to bigger issues. Do we blame productivity, monopoly or our economic culture for Britain’s extraordinary low pay problem? And, low pay is a national problem that varies across Britain’s local labour markets – as a result of differences in their underlying economic dynamism. The Good Economy Partnership’s Living Wage Map of Britain shows that the locus of low pay jobs cuts through all regions of the country, including London. As such, the challenge of transitioning Britain from a low pay to a high pay economy will be unequal across the country – as will the effort needed to do so. How can we achieve the right balance?
The Government must ensure that the worst ‘low pay economies’ – and the communities that depend on them - do not fall further behind. The role of public sector employers is crucial to this. Low pay problems are more pervasive in areas where private investment is ‘thin’ and public sector employers are dominant. Public sector employers have to take the lead in these less resilient areas of Britain, where low pay is more reflective of a general economic malaise, rather than the wage and employment practices of individual employers. Government policies should back up public sector employers who want to lead by example. Are we doing enough with the Social Value Act and public procurement? Do LEPs see public sector employers as drivers of good jobs, directly and indirectly through supply chains? Good Jobs is a natural focus for place-making and inclusive local economic development. Who wants to live in Low Pay Britain?
I recommend reading Professor McCann’s book and the Resolution Foundation report. In the meantime, regardless of the state of geo-economic theory, we’re all bound for Britain’s new city states. The Centre for Cities is already anchored up. It is now joined by the RSA Inclusive Growth Commission and the Resolution Foundation and also a crack team of ministerial local growth champions. Next year, shortly before the new Metro Mayors come to power, the Government will fire the starting pistol on Brexit negotiations, and come what may Britain will have a new economic geography – we hope it works for everyone.