A ‘Northern Powerhouse’ must fuel more jobs and better jobs

The North could lead the way when it comes to tackling in-work poverty, says Katie Schmuecker

The North should seize the Northern Powerhouse agenda and use it to develop a new model of growth. This is the ambitious and optimistic messages in today’s State of the North report from IPPR North.

So with the next tranche of devolution on the horizon with the Comprehensive Spending Review, what would be the hallmarks of a form of prosperity that helps reduce poverty?

Work is rightly held up as a way out of poverty for most people. But high working poverty shows this route does not function as it ought. Many of the challenges seen nationally are more acute in the north of England. Whereas one in five people are low paid in the country as a whole, the figure rises to one in four in the North.

And while a short period struggling on low pay at the beginning of working life would be acceptable if it was followed by earnings progression, all too often this is not the case. A large proportion – 28 per cent – of low-paid people get stuck in low pay – a figure that rises 34 per cent in the North East. It is clear that the North needs to focus not just on more jobs but on better jobs too.

First, there needs to be a focus on increasing productivity. This goal often invokes thoughts of large transport projects and scientific innovation. These undoubtedly have their place, but just as important – if not more so – are activities to increase skills, fill skills gaps and shortages, and improve workforce development, organisation and relationships.

This requires economic development, business support and skills to be linked. Getting this right should help drive up demand for skilled workers and push up pay, beginning with the service sectors that create the most low-paid jobs.

Second, Welfare to Work should be reshaped. As the Work Programme comes up for renewal, some Northern cities are pressing for greater responsibility for employment support programmes. Where they succeed, they should rewrite the high-level incentives in employment support programmes so that the whole system is geared towards reducing poverty by not only supporting people to move into sustained work but to increase their earnings too.

Third, there needs to be a focus on ‘getting on’ once in work. Reshaping the incentives in the Welfare to Work system will help, but this will not reach those already in work but stuck in low pay. The evidence about what works for this group is less clear. The North should lead the way with structured and evaluated trials to see what combination of careers advice, support, coaching and training is effective for different people.

Child poverty alone is estimated to cost the UK £29billion a year in lost earning and productivity, and extra demand on the benefits system and public services. Given a quarter of the UK’s children experiencing poverty live in the north of England, the cost of child poverty to the North could be around £7.3billion. Developing the economy so growth reduces poverty would be a win-win.