Graduates and Regional Productivity Graham Gudgin Regional - PowerPoint PPT Presentation

Graduates and Regional Productivity Graham Gudgin Regional Forecasts Ltd

Extensive Literature in Economics linking Education and productivity: • Private returns to Education • Cross-Country Studies

Private Returns to Education • Wages are higher for better qualified employees. • The usual measure is the increase relative to those with no qualifications

Private Returns to Education % Increase in Hourly Wage at Age 33 Qualification MEN WOMEN BASIC 7.2 6.9 GCSE 15.1 11.2 5 GCSE'S 20.8 25.8 A LEVEL 33.6 37.1 DEGREE 51.8 72.5 source Dearden(1999)

Cross-Country Studies A large number of studies have been undertaken examining the impact of education on per capita GDP These find that an extra years education in OECD countries add around 6% to national per capita income Most recent studies use the 1994-6 IALS to directly measure ability in literacy and numeracy. These show an elasticity of 2.5 to per capita GVA from increases in literacy/numeracy. However there is less evidence for an impact of graduate- level skills alone

My interest is in the impact of educational qualifications on productivity and living standards across UK regions There is good evidence that graduates make a large difference to regional productivity

GVA Difference from UK Average 2003 40 30 % Pt Difference from UK average 20 10 0 GL SE EN SW EM WM NW YH NE WW SC NI -10 -20 -30 Region

Components of Regional Differences in Per Capita GVA 2003 45 Commuting etc Dependency Rate 35 Employment Rate 25 Labour Productivity Percentage points 15 5 GL SE EN SW EM WM NW YH NE WW SC NI -5 -15 -25 Regions

Employment Rates: Difference From UK Average 2003 6 4 % point diff. from UK average 2 0 SE+GL EN SW EM WM NW YH NE WW SC NI -2 -4 -6 -8 -10 -12

GVA per Head and Productivity 35 GVA per Employment GVA per Head 25 % point diff. from UK average 15 5 GL SE EN SW EM WM NW YH NE WW SC NI -5 -15 -25 Regions

GVA per Employee (UK=100) 115 110 105 South (UK = 100) N.East Wales 100 Scotland N.Ireland UK 95 90 85 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2

Regional Wages Closely Reflect Productivity 35 GVA per Employee Average Weekly Wages % point diff. from UK average 25 15 5 GL SE EN SW EM WM NW YH NE WW SC NI -5 -15 Regions

LEVEL4/5 QUALIFICATIONS (% of all 16-74) & WAGES BY REGION 700.0 Average Weekly Wages 650.0 600.0 550.0 2003 500.0 450.0 400.0 350.0 15.0 20.0 25.0 30.0 35.0 Level 4/5 as % as % of All People 16/74

Highest Qualification of People 16-74 (percent) 2001 all popn aged 16-74 level0 level1 level2 level3 LEVEL4,5 ENGLAND&WALES 31.0 17.9 20.8 9.0 21.4 NE 37.5 18.2 20.3 7.8 16.2 NW 34.3 18.0 20.9 8.3 18.5 YH 35.9 18.6 19.5 8.4 17.7 EM 34.2 19.1 20.3 8.4 18.0 WM 36.6 18.0 20.0 8.0 17.4 EN 30.1 19.6 22.1 8.6 19.6 GL 25.1 13.8 18.0 10.3 32.8 SE 25.7 18.4 22.7 9.9 23.3 SW 28.2 19.1 23.1 9.3 20.3 WW 35.6 16.7 21.3 7.7 18.7 SC 33.2 24.7 15.7 7.0 19.4 NI 41.6 17.2 16.4 9.0 15.8

Average Weekly Wages Reflect % of People Who Are Graduates 650 y = 8.3367x + 292.54 London Average Weekly Full Time Wage (£) 2003 R 2 = 0.532 600 Basingstoke Guildford and Aldershot 550 Southampton Craw ley Cambridge Aberdeen 500 Loughborough Derby Oxford Bristol Manchester Birmingham Glasgow Cardiff Edinburgh 450 Brighton Doncaster York 400 H l Belfast Carlisle Stoke Liverpool Tyneside Sw ansea 350 Rest of NI 300 9.0 14.0 19.0 24.0 29.0 % Graduates (2001) Sources: NES 2003, Census 2001

% of EMPLOYED WHO ARE GRADS in PRIVATE SECTOR vs AVERAGE EARNINGS 2001 600.0 London Berkshire 550.0 Surrey 500.0 Herts WEEKLY WAGE Birmingham and Solihull Hants MK, Oxon, Bucks Cambs 450.0 Essex Ches,Warringtn Kent W of England Mersey 400.0 Derbys Tyne N Yorks Tees Durham Mid Wales 350.0 y = 12.085x + 268.89 Northumberland 2 = 0.8398 R 300.0 6.0 11.0 16.0 21.0 26.0 31.0 % PRIVATE SECTOR GRADS

% of EMPLOYED POP 16-74 GRADS in PUBLIC SECTOR 2001 vs Av Earnings 2001 600.0 London TOTAL Berkshire Surrey 550.0 y = -3.031x + 444.66 Hertfordshire R 2 = 0.0047 500.0 Essex Cambridgeshire 450.0 400.0 NI Black Mid Wales 350.0 Country Northumberland Lincolnshire and Rutland 300.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0

LEVEL 0 QUALIFICATIONS (% OF ALL 16-74) & WAGES BY REGION 700.0 650.0 Average Weekly Wages 2003 600.0 550.0 500.0 450.0 400.0 350.0 25.0 30.0 35.0 40.0 45.0 level 0 as % all people 16-74

Average Wages Low in Areas With High levels of Unqualified People 650 London y = -5.7969x + 615.04 600 Average Weekly Full Time Wage (£) 2003 R 2 = 0.3703 Guildford and Aldershot 550 500 450 Dudley & Belfast Sandw ell 400 NI 350 300 15 20 25 30 35 40 45 % with no qualifications (2001)

Highest Qualification By Occupation Scotland 2001 Elementary Graduates Machine Operatives Other Higher Education Sales Personal services Skilled Trades Admin/Secretarial Assoc Professionals Professional Managers 0.0 20.0 40.0 60.0 80.0 100.0 percent

Highest Qualification UK 2003 Percent of Total Other services Public services Finance Tranp,Comms Graduate Distribn Other HE Constr Manufg Energy Agri 0 10 20 30 40 50 60 Percent

GVA per Head Closely Related To Employment in Financial and Business Services 26 GL Total GVA per head (£000's) 24 R 2 = 0.94 22 20 18 SE YH SW 16 EM EN SC 14 NW NI NE 12 WM WW 10 10 15 20 25 30 35 Employment in financial & business services (% of total)

Concentration of business services, 2003 Ten most concentrated areas % of Total Region Unitary Authority Employees South East Woking 37.0 South East Bracknell Forest 36.9 South East Hart 34.3 Greater London City of London 33.9 South East Windsor and Maidenhead 33.6 South East Vale of White Horse 33.4 Greater London Westminster, City of 32.1 South East Wokingham 32.1 South East Wycombe 29.8 Greater London Camden 29.4 Ten least concentrated areas % of Total Region Unitary Authority Employees Northern Ireland Fermanagh 3.0 South West Isles of Scilly 3.0 Northern Ireland Down 2.8 North East Wansbeck 2.8 Northern Ireland Moyle 2.7 Northern Ireland Carrickfergus 2.7 Northern Ireