the pay postcode lottery event slides.pdf

3. • Workers with high earning potential cluster in e.g. London
• Jobs in e.g. London would pay more to all kinds of workers

4. •
• Moving people or jobs around might change regional inequality but won’t change
total earnings much
•
• Can increase aggregate GDP if we put more people within reach of the best jobs

5. •
•

6. •
• Education, earnings and employment history of nearly every English school-leaver born since
1985
•
•
• Infer the place effect when you see people’s wages change as they move jobs
• Infer the person effect from their wages and the place effect

7. Variance decomposition of log earnings across TTWAs, using different methods: GB / England

9. •
•
•
•
•

13. •
• Concentrate housebuilding in the best labour markets
• All kinds of housing – including social and affordable
•
• Tax housing properly
• Permanent boost from experience in the best labour markets
•
• Avoid US-style corporate subsidy arms races
• Anchor firms (e.g. BBC, Nissan)
• Clusters (e.g. Canary Wharf)

15. @TheIFS
Comments on ‘The
Power of Place’
Xiaowei Xu, IFS
▪ June 2025

16. © Institute for Fiscal Studies
Two main comments
1. What is a place effect?
2. What are the policy implications?
Draws on my new report (out today):
On the Move: How young people’s mobility responds
to and reinforces geographical inequalities

17. © Institute for Fiscal Studies
1. What is a place effect?
People versus place
▪Place effects bigger than previously thought
▪Young workers
▪New techniques
People = place?
▪High-skilled people attract (and create) high-paying
firms: people → place
▪High-skilled people move to where opportunities
are: place → people

18. © Institute for Fiscal Studies
Graduates move to high-paying cities
Net migration age 16 to 27 (vertical axis) by ‘place effect’ (horizontal axis)

19. © Institute for Fiscal Studies
Top achievers from outside London move (to
London)
Probability of moving (left) and share of movers going to higher-paying TTWAs
(right), age 16 to 27

20. © Institute for Fiscal Studies
Youth mobility is increasing,
especially for graduates
Probability of living outside TTWA of origin relative to 1986 birth cohort, controlling
for observable characteristics

21. © Institute for Fiscal Studies
2. What are the policy implications?
Bringing people to jobs, or vice versa?
▪ Building houses in productive places and promoting early-career
moves
▪ Incentivising firms to relocate
My personal view: needs to be more of the latter!
▪ High-skilled people don’t return to their hometowns
▪ 1 in 3 workers who moved to London in early 20s leave by 32
▪ But majority (62%) move to a new TTWA; half of these to TTWAs that border
London
▪ Those who return are lower-skilled
▪ Concentration of opportunity in London wastes talent
▪ More than half of graduates in Cumbria and Lincolnshire are not in graduate jobs
▪ Graduates from less advantaged families are less likely to move to London

22. © Institute for Fiscal Studies
In summary
▪Important new research investigating what drives
successful places
▪Regional growth is a coordination problem – need
both people and place (firms)
▪And need to spread opportunity more widely
Thank you!

23. The Institute for Fiscal Studies
7 Ridgmount Street
London
WC1E 7AE
www.ifs.org.uk