Ignoring progression in the low-skilled workforce is holding back city growth

UK cities should have new powers to address in-work poverty and support growth, says Jonathan Schifferes.

New research from the City Growth Commission , supported by JRF, shows the importance of investing in the local workforce’s skills and developing them to address in-work poverty and support city growth.

In Human Capitals, we recommend new local powers for cities, coupled with national incentives, and interventions targeted at key moments in careers and business cycles.

Our recommendations focus on two themes:

  1. Government spending on provision of adult skills training and further education should be controlled locally, at the city region scale, which aligns to how labour markets function. Local areas should be able to apply to create ‘metro minimum wage’ areas to raise pay.
  2. There is huge scope for interventions to target individuals at key moments in their careers where progression may falter, such as redundancy, migration, or registration for in-work benefits. It is clear from our research that transport, housing and childcare are often barriers to progressing, especially for low-skilled people.

While policy and media frequently focus on unemployment as a headline issue to signify economic strength, the role of the existing workforce is too often neglected when it comes to strategic economic plans. In-work poverty and in-work benefit bills are on the rise; this means that strengthening progression at work – especially among low-skilled people – requires new policy attention.

Over 90 per cent of 2020’s workforce is already in a job today; and 43 per cent of them aren’t using all their skills at work – a massive source of potential growth. As the world of work evolves, employers have a role in ensuring that business growth and workforce development are seen as part of the same process of moving up the value chain in how they compete. Government has a role in targeting smart investments to develop the workforce, and incentivising employers and employees to do the same.

Currently, we act as if we have a national labour market rather than a network of interlinked local labour markets, anchored by our different cities. Our data analysis highlights the huge variation between the labour market issues faced by employers in different parts of the country. This means different approaches are required to address labour market issues, but currently cities and councils have little say in how public money is spent in their area, and central government efforts are fragmented and uncoordinated.

The labour market can’t be seen as static: while growth strategies focus on developing and attracting high-level skills and high-value industries, 87 per cent of the demand for workers over the next decade will come from replacing existing workers.

Cities’ commuting footprints grow every year, and different local authorities vary hugely in how quickly their adult workforce replaces itself: from one in eight, annually, in several inner London boroughs, to one in 40 in parts of northern cities such as Doncaster, Sunderland and the Wirral.

Understanding these flows better is a key to inclusive and sustainable growth strategies based on reducing skills mismatches between employers wanting workers and people wanting work. We argue Local Enterprise Partnerships should develop a formal advisory role and use data from across government to understand flows in the labour market – between places and across career paths.

It’s clear that we need a broader concept of what economic policy and economic strategy includes. Stronger national economic growth will largely come from strengthening in-work progression at the city scale, and in all sectors and skill levels.

Read more about our JRF’s work on Cities, growth and poverty.