Boosting Wage Variation Across the Country: A Path to Higher Living Standards

The Government is committed to putting more money in people’s pockets nationwide to boost wage variations. Achieving this goal requires a clear understanding of what drives wage differences in different regions. One of the Government’s six key milestones is to improve living standards nationwide, and a crucial part of this strategy is increasing local wages. This blog explores wage variations across the country, the factors influencing them, and what needs to be done to raise incomes everywhere.?

Understanding Wage Variations

Wages vary significantly across different regions, with the performance of cities playing a major role in these differences. However, a worrying trend is that wages have stagnated across the country since 2008.

• Workplace wages in cities and large towns are consistently higher than those in rural areas due to the advantages that come with urban locations.
• Regional pay disparities are largely driven by how well cities perform economically.

The biggest wage gaps are found between cities rather than rural areas. If a region is struggling, it is likely because its cities are underperforming. For example, London has the highest workplace wages in Britain—33% higher than the national average and 68% higher than Burnley, which has the lowest workplace pay. This translates to an annual wage difference of nearly ￡20,000, meaning that by August, a worker in London has already earned what someone in Burnley makes in an entire year.

Where are the top highest-paying cities across the UK??

Eight of the ten highest-paying cities are located in the Greater South East, the country’s best-performing region. Meanwhile, other Regions lag behind, with only a few cities—such as Bristol, Swindon, Derby, Edinburgh, Aberdeen, Leeds, and Warrington—having wages above the national average. To address this, the Government has prioritised regional growth as a central focus of its upcoming Industrial Strategy.

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The Stagnation of Wages Since 2008

Despite urban areas typically offering higher wages, wage growth has been sluggish across all cities since the 2008 financial crisis. In real terms, most places have not seen an increase in wages, and for those that have, the growth has been minimal. Coventry, the city with the highest wage increase since 2008, has only seen an 11% rise in wages over 15 years. In contrast, between 1997 and 2008, wages in Coventry grew by 31%.

Both northern and southern cities have struggled with wage stagnation. In some places, people are actually earning less today than they did in 2008. Aldershot, for example, has seen the largest drop, with real wages now 17% lower than they were 16 years ago. Despite repeated policy efforts—such as ‘regional development policy,’ ‘rebalancing the economy,’ ‘Northern Powerhouse,’ and ‘Levelling Up’—these initiatives have yet to make a meaningful impact on wage growth. More concerning is that the overall wage gap has not widened due to improvements in underperforming cities, but rather because once-thriving urban centres have also stagnated.

Guiding Principles for Local Growth Plans

The Government has tasked mayoral authorities with developing Local Growth Plans as part of its broader Industrial Strategy. Even areas not specifically asked to submit a plan may revise their local economic strategies in response to national policies. The following principles should guide these plans to ensure they effectively boost prosperity:

1. Prioritise the Exporting Economy: Wages in an area are primarily driven by its export base. Growth policies should focus on expanding and improving this sector to create higher-paying jobs.
2. Focus on Cities and City Centers: The most innovative and high-value industries thrive in cities and city centres due to their economic advantages. Strategies should recognise the distinct roles urban and rural areas play in generating prosperity and tailor policies accordingly.
3. Look Beyond ‘Key Strengths’: While it may be tempting to focus on existing strengths, real change comes from addressing economic weaknesses. Struggling areas should concentrate on attracting cutting-edge businesses and reducing reliance on a single industry.
4. Avoid Overreliance on Government’s Sectoral Choices: The national Industrial Strategy will focus on a few key sectors, but these may not be relevant to all local economies. Instead, local strategies should emphasise place-based interventions—such as improving commercial and residential space, increasing city-centre density, enhancing transport networks, and upskilling the workforce.
5. Ensure Inclusive Growth Through Export-Led Growth: Inclusive growth is only possible if the local economy is growing overall. Efforts to achieve inclusive economic development must be linked to strengthening the export sector, as this is the foundation of sustainable wage increases.

Conclusion

If the Government is to succeed in raising living standards across the country, addressing wage disparities must be a top priority. While cities continue to play a crucial role in determining regional pay, economic stagnation since 2008 has hindered progress. By focusing on export-led growth, strengthening urban economies, and implementing targeted local policies, the Government and local authorities can create a more prosperous future for all regions.

For more information on UK wages, you can read the?full report?from Cities Outlook.?

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