Why do some cities create jobs, while others lose them?

Where is England's mystery boom town? Image: The Voice of Hassocks/Wikimedia Commons.

Which English city do you think has seen the biggest growth in its jobs market over last century or so? Is it London with its financial wizardry and exciting new tech industry? Manchester with its trams and its media? Cambridge with its science park?

We're being terrible unfair here, because you will quite literally never guess. (You really won’t.) Here’s the top 10:

Now Crawley, a mid-sized town in West Sussex, has two big factors working in its favour on this one. One is that it was tiny in 1911, with a population of just 5,000. It's now 20 times that size, thanks in large part to being a convenient 45 minute train ride from central London. And even though it’s mainly a dormitory town for the big city, when a town’s population grows by that much, its job market is inevitably going to grow by a fair bit, too.

The other advantage Crawley is sitting on is the presence of a rather big airport next door at Gatwick. Being next to an airport can do many horrible things to a town, but if considered from a purely employment perspective, they tend to be rather good.

You can spot the same phenomena at work in some of the other cities that make the top 10. Many of them have seen significant population growth over the last century; two more are conveniently placed for international airports.

But other factors seem to be in play, too. Being close to London clearly helps. So does the presence of a university, around which research-focused companies can cluster. There isn’t an obvious single factor.

Now consider the towns and cities which have going in the opposite direction. In 1911, Burnley, a market town in eastern Lancashire, had a population of more than 106,000. By 2011 it had fallen to 73,000, a fall of nearly a third.

But that's nothing compared to the collapse in the town's job numbers, which have fallen by half.

With this table it’s much, much easier to spot the pattern. Every one of these towns and cities is in the densely populated northern belt that stretches across England from the Mersey to the Humber. In 1911, this was Britain’s industrial heartland.  A century later, it wasn't anymore.


The importance of being southern

These tables both come from “A Century of Cities”, a report published early this month by the Centre for Cities think tank, which looks at a hundred years of economic data covering cities in England and Wales. For obvious reasons, the report is concerned in part with Britain’s north/south divide. But it also argues that we’ve been misdiagnosing that divide – or at least, that we’ve been coming up with the wrong treatment for it.

A century ago, the report says, the biggest driver of city growth was proximity to resources. That could mean coal, or other things you put into factories; then again, it might mean docks or transport links. Either way, it was fundamentally a matter of physical geography.

Now, though, the biggest driver of growth is proximity to “knowledge”: the cities that have thrived are those which have succeeded in attracting skilled workers and clusters of expertise. In other words, it's now human geography that drivers growth.

That means that the cause of the north/south divide is not the collapse in manufacturing in itself (after all, London lost plenty of manufacturing jobs, too). Rather, it’s the failure to develop or attract the skilled workforce you need to replace it with something else.

In other words, policies intended to revive the manufacturing sector, most recently chancellor George Osborne’s pledge to create “march of the makers”, are solving the wrong problem. Apart from anything else, modern manufacturing just isn’t as employment intensive as it once was.

Knowledge is power

It’s also overly simplistic to say that job growth has been an entirely southern affair. Here's a map of which cities have lost and gained jobs over the last century:

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The south is clearly doing better; but in the north, the picture is mixed, rather than universally terrible.

There's a stronger correlation than the one between "southernness" and growth; that's the one between skills and growth. Here’s another map, showing the share of each city's jobs in private sector knowledge-intensive business (KIBs). The correlation with jobs growth is far from perfect, but it definitely seems to be there:

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As to what drives the distribution of those exciting sounding KIBs jobs, one big factor is history. There is also a clear correlation between where knowledge-based jobs were in 1911, and where they were by 2013: if a city didn’t have many of them a century ago, it’s pretty unlikely to have that many of them now. 

That said, the impact history has isn't always a straightforward one, and an early industrial decline may work in a city’s favour when it comes to breaking into new types of industry. These graphs show the distribution of different types of jobs in Manchester over time:

The city’s manufacturing sector was already collapsing by the middle of the 20th century. But one side effect seems to have been that the number of knowledge-intensive jobs in the city began to grow early, too.

Now look at the same graphs for Birmingham:

Birmingham's industrial decline came later – but it’s been slower to build up its share of high-value service jobs, too.

So, how do you improve a struggling regional economy? The report makes three suggestions. You can improve the skill of the workforce. You can encourage “knowledge networks” – universities, research centres, clusters of business and so forth – to form, boosting the productivity of those workers.

Or you can deal with the scars left by industry – desolate factories and so on – and focus activity in the city centre to encourage that process. All of these suggestions should lead to more productive individuals, working in a more productive way.

But building an airport helps, too.

 
 
 
 

There isn’t a single national housing market – so we need multiple models of local regeneration, too

Rochdale. Image: Getty.

