Graduate Mobility and Closing the Productivity Gap for UK Cities

There has been much discussion in recent years about the UK ‘productivity puzzle’: the shortfall in productivity between the UK and comparable EU states like Germany and France, with this gap widening in the last decade. One important perspective for understanding productivity relates to skills and education, and how well graduate skills are integrated with businesses and are helping to expand knowledge economy industries. This is where the UK has a distinct advantage due to the high number of world leading universities across the country. Yet this strong higher education base is not currently translating into sufficient numbers of productive graduate jobs in the UK.

The Foresight Government Office for Science has been investigating this topic, and recently published the Future of Cities: Graduate Mobility and Productivity report. I contributed to the report with data analysis on graduate flows from higher education institutions to workplaces using HESA data from 2013/2014.

There are several interesting aspects of the Foresight report. Firstly there is a strong city focus, which is vital when you see that productivity is highly city dependent, and has close links with regional patterns such as the north-south divide in the UK.

Productivity (Gross Value Added(GVA) per person employed) across British cities, 1981 and 2011 (Source Martin, Gardiner and Tyler 2014)
Productivity (Gross Value Added(GVA) per person employed) across British
cities, 1981 and 2011 (Source Martin, Gardiner and Tyler 2014)

The productivity gap at the city level is further linked to graduate flows. London dominates the UK as a graduate employer, both in absolute terms and in proportional flows from higher education institutions to workplaces. The scale of the labour market and graduate recruitment programs in London, as well as its reputation as an ‘escalator region’, all add to this huge reach.

LondonPropFlows_02
Data HESA Destination of Leavers Survey 2013/2014

Map1_TotalGraduates2_legendupdate Table

That is not to say however that other large city-regions do not also have significant national graduate flows. Birmingham, Leeds and Manchester all draw significant numbers of graduates, with respective strengths in industries such as advanced manufacturing, creative industries and financial services (note HESA data is at county level, with Birmingham part of West Midlands and Leeds part of West Yorkshire). This is the foundation on which future growth will build.

ManchesterPropFlows_01
Data HESA Destination of Leavers Survey 2013/2014
WestYorkshirePropFlows_01
Data HESA Destination of Leavers Survey 2013/2014
WestMidlandsPropFlows_01
Data HESA Destination of Leavers Survey 2013/2014

A second interesting aspect of the Foresight report is that it has been produced in collaboration with regional and local government agencies in Birmingham, Manchester, Leeds, Liverpool, Bristol and Cardiff. There are a number of initiatives in development to address key aspects of graduate employment, including:

• The Skills Engine being developed in Birmingham brings together a network of key players from the local area in order to improve the matching of demand for and supply of talent in the local economy.

• FASTTRACK is an initiative being tested by Leeds University to attract and assist graduate integration into small and medium-sized businesses in the region through placements and specially designed induction and training programmes.

• The Graduate Business Lounge builds on Bristol’s existing engagement in student enterprise to integrate existing graduate enterprise service providers and platforms to foster greater student entrepreneurship.

• New Economy Hubs in Birmingham, Liverpool and Manchester will take a multi-sector approach to understanding key economic growth areas at the city regional level.

• The GRAData Project, working with Leeds City Council and Leeds Institute for Data Analytics, aims to improve university and council use of national graduate data. The hope is that this will improve local careers support for students, and illuminate graduate mobility to enable the development of regional talent strategies.

These cities are well aware of the challenges in graduate skills and recruitment, and recent devolution processes are providing opportunities for improving graduate employment offers and addressing regional economy issues more generally. Data analysis and policy support are important is this role, with organisations set up such as New Economy Manchester and the University of Birmingham City REDI institute expanding.

For more details on the Foresight research, read the report here, and it is also worthwhile exploring the wider Foresight Future of Cities page.

 

 

Uneven Growth, Devolution and Urban Futures Research in the UK

This post was written for the UCL Big Question Debate on the UK General Election 2015.

The financial crises and recession that began in 2008 were initially viewed as an opportunity for rebalancing the UK economy away from financial services towards a broader base, and addressing Britain’s long term north-south divide. In reality however the post-recession period has seen a strengthening of regional divisions with high rates of growth in London and much of the South East, compared to mixed or negative performance in the rest of Britain (see the map below). While the South East now needs to tackle the knock-on effects of growth in terms of the severe housing shortage, many regions in the UK have been struggling to achieve growth at all.

GB_Employment_Change

City devolution policies are aimed at boosting growth in northern cities and narrowing regional disparities. The 2015 general election is unique for the prominence of these policies, with devolution manifesto commitments from all the major parties. The Conservatives would continue their programme of devolving some powers and budgets to specific northern cities, while Labour and the Lib Dems would legislate for more comprehensive city devolution. Are these policies likely to work? There is currently much debate and uncertainty over this question. I argue here that urban research can help us understand current trends in cities and the directions urban futures are likely to take.

Firstly we need to understand the continuing structural changes in the economy. Economic growth is being led by professional and business service jobs, so-called ‘knowledge economy’ sectors (see graph below). Despite zero growth in financial services jobs over the last 15 years, professional and business services continue to grow substantially led by sectors such as ICT, management consultancy, creative industries, legal and real estate. Other service sectors are more mixed, with a decline in administrative jobs, and some growth in retail and public services. Meanwhile manufacturing continues to be in decline, though has levelled off in the last five years.

EmploymentChangebySector

The economic picture illustrated above is one that significantly favours cities and city-regions. Knowledge economy firms benefit from clustering together, sharing labour markets, knowledge spill-overs and other externalities. These agglomeration economies are strongest in cities, and strongest of all in large cities, where the density of transport and communications infrastructure facilitates connections and reduces costs. An expanding academic literature describes how larger cities are on average more innovative, competitive, diverse and sustainable, backed up with empirical evidence mostly from the USA. This line of reasoning chimes with the strong economic performance of London in the UK, and explains how the capital has been able to bounce back from the recession through its diverse economic base.

Yet in research at the Centre for Advanced Spatial Analysis (CASA) we have found that the relationship between city size and economic performance does not hold for Great Britain (see paper). Several small cities are the fastest growing in the country and have become highly specialised in knowledge economy industries, principally cities/towns in the South East with universities such as Milton Keynes, Cambridge and Brighton. Meanwhile the major post-industrial cities, such as Birmingham, Manchester, Liverpool, Leeds and Newcastle are underperforming given their relatively large size.

Are these northern cities capable of faster growth and developing stronger knowledge economy clusters? Recent regeneration in cities such as Manchester would suggest yes, and indeed some green shoots can be seen in the North West and West Midlands in the map above (these two regions are the fastest growing from 2010-2014 after London).  Such regeneration does however require significant investment, planning and political collaboration. Thus this is where devolution policies come in. The intention is to give cities more powers for strategic planning, housing, transport and local budgets. More comprehensive devolution proposals allow cities to retain money raised by local taxation. At present the city with by far the most devolved powers is London, with the creation of the mayor and Greater London Authority having positive impacts on development over the last 15 years and helping attract infrastructure spending towards the capital (indeed to an unfair extent- there is a huge UK public investment bias towards London). Would devolution allow other large cities to repeat London’s success, or would fiscal devolution favour existing affluent cities and exacerbate divisions?

Many of these issues around the future of UK cities are being discussed by the Foresight Future of Cities project which UCL is significantly involved in. You can read current Foresight working papers exploring this and many other current urban debates here. We also have a new CASA paper investigating the fracturing political geography of Great Britain.