Past, present and the future of living standards in the Sheffield City Region
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Slides presented at Resolution Foundation event in Sheffield Town Hall 19 January
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Past, present and the future of living standards in the Sheffield City Region
- 1. Forging ahead or falling behind? Past, present and the future of living standards in the Sheffield City Region Craig Berry, Deputy Director at SPERI Dan Jarvis, MP for Barnsley Central Julie A Kenny CBE DL, Entrepreneur Emma Stone, Director of Policy and Research at Joseph Rowntree Foundation Stephen Clarke, Research and Policy Analyst at the Resolution Foundation Torsten Bell, Director of the Resolution Foundation @resfoundation // #MetroMayor
- 2. Forging ahead or falling behind? Past, present and the future of living standards in the Sheffield City Region Stephen Clarke January 2017 @stephenlclarke / @resfoundation 2
- 3. A disclaimer 3 In this research we have included in the Sheffield City Region the original four areas: • Barnsley • Doncaster • Rotherham • Sheffield And • Bassetlaw • Chesterfield
- 4. THE PAST 4
- 5. Industrial upheaval had a big impact upon the region, but by the early 1990s employment rate was similar to those in other cities 5
- 6. The 2000s was a period of strong economic growth 6
- 7. Growth was powered by service industries in particular 7
- 8. Growth was powered by service industries in particular 8 Health, social work, construction and education were all big contributors to economic growth during the period Manufacturing shrank, but less so than the in the rest of the country
- 10. Sheffield’s recovery from the crisis has been sluggish 10
- 11. People are in work, but pay is low 11
- 12. The typical worker in the region takes home £43 less a week than a typical employee in the UK. A pay gap that is present in most parts of the region 12
- 13. THE PAY GAP 1. WHO WORKS AND WHERETHEY WORK 2. HOWTHEY WORK (PRODUCTIVITY) 13
- 14. The pay gap is partly because the region has relatively more firms that tend to pay low – dragging down overall pay 14 Manufacturing is a big employer in the region. 1.6% more people are employed in the sector compared to other city regions
- 15. The pay gap is partly because the region has relatively more firms that tend to pay low – dragging down overall pay 15 Hourly pay in manufacturing in the region is about £2 lower than the pay of the average UK worker
- 16. It is also because the region has more workers with lower education levels, who tend to be paid less 16
- 17. Productivity explains the other half of the pay gap 17
- 18. Productivity is lower in most sectors 18
- 19. Productivity is lower in most sectors 19 The majority of sectors contribute to the region’s productivity deficit, but particularly the large sectors of retail, manufacturing and office admin Only in education is productivity significantly higher
- 20. Low pay acts as a drag on household incomes, although employment and low housing costs offset this 20
- 21. Although as with pay, household incomes vary across the region 21
- 22. THE FUTURE? 22
- 23. The NLW will reduce the number of low paid workers in the region 23 ‘Low paid’ refers to anyone paid below two-thirds of the median wage
- 24. But will bring with it new challenges – particularly the need to help workers progress off the wage floor 24
- 25. In some sectors nearly 7 in 10 workers may be paid the legal minimum by 2020 25
- 26. MISSING OUT ON THE NORTHERN POWERHOUSE? 26
- 27. The region needs to get devolution back on track and take steps to raise pay 27 Priority 1: The form, powers and geography of devolution is a local decision, but opportunity should not be missed. Priority 2: Set up Sheffield Low Pay Commission to tackle low pay in the retail and leisure sectors in particular. Priority 3: Build on existing strengths, particularly growing student population
- 28. Forging ahead or falling behind? Past, present and the future of living standards in the Sheffield City Region Craig Berry, Deputy Director at SPERI Dan Jarvis, MP for Barnsley Central Julie A Kenny CBE DL, Entrepreneur Emma Stone, Director of Policy and Research at Joseph Rowntree Foundation Stephen Clarke, Research and Policy Analyst at the Resolution Foundation Torsten Bell, Director of the Resolution Foundation @resfoundation // #MetroMayor
Editor's Notes
- In this presentation I will attempt to provide an overview of living standards in the region both in the past and looking forward. I apologise for focusing on some issues – such as pay – more than others such as employment. The report has a lot more content than I was able to squeeze in here, so please do read it, particularly as it also contains a plethora of cultural references, indeed one of the best things about this research project was combing the Full Monty and the Arctic Monkeys, amongst other things for chapter titles.
- This research project began in October and events have moved on a little since then, therefore although I may have been researching something that may no longer exist…. I should be clear that for this report we’ve included in the region – we have included all the constituent members of the Sheffield City Region listed here.
