Pay is falling behind productivity – with Brexit-voting areas worst off | Business
The British economy risks splitting further along lines drawn by the Brexit vote, according to a report warning pay rises in some parts of the country have failed to match increases in worker productivity.
According to the thinktank Localis, there has been a breakdown in the relationship between rising levels of worker productivity – a key measure of economic output per hour of work – and increases in pay and feelings of self-worth among employees.
Leave-voting areas appear to have been short-changed the most, while remain strongholds have tended to fare much better. Some areas, including Lancashire, Cumbria and the south east midlands, have seen falling rates of pay and worker satisfaction over the last five years, despite rising levels of economic output.
Other areas, such as parts of London and Oxfordshire, have seen levels of reward shift upwards over the last five years, sometimes with little improvement in productivity.
Almost six in 10 people in Lancashire voted to leave the EU in the 2016 referendum. In Cumbria 56% voted leave and in the south east midlands 55%. London was one of the most pro-remain regions with 60% of people voting to stay in the EU. Oxfordshire also voted strongly to remain.
The report found that workers in large parts of the country are failing to benefit from improvements in the economy. This could cast doubt on a central plank of the government’s strategy for boosting workers’ pay by increasing productivity.
Two-thirds of the 1,641 people polled by YouGov for the report said they feel little to no benefit when the national economy grows or if their employer does well financially. Meanwhile, half said they feel as though their colleagues and friends are paid less than their work is worth.
Ministers are attempting to use the industrial strategy to boost productivity rates amid concerns failure to do so would condemn workers to sluggish pay growth that could struggle to return to pre-financial crisis levels until at least the middle of the next decade.
Jack Airey, head of research at Localis, a cross-party not-for-profit thinktank, said: “The alarm bells should be ringing for some places like Cornwall, the Black Country and the Isles of Scilly, where they’re being left behind by the rest of the economy.
“We need to put some more thought into the industrial strategy. We’re basically asking people to work harder, but for what?”
Many areas analysed in the report were found to have upped their productivity rates yet had seen relatively weak, sometimes negative, growth in wages. In one example, Dartford, on the edges of London, has seen economic output per head increase by close to 30% between 2010 and 2015, yet median wage growth was less than 3% over the same period.
The report found the five worst areas for wage growth relative to productivity in England over the last five years were Hounslow and Camden in London, as well as Mendip in Somerset, Rushmoor in Hampshire and Three Rivers in Hertfordshire.
For places getting left behind economically in the last five years, the report found pay and worker satisfaction had slipped from the national average and warned that without significant intervention from central and local government, there is a risk these places will slide further away from the rest of the country.
Responding to the report, Philip Atkins, vice-chair of the County Councils Network and leader of Staffordshire County council, said: “A blanket one-size-fits-all policy will not fulfil the government’s pledge to create ‘an economy that works for everyone’.”