Regardless of the upgrade, there is an age-old problem to solve – Institute For Fiscal Studies

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I hesitate to delve into the discussion about leveling up. I have no answers. Nor, really, anyone else, let alone the Prime Minister, who certainly provided none in last week’s long-drawn but ultimately empty speech. Again, he is in good company. This ambition to level up isn’t new, after all. Efforts to reduce spatial disparities in the UK date back at least to the Special Zones Act 1934. The disparities between regions in the UK are long standing and, in some dimensions, at least, have not changed much in decades.

So what is the problem, what can we do to fix it and how will we know when we are successful?

You might think the answer to the first question was obvious: some parts of the country, London, the South East, are much better off than other parts, the Midlands and the North. Not, in fact, if you look at people’s disposable income. Once housing costs are taken into account, the median disposable income in London is no higher than the national average. Other things are very different, however. There are big differences in productivity. Salaries are higher in London. According to Professor Henry Overman of the London School of Economics, this is mainly because of where the best educated and skilled people live and work, rather than because there is a big difference between what people of the same level can win in different parts of the country. There are many more graduates in London than in the North.

A very big difference is that the very rich, both the richest and the richest, are concentrated in London and in the South East. The poor are not only always with us, they are everywhere, as numerous in London as elsewhere.

The problem economically is that good, high-skilled, well-paying jobs are not distributed evenly across the country. The poorest regions are losing too many of their better educated young people because they do not have attractive jobs to turn to. Highly skilled jobs are difficult to find in areas with few highly skilled workers. You see the problem.

The term “good jobs” is important. We are not the only ones who worry about these things. It has probably escaped you that in France, a commission of eminent economists, headed by Nobel laureate Jean Tirole and the former chief economist of the International Monetary Fund Olivier Blanchard, has just completed a report commissioned by President Macron. It examines three major economic challenges: climate change, demographic change and inequality. It’s hard to imagine Prime Minister Johnson ordering something similar.

They worry about inequalities there too, even though income inequalities are much lower than here, in part because of a much more generous benefit system. Their proof of what really worries their countrymen – a good place to start, by the way – is that unequal incomes per se are not the problem. Unequal opportunities and in particular the opportunities to get a “good job” are what matters. The French, and I suspect the British rather, consider that a good job is one which “offers them a reasonably long tenure in the company, salary progression and good benefits, responsibilities, promotion opportunities and a decent working environment. A good working life is one in which, in addition, if a good job is made redundant, another good one can be found. The problem is that inadequate education and training, along with changing technology and business models, has resulted in a hollowing out of traditional skilled and middle-class jobs, especially in peripheral regions.

Easy to say, difficult to approach. But it rings true. Ed Miliband could have said we needed a pre-distribution. Others might require an industrial strategy. Perhaps the greatest economic challenge we face is finding ways to manage the effects of trade and technological change in a way that promotes rather than undermines good jobs. One thing is certain. Redistribution of income through higher benefits may be necessary, it may reduce income inequalities, but it will not reduce those inequalities that people seem to really care about.

The Prime Minister quoted Andy Haldane, former chief economist at the Bank of England, for saying that our economy “is about to recover like a coil spring”. That did not prevent him from dissolving the industrial strategy board, of which Haldane was chairman. Johnson, however, may agree with his view that “sustainable local growth must be anchored in local strategies, covering not only infrastructure but also skills, sectors, education and culture” . You cannot level up from the center. If there was any content to his speech, it was his nod to the need for more elected mayors and greater decentralization of power from the center.

How will we know if we are making progress? The obvious thing to look at will be the distribution of wages, skilled jobs and skilled workers across the country. There is, however, an even more fundamental difference between us, the narrowing of which I would take as real and unmistakable proof of success. Johnson said he was outraged that “a man from Glasgow or Blackpool is on average ten years younger on this planet than a man growing up in Hart, Hampshire or Rutland”. Why, he asked, “do the people of Rutland live to such stupendous ages?”

We know the answer to this. People who are better off, and have happier, more fulfilling lives and good jobs, live longer and healthier lives than those who don’t. This is the clear conclusion of decades of work on health inequalities.

We will know that we are on the verge of taking it to the next level when the differences in health and life expectancy across the country begin to diminish. Unfortunately, it is a measure of inequality that has clearly moved in the wrong direction over the past decade.

This article first appeared in The Times and is reproduced here with kind permission.



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