1. Economics
February 1, 2016

Britain's cities are generating wealth far beyond their boundaries. Wage statistics prove it

By Paul Swinney

As Cities Outlook 2016 shows, the majority of the UK’s economy is concentrated in our largest cities. But this doesn’t just benefit city residents – it also benefits those living in the areas around cities to. And a glance at the data on where wages are earned shows us why.

In 2015, people living in cities were paid a combined total wage of £6.8bn. That’s a big number, but it’s quite a lot less than the £8bn earned by people who work in cities. This meant that, in net terms, our cities generated £1.2bn in wages for those people living in their hinterlands or beyond.

The role that a city plays in its wider area varies from place to place, as illustrated in the map below. In cities marked in green, workers earned more than residents: these places provided high paid job opportunities for people from their surrounding areas.

Red, on the other hand, represents cities where the total pay packet of workers was lower than wages earned by residents. In these cities, many residents have looked elsewhere for higher paid job opportunities.

Click to expand. Source: ONS 2015, Annual Survey of Hours and Earnings.

The map tells us three main things. Firstly, many cities play a hugely important role in providing jobs for their wider areas. In two thirds of all UK cities, the total wages earned by workers outstripped wages earned by residents. 

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Secondly, a number of cities around London see an inflow of wages, rather than an outflow, reflecting the strength of the capital’s economy. And with the exception of Reading, all of these cities were coastal, suggesting that the amenities and quality of life offered by seaside places is a big draw for London workers. (This was echoed in our survey work of Brighton in our Urban Demographics research from last year.)

Thirdly, the inflow of wages into a number of cities in Yorkshire and the North West show the importance of Manchester, Leeds and Liverpool within the Northern Powerhouse region. To some people, the Northern Powerhouse is about spreading economic activity across the North. But this data shows the vital importance of these three big cities as a source of wages – despite the fact that, on a national level, these places punch below their weight. Improving the performance of these cities will be vital to turning round the fortunes of the northern economy as a whole.

A number of city leaders have in the past expressed concern that their residents are lower paid than their workers – raising questions about why residents are unable to take advantage of the job opportunities within their cities.

But such statistics also show the role of the cities in providing opportunities beyond their boundaries. While in some ways they represent a challenge, in other respects they’re a sign of strength.

More importantly, it underlines the importance of cities and their wider areas working together on policy. Economic policy should match the geography that people work, shop and live their lives over. And while there has been huge progress in recent years, especially with the formation of combined authorities across many of parts of the country, some of our largest cities still have some way to go to put city-region-wide structures in place.

Paul Swinney is principal economist at the Centre for Cities.

To find out more about the Cities Outlook 2016 report, click here.

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