Employment and wage gaps between parts of the UK have fallen since the 1990s, with the difference between low and high-employment local authorities shrinking by 3 percentage points over the 2010s.
A report by think tank the Resolution Foundation used a range of economic outcomes to assess the state of geographic inequality facing the UK.
The analysis revealed a mixed picture as some economic gaps have shrunk, some remain unchanged, and some have worsened – particularly in most recent years.
The narrowing of employment gaps means it has become easier to find work in historically low-employment areas than it used to be. In Tower Hamlets and Manchester, for example, the employment rate has risen from around 50% to 70% over the past three decades.
Regional employment gaps
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The regional employment gaps that remain are much less worrying, according to the Resolution Foundation, than those experienced following the deindustrialisation of the 1980s and 1990s.
Wage gaps between places have also come down, primarily for the lowest earners, and thanks to a rising national minimum wage.
For example, the pay gap between the lowest-paid workers in Basingstoke (one of the highest-paid areas) and Plymouth (one of the lowest-paid areas) was 26% in 1997, but this shrunk to just 3% by 2023.
But despite shrinking wage and employment gaps in the past couple of decades, geographic gaps in income inequality before housing costs have remained stubbornly high.
The average income per head in the richest area, Kensington and Chelsea, is over four times that of Leicester, the poorest area.
The think tank says that over the past 25 years, poor places have tended to remain poor and rich places rich. For example, the average before-housing-cost income per head in Hammersmith and Fulham has been consistently two-to-three times higher than in Burnley since the late 1990s.
Another large and persistent economic gap is productivity – a measure of the ‘effectiveness’ of local economies. Gross Value Added (GVA) per job in London was 45% above the national average in 2022, and many of the country’s second cities lag behind, with Manchester 7% above the average and Birmingham 4% below.
These productivity gaps are rooted in the 1980s deindustrialisation period, as areas outside of London struggled to transition from manufacturing to service industries as effectively as the capital.
The Resolution Foundation also found widening spatial disparities in child poverty in the most recent years. The result is that nearly half (48%) of children living in Birmingham and Manchester are now growing up in relative child poverty (after housing costs).
The Uneven Ground report notes that the geographic location of child poverty hotspots has shifted: in 2014-15, 19 of the 20 hotspots were in London, but by 2022-23, only three remained in London, with the rest split between the North West and West Midlands.
Charlie McCurdy, economist at the Resolution Foundation, said: “While the UK has narrowed employment and wage gaps across the country over the last three decades, income and productivity gaps have remained large, and child poverty gaps have grown in recent years.
“Of most concern is that regional economic differences are deeply entrenched: across multiple measures, the places that were doing worst in the late 1990s have generally continued to do so.
“The new government may have ditched the language of ‘levelling up’, but their growth agenda cannot be achieved without unlocking the potential of the UK’s second cities and raising living standards in all parts of the country.”
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