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How to… ensure growth is inclusive

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In Leeds almost 20% of all jobs pay less than the living wage. Photo by Creative Services, Leeds City Council

The Joseph Rowntree Foundation, Leeds Council and Leeds City Region have joined forces and embarked on a programme to ensure that growth and poverty reduction in the region are linked. Josh Stott reports.

We know that economic growth passes many people and places by. Even in more successful urban economies there is no guarantee that all citizens will benefit from growth in their local economy, and growth may not reach all parts of a city. The persistence of poverty for households trapped in a low pay, no pay cycle and the persistence of acute deprivation in the same old neighbourhoods highlights the stark limitations of trickle-down economics. A rising tide will not lift all boats.

We know that job creation is the critical factor in linking growth and poverty reduction, and the quality of the jobs created matters, as well as the quantity. The face of poverty in the UK is changing, and families in which at least one adult works have become the largest group in poverty. In 2011/12 more than half of the 13 million people in poverty in the UK were in a working family. Britain has a larger proportion of low-paid, low-skilled jobs than most developed countries.

The situation is likely to worsen as the UK labour market ‘hollows out’ and the number of mid-level jobs decline, meaning progression opportunities will be increasingly limited for the growing bottom end of the labour market. Tax and benefit policy changes alone will not reduce poverty unless the bottom end of the labour market is addressed.

Cities are becoming increasingly important for economic growth and they also have high levels of poverty. The city growth agenda is spawning a new institutional framework around city regions, local enterprise partnerships and combined authorities and new central/local relationships negotiated through city deals and the single growth fund. This agenda has been squarely focused on growth. Issues around the distribution of growth, and who might benefit from the proceeds of growth have been marginalised.

We want to broaden the current growth discourse. Poverty should not be viewed merely as a drag on growth, an unfortunate outcome from growth or relevant only to public service reform. Poverty reduction is a key driver of growth. It is integral to creating a sustainable urban economy. Growth and poverty is a single agenda with a single set of objectives focused around raising skills levels, raising levels of employment, raising pay levels and increasing productivity.  Local economic strategies need to cover local economies as a whole, not just high growth, innovative sectors.

Albeit within a highly centralised fiscal and regulatory framework here in the UK, we want to identify what can be done at city or city region level to deliver more and better jobs and to connect these jobs to households in poverty.

 

Our More Jobs Better Jobs partnership
The More Jobs, Better Jobs partnership provides an exciting opportunity for us to explore these issues in practice and in depth. We are going to be working together over the next four years to gain a better understanding of how these issues play out at a local level, and to identify and support adoption of new policy and practice.

The partnership is in its early stages and we have identified four cross-cutting themes to help unpack some of the issues and guide our activity:

  1. What type of job growth will help reduce poverty?
    Leeds city region’s sector strategy is focused around the usual suspects: financial and professional services; advanced manufacturing; health and life sciences; low carbon and environmental industries; digital and creative industries. But will they benefit all? We are interested in exploring who is and who is not going to benefit from different local growth initiatives. We are also interested in exploring growth in lower value sectors such as hotels and catering, retail and care which are particularly associated with low pay. We want to identify what can be done at a local level around issues of job quality, skills utilisation and progression.
  1. Linking local residents to opportunities:
    Leeds city region faces major challenges in aligning its supply and demand of labour. Skills levels across the city region are generally lower than average. One opportunity we are currently exploring is based around a set of strategic development sites earmarked to bring forward tens of thousands of future jobs. We want to identify what can be done to ensure local residents will benefit from the expected training and employment opportunities rather than them simply being displaced by more socially mobile in-movers or commuters.
  1. How can anchor institutions procure to help reduce poverty?
    Anchor institutions such as local authorities, hospitals, universities, housing associations and the headquarters of private employers have an inherent stake in the city or region and are the biggest employers, biggest spenders and biggest providers of services. Working with these partners we want to understand their contribution to the local economy and poverty reduction and to identify alternative procurement and recruitment practices which could maximise their impact locally.
  1. What’s the business case?
    Yes, there is a social and moral case for making the connections between growth and poverty but what about the business case? If we are serious about making poverty reduction more integral to local growth strategies then we need to be clearer about the scale of costs and benefits which accrue from doing so. Reducing poverty brings a range of economic and financial benefits, which can be important in driving local economic growth and managing future demand on local public services:
  • making more efficient use of people’s skills, knowledge and experience, and boosting productivity;
  • raising incomes, increasing spend and demand in a local economy, directly benefiting local businesses;
  • reducing welfare spending and demand for public services, and increasing tax revenues. This means additional investment could be channelled into growth-enhancing policies and initiatives.

The defining feature of our partnership is that we are approaching growth and poverty as a single agenda. This is complicated as it requires thinking well beyond the confines of traditional approaches to economic development. Households in poverty accessing jobs, sustaining jobs and progressing in jobs is multi-dimensional and cuts across economic development, skills, welfare and other areas such as childcare, housing and transport.

Alongside our work focussing on Leeds City Region we are also developing a wider evidence base of comparative international and UK wide research. We are hoping this wider body of work can be cross fertilised into our partnership with Leeds City Region and critically that our work with the City Region can be translated to other cities.

Leeds City Region in numbers:

Growth potential

  • Annual output = £54bn (the biggest of the core city region economies).

  • Over 100,000 businesses, 3 million residents and a workforce of 1.4m.

  • Home to 8 higher education institutions and 14 further education colleges, catering for a student population of around 230,000.

  • Employment growth of 60,000 jobs (4.1%) forecast between 2013 and 2018.

Poverty challenges

  • Almost 10% of the UK’s most deprived areas – a far higher proportion than would be expected for its population size.

  • An above average number (187,000) of workless households and a further 453,000 economically inactive people

  • Income per head is over £3,300 lower in parts of the city region (i.e. Wakefield) than in England as a whole and these gaps are widening.

  • In Leeds almost 68,000 jobs (c. 20% of all jobs) pay less than the recommended living wage (£7.65/hour )

Josh
Josh Stott is head of the place team at the Joseph Rowntree Foundation. Further information about the Cities Growth and Poverty programme and the More Jobs, Better Jobs partnership can be found here http://www.jrf.org.uk/topic/cities

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