William Eichler 25 January 2016

Jobs boom in cities accompanied by low urban wages, report reveals

Nearly a million new jobs have been created in British cities since 2010, but the average salary has decreased, according to a new report from Centre for Cities.

Cities Outlook 2016 reveals that more than 980,000 new jobs were created in cities between 2010-14, but that urban wages fell by 5% in the same period – a decrease in average annual salary of £1,300 per city dweller in real terms.

Cities were responsible for three quarters of the jobs boom between 2010 and 2014, but nearly half (29) of UK cities are currently classified as having ‘low-wage, high-welfare’ economies, the report’s authors found.

Centre for Cities did, however, also find that 14 UK cities are already delivering ‘high-wage, low-welfare’ economies, but these were concentrated mostly in the Greater South East, suggesting a geographical divide across the country.

The report’s findings also suggest a close correlation between high wages and fast jobs growth. The number of jobs in high-wage places has risen by 10% since 2010, compared to 3% in low-wage cities.

But welfare spending has also grown at a much faster rate in high-wage cities, with housing benefit payments more than 50% higher than in other places. This is due to a high demand for housing leading to an increase in housing benefit payments.

Commenting on the findings of Cities Outlook 2016, Alexandra Jones, Chief Executive of Centre for Cities, said:

Cities Outlook 2016 highlights the size of the challenge facing the Government in building a high-wage, low-welfare economy, and the importance of supporting and empowering UK cities in order to make that vision a reality.

‘One of the most pressing issues is the need to tackle skills-gaps and improve schools attainment, especially in low-wage cities, to help those places attract businesses and jobs, and support more people to move into work, particularly in high-skill sectors.’

Ms Jones also stressed the importance of tackling housing issues.

'For cities which have seen strong growth in wages and jobs, the focus should be on addressing housing shortages, to ensure that their success isn’t derailed by a lack of affordable homes.’

Emphasising the need for more devolution, Ms Jones continued:

‘Cities also need more powers and incentives to boost jobs and wages. Giving places control over skills and welfare budgets, and allowing them to keep any savings made by reducing the welfare bill, would incentivise local leaders to invest in employment programmes that, if successful, would reduce people’s need for benefits payments.’

‘Further devolution would also enable local leaders to make spending decisions which better meet the needs of their communities and give them more incentives to drive economic growth,’ she added.

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