Workers in the early stages of their career face a pay penalty for doing the same job in a different part of England, according to new analysis which unveils “stark and persistent” regional wage inequalities.
An average employee in London earns nearly twice as much as the equivalent in Liskeard, in Cornwall, research by the Resolution Foundation showed.
The analysis suggests that higher wages are not driven by the people that work there, but by the place in which they work.
This leads to a full-time worker early on in their career suffering a 5% “place-based pay penalty”, according to the think tank. This could be worth about £1,300 year if they move from a typical high-paying jobs market, such as Harrogate, to a low-paying one, such as Dudley.
The study analysed earnings data spanning all early-career workers in England, covering more than 11 million individuals.
The Resolution Foundation said its findings mark a significant shift from previous studies which have indicated that wage inequality between UK regions is driven by differences in the type of people who live there.
Pay divides have also commonly been attributed to the size of the local jobs market.
But the study suggests that a bigger jobs market does not necessarily equal higher wages – with, for example, average workers in Cambridge earning 23% more than in the similarly-sized Leicester.
Instead, a major driver of place-based penalties come from where individual firms choose to locate, meaning that if higher-paying firms relocated to a new area then it could boost pay for the local population, it found.
London continues to pay higher rates irrespective of what sector they work in, according to the analysis.
The average yearly wage for a full-time worker in the capital is £59,120 a year – nearly double the £31,692 earned in Liskeard, official data shows.
The Resolution Foundation said policymakers can address the issues by encouraging housebuilding, including affordable homes, in better-paying areas, and supporting higher-paying firms to expand to regions across England.
Greg Thwaite, research director at the Resolution Foundation, said: “England is beset by stark and persistent geographic wage inequalities, with Londoners’ typical earnings twice as much as those living in places like Liskeard or Cromer.
“It’s often assumed that people are driving these divides but, in fact, place-based pay penalties are rife across England.
“A typical early career worker could lose out on £1,300 a year just because of where their job is located.
“Policymakers at local, regional and national levels can address these divides by creating the conditions for high-paying firms to locate to their areas, while avoiding an arms race between regions in subsidies for firms.
“Moving to higher-paying areas can hugely boost young people’s career earnings, but housing is a major barrier to making these moves. Policymakers should do more to bring these housing barriers down.”
