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Economy / Jobs

Why do some cities create jobs, while others lose them?

Which English city do you think has seen the biggest growth in its jobs market over last century or so? Is it London with its financial wizardry and exciting new tech industry? Manchester with its trams and its media? Cambridge with its science park?

We’re being terrible unfair here, because you will quite literally never guess. (You really won’t.) Here’s the top 10:

Now Crawley, a mid-sized town in West Sussex, has two big factors working in its favour on this one. One is that it was tiny in 1911, with a population of just 5,000. It’s now 20 times that size, thanks in large part to being a convenient 45 minute train ride from central London. And even though it’s mainly a dormitory town for the big city, when a town’s population grows by that much, its job market is inevitably going to grow by a fair bit, too.

The other advantage Crawley is sitting on is the presence of a rather big airport next door at Gatwick. Being next to an airport can do many horrible things to a town, but if considered from a purely employment perspective, they tend to be rather good.

You can spot the same phenomena at work in some of the other cities that make the top 10. Many of them have seen significant population growth over the last century; two more are conveniently placed for international airports.

But other factors seem to be in play, too. Being close to London clearly helps. So does the presence of a university, around which research-focused companies can cluster. There isn’t an obvious single factor.

Now consider the towns and cities which have going in the opposite direction. In 1911, Burnley, a market town in eastern Lancashire, had a population of more than 106,000. By 2011 it had fallen to 73,000, a fall of nearly a third.

But that’s nothing compared to the collapse in the town’s job numbers, which have fallen by half.

With this table it’s much, much easier to spot the pattern. Every one of these towns and cities is in the densely populated northern belt that stretches across England from the Mersey to the Humber. In 1911, this was Britain’s industrial heartland.  A century later, it wasn’t anymore.


The importance of being southern

These tables both come from “A Century of Cities”, a report published early this month by the Centre for Cities think tank, which looks at a hundred years of economic data covering cities in England and Wales. For obvious reasons, the report is concerned in part with Britain’s north/south divide. But it also argues that we’ve been misdiagnosing that divide – or at least, that we’ve been coming up with the wrong treatment for it.

A century ago, the report says, the biggest driver of city growth was proximity to resources. That could mean coal, or other things you put into factories; then again, it might mean docks or transport links. Either way, it was fundamentally a matter of physical geography.

Now, though, the biggest driver of growth is proximity to “knowledge”: the cities that have thrived are those which have succeeded in attracting skilled workers and clusters of expertise. In other words, it’s now human geography that drivers growth.

That means that the cause of the north/south divide is not the collapse in manufacturing in itself (after all, London lost plenty of manufacturing jobs, too). Rather, it’s the failure to develop or attract the skilled workforce you need to replace it with something else.

In other words, policies intended to revive the manufacturing sector, most recently chancellor George Osborne’s pledge to create “march of the makers”, are solving the wrong problem. Apart from anything else, modern manufacturing just isn’t as employment intensive as it once was.

Knowledge is power

It’s also overly simplistic to say that job growth has been an entirely southern affair. Here’s a map of which cities have lost and gained jobs over the last century:

Click to expand

The south is clearly doing better; but in the north, the picture is mixed, rather than universally terrible.

There’s a stronger correlation than the one between “southernness” and growth; that’s the one between skills and growth. Here’s another map, showing the share of each city’s jobs in private sector knowledge-intensive business (KIBs). The correlation with jobs growth is far from perfect, but it definitely seems to be there:

Click to expand

As to what drives the distribution of those exciting sounding KIBs jobs, one big factor is history. There is also a clear correlation between where knowledge-based jobs were in 1911, and where they were by 2013: if a city didn’t have many of them a century ago, it’s pretty unlikely to have that many of them now. 

That said, the impact history has isn’t always a straightforward one, and an early industrial decline may work in a city’s favour when it comes to breaking into new types of industry. These graphs show the distribution of different types of jobs in Manchester over time:

The city’s manufacturing sector was already collapsing by the middle of the 20th century. But one side effect seems to have been that the number of knowledge-intensive jobs in the city began to grow early, too.

Now look at the same graphs for Birmingham:

Birmingham’s industrial decline came later – but it’s been slower to build up its share of high-value service jobs, too.

So, how do you improve a struggling regional economy? The report makes three suggestions. You can improve the skill of the workforce. You can encourage “knowledge networks” – universities, research centres, clusters of business and so forth – to form, boosting the productivity of those workers.

Or you can deal with the scars left by industry – desolate factories and so on – and focus activity in the city centre to encourage that process. All of these suggestions should lead to more productive individuals, working in a more productive way.

But building an airport helps, too.
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