- The region, like others in the Midlands and the North was badly affected by deindustrialisation and the upheavals in the coal and steel industries. This chart shows that employment in the region was significantly lower than that in parts of the South of the UK in the 1980s.
- However, during the 1990s and more so in the 2000s the region’s economy grew strongly. This chart shows that growth was faster than in the UK as a whole and the other city region. However, this strong performance has not continued since the crisis. Unfortunately it is projected that this year the region’s economy remains 7.8 per cent below it’s pre-crisis peak. This is one of the largest short falls of any city region.
- Before the financial crisis growth in the region was powered by a range of sectors.
- This chart shows how much each sector contributed to growth before the financial crisis. Each sector is listed on the right and their contribution is shown in the bars. Particularly important contributors were health and social work, education and construction. This reflects the large increase in public sector jobs during the period, something which has contributed to the region’s sluggish recovery as public sector spending has been paired back.
- However, during the 1990s and more so in the 2000s the region’s economy grew strongly. This chart shows that growth was faster than in the UK as a whole and the other city region. However, this strong performance has not continued since the crisis. Unfortunately it is projected that this year the region’s economy remains 7.8 per cent below it’s pre-crisis peak. This is one of the largest short falls of any city region.
- While in the report we look at how various aspects of living standards have evolved in the region, In the rest of this presentation I will focus on two in particular: pay and productivity. This is because these two stand out as particular areas of concern for the region, whereas as you can see the from chart, employment in the region is about average.
- As we have seen low pay is problem for the region. However, to an extent, the city of Sheffield bucks this trend. This chart shows pay across the pay distribution, with the lowest earners on the right and highest earners on the left. Overall employees in Sheffield are paid more, but this really only benefits higher paid workers. The pay premium increases as you go up the distribution.
- I now want to turn to look at why pay is so low in the Sheffield city region. There are two main reasons: the nature of the region’s economy and low productivity. Turning to the first.
- This chart shows seven of the sectors in the region which are particularly overrepresented and the difference between pay in those sectors and the GB average. For instance manufacturing is a big employer, and employs 1.6 per cent more people in the region than it does in other city region.
- As I said the second reason that pay is low in the Sheffield City Region is because the majority of sectors in the region are less productive than their counterparts elsewhere. This chart characterises all sectors in the Sheffield City Region (displayed down the right). Overall productivity per employee is 22 per cent lower in the region than the England average.
- As I said the second reason that pay is low in the Sheffield City Region is because the majority of sectors in the region are less productive than their counterparts elsewhere. This chart characterises all sectors in the Sheffield City Region (displayed down the right). Overall productivity per employee is 22 per cent lower in the region than the England average.
- The majority of sectors are less productive (those that correspond to the red bars on this chart). In particular wholesale and retail industries, manufacturing and office admin. Only education is significantly more productive.
- Fortunately for residents the region does not have the lowest household income of any region. This is partly to do with a relatively (at least compared to the other cities) employment rate, and the fact that housing costs are low in the region. This chart shows household income, after housing costs are taken into account. The region is marginally above city region average, but is still significantly below the rest of Great Britain
- However, in some parts of the region household income is particularly low. We can see on the map of the region here that the areas with particularly high income are found in the West and South West of Sheffield, while East Sheffield and parts of Rotherham are home to households with the lowest income.
- I will now take a brief look at what the future may hold in terms of low pay in the region. This is primarily influenced by the impact of the NLW which is scheduled to rise over the course of the next four years, and we estimate that it could be around £8.60-80 by 2020.
- Firstly it is important to recognise the positive effects of the NLW which will boost pay for the lowest paid employees. This chart shows that we expect that the NLW will mean that the share of low-paid workers (those that earn two-thirds what the average worker earns) will fall from around 25 per cent to around 21 per cent by 2020.
- However, this will bring with it new challenges. Particularly a higher number of people that will be paid just the legal minimum. The second line on the chart shows the share of employees that we expect will be paid the minimum wage by 2020 in the region – around 1 in 5.
- The 1 in 5 headline figure however hides significant variation across different workers and sectors. For example, this chart shows that nearly 7 in 10 workers in the hotels and restaurants sector will be paid the national minimum by 2020 and nearly 1 in 2 part-time workers.
- So what can local leaders do to begin addressing this?
- In the report we outline three priorities. The first is that devolution gets back on track, it would be damaging if South Yorkshire missed out on the powers being offered to other areas. The second is that local leaders set up a commission to examine the issue of low pack in some of the large low paying sectors in the region. Finally, the region should continue to build on its strengths
- Thanks a lot for listening and I look forward to discussing these issues further with the panel.