This week’s budget comes ten years after the 2007 financial crisis. The trigger for that crisis was a loss in confidence in mortgages for homes, with banks suddenly recognising the vulnerability of loans on their books.

In the last ten years, the UK’s cities and regions have followed very different paths. This week’s focus on housing affordability is welcome, but it will be a challenge for any chancellor in the coming decade to use national policy to help towns up and down the country. Local housing markets differ drastically. The new crop of city-region mayors are recognising this, as rents in parts of south Greater Manchester are on average double the rents in parts of the north of the city-region.

When it comes to buying a home, politicians are increasingly articulate about the consequences of inequity in our housing system. But we must recognise that, for 9m citizens who live in social rented homes, the prospects of improvements to properties, common areas and grounds are usually tied to wider projects to create new housing within existing estates – sometimes involving complete demolition and rebuilding.

While the Conservative governments of the 1980s shrank the scale of direct investment in building homes for social rent, the Labour governments from the late 1990s used a sustained period of growth in property prices to champion a new model: affordable housing was to be paid for by policies which required contributions to go to housing associations. Effectively, the funding for new affordable housing and refurbished social homes was part of the profit from market housing built next door, on the same turf; a large programme of government investment also brought millions of social rented homes up to a decent standard.

This cross-subsidy model was always flawed. Most fundamentally, it relies on rising property prices – which it is neither desirable nor realistic to expect. Building more social homes became dependent on ratcheting up prices and securing more private profit. In London, we are starting to see that model come apart at the seams.

The inevitable result has been that with long social housing waiting lists and rocketing market prices, new developments have too often ended up as segregated local communities, home to both the richest and the poorest. They may live side by side, but as the RSA concluded earlier this year, investment in the social infrastructure and community development to help neighbours integrate has too often been lacking. Several regeneration schemes that soldiered on through the downturn did so by building more private homes and fewer social rented homes than existed before, or by taking advantage of more generous legal definitions of what counts as ‘affordable housing’ – or both.

A rough guide to how house prices have changed since 2007: each hexagon is a constituency. You can explore the full version at ODI Leeds.

In most of England’s cities, the story does not appear to be heading for the dramatic crescendo high court showdowns that now haunt both developers and communities in the capital. In fact, for most social housing estates in most places outside London, national government should recognise that the whole story looks very different. As austerity measures have tightened budgets for providers of social housing, budgets to refurbish ageing homes are under pressure to do more with less. With an uncertain outlook for property prices, as well as ample brownfield and greenfield housing sites, estates in many northern towns are not a priority for private investors in property development.

In many towns and cities – across the North and the Midlands – the challenges of a poor quality built environment, a poor choice of homes in the local are, and entrenched deprivation remain serious. The recent reclassification of housing associations into the private sector doesn’t make investing in repairs and renewal more profitable. The bespoke ‘housing deals’ announced show that the government is willing to invest directly – but there is anxiety that devolution to combined authorities simply creates another organisation that needs to prioritise building new homes over the renewal of existing neighbourhoods.


In Rochdale, the RSA is working with local mutual housing society RBH to plan for physical, social and economic regeneration at the same time. Importantly, we are making the case – with input from the community of residents themselves – that significant investment in improving employment for residents might itself save the public purse enough money to pay for itself in the long-run.

Lots of services are already effective at helping people find work and start a job. But for those for whom job searching feels out of reach, we are learning from Rochdale Borough Council’s pioneering work that the journey to work can only come from trusting, personal relationships. We hear time and again about the demoralising effect of benefits sanctions and penalties. We are considering an alternative provision of welfare payments, as are other authorities in the UK. Importantly, residents are identifying clearly the particular new challenges created by new forms of modern employment and the type of work available locally: this is a town where JD Sports is hiring 1000 additional workers to fulfil Black Friday orders at its warehouse.

In neighbourhoods like Rochdale’s town centre, both national government and the new devolved city-region administration are considering an approach to neighbourhood change that works for both people and place together. Redevelopment of the built environment is recognised as just one aspect of improving people’s quality of life. Residents themselves will tell you quality jobs and community facilities are their priority. But without a wider range of housing choices and neighbourhood investment locally, success in supporting residents to achieve rising incomes will mean many residents are likely to leave places like Rochdale town centre altogether.

Meaningful change happen won’t happen without patience and trust: between agencies in the public sector, between tenants and landlords, and between citizens and the leaders of cities. This applies as much to our planning system as it does to our complex skills and employment system.

Trust builds slowly and erodes quickly. As with our other projects at the RSA, we are convinced that listening and engaging citizens will improve policy-making. Most of those involved in regeneration know this better than anyone. But at the national level we need to recognise that, just as the labour market and the housing market vary dramatically from place to place, there isn’t a single national story which represents how communities feel about local regeneration.

Jonathan Schifferes is interim Director, Public Services and Communities, at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).