Press Story

The report - Richer Yet Poorer: Economic inequality and polarisation in the North of England - shows that economic growth in the North prior to recession led to increasing pay inequality.

The highest-earning 20 per cent increased their earnings at twice the rate of the bottom 20 per cent.

Key findings include:

Of the Northern regions, the North West has the greatest pay inequality, where the top 20 per cent earn £427 more per week than the bottom 20 per cent.
Yorkshire and Humber is the most equal in terms of the difference between top and bottom earners, with the top 20 per cent earning £390 more per week than the bottom 20 per cent.
In the North East, the top 20 per cent earn £392 more per week than the bottom 20 per cent.
The greatest disparities between high and low earners are found in London, where the top 20 per cent earn £686 more per week than the bottom 20 per cent as a result of the number of high earners found there.

The research also warns that inequality is potentially damaging for all members of society. Statistical analysis carried out for the report indicates that more unequal cities appear to have less community cohesion and a weaker sense of belonging.

The social fabric of communities appears to be more fragile in areas where the rich and poor are most divided.

At the city level, Leeds was found to be the most divided in terms of how much the rich and poor are concentrated in different areas followed by Tees Valley and Manchester.

Liverpool, Tyne and Wear, and Central Lancashire had a more even spread of rich and poor between areas making them the least divided of the Northern cities.

Ed Cox, Director of ippr north said:

'Currently, it is fairer up North, with income and pay inequality lower than the UK average, particularly when compared to London and the South East. But over the past decade of economic growth before the recession hit, inequality increased in the North.
Some will argue that this was a price worth paying. However, our research has found that inequality is potentially bad news for everyone and may affect the social fabric of our communities. The good news is that economic growth and tackling inequality can go hand in hand.
Policymakers should focus now on a model of growth which balances economic and social objectives, rebalancing the economy between North and South but also narrowing the gap between the rich and poor.'

While many of the major policy levers to tackle inequality lie with central government - such as tax and benefit policy and decisions about the minimum wage - the report sets out five recommendations for what can be done at the local level.

They focus particularly on newly emerging Local Enterprise Partnerships which are responsible for driving economic growth:

A 'good growth' strategy to balance economic growth and social impact should be developed which takes account of the spatial aspects of inequality so that cities do not become divided into rich and poor areas.
LEPs should identify industrial sectors with poor productivity, focussing especially on those who are large employers. Boosting productivity would have a knock-on effect on wage levels, helping to tackle inequality.
To boost wages among the lowest paid, LEPs should calculate the Living Wage for their area and promote its uptake.
Employers should be encouraged to voluntarily sign up to a pay ratio scheme that would limit excessive wages at the top. A ratio of 1:20 is currently being considered for the public sector.
Helping people into work is the best way to reduce inequality so the Work Programme should be tailored to suit local needs and local labour market conditions.

In addition, local authorities should have greater financial powers to enable them to shape their areas and offer affordable housing or physical regeneration so that the rich and poor do not become divided and concentrated in different areas.

Notes to editors

This research was supported by the Webb Memorial Trust.

The research focussed on the eight city-regions of the North: Manchester, Liverpool, Central Lancashire, Leeds, Sheffield, Tyne and Wear, Tees Valley and Hull and Humber Ports.

The Living Wage is the minimum hourly wage necessary to meet essential needs.

Contact

Tamsin Crimmens, Media Officer: 07800 742 262 / 0191 233 9051 / t.crimmens@ippr.org