To reduce inequalities between different parts of the country — the goal of the Levelling Up agenda — we need first and foremost to understand how local economies across the country work. Place plays a central part in this agenda and labour market insights can help us understand how, why, and what we should be doing about it. In particular, data can help us unpack three of the key factors that determine the economic success of an area: type of geography; industry make-up; and skills make-up.
Type of geography
Agglomeration matters when it comes to economic growth. Urban areas tend to attract more businesses and more people than other parts of the country, and therefore have a more vibrant labour market than rural areas.
This matters for levelling up. The first mission set out by the Government in the agenda says that ‘by 2030 pay, employment and productivity will have increased everywhere in the country’, but the level of such increase will very much depend on the type of place in question. This is visible in the graph below, which shows the level of recruitment activity over the last 12 months in the highest and lowest priority areas (green and orange dots respectively), across different types of geography (rural, significantly rural and urban). As you can see, whether they are considered high or low priority, urban areas have a more active recruitment market than other areas. Therefore, when thinking about the Levelling Up agenda, it is important to compare like for like: for rural areas in need of levelling up, a realistic goal could be to increase their economic activity in line with that of already successful rural areas, rather than attempting to attain to that of urban areas.
Another key determinant of the economic success of a place is its industrial make-up. As the UK continues to specialise in high-skilled and knowledge-intensive activities, it is no surprise to see that the most economically successful areas in the country have more of these jobs than places said to be in need of levelling up.
The chart below groups industries by skill level, and shows which of the priority areas have specialisms in them, as measured by Location Quotient (this is a measure of the proportion an industry makes up in a particular location, compared with the proportion the same industry makes up in the national economy, with the national economy benchmarked at 1.0). It is clear from this that higher skilled industries, such as Knowledge intensive financial services, are concentrated in the lowest priority areas (orange dots), whereas lower skilled industries, such as Low technology manufacturing, tend to be concentrated in the higher priority areas (green dots).
A third determinant of the success of a place is skills: alongside high-productivity, high-skills jobs, places need people with the relevant skills to be able to carry out these jobs.
However, as we mentioned in a previous piece, simply churning out more university-educated individuals in itself cannot be the only solution. This is because more highly-educated individuals tend to be more mobile, meaning if they do not find suitable opportunities in their local area they are more likely to leave, bringing with them their newly-acquired skills. This highlights the complex interdependencies between jobs and skills in the Levelling Up agenda and how important it is for local stakeholders to work together to address these multiple challenges in a coordinated matter.
For a further discussion on the importance of place, check out our recent webinar below. We are also hosting more webinars on Levelling Up over the coming months, focusing on skills (26th April), local partnerships (24th May), and reducing disparities (28th June).
You can register for any or all of these by clicking the button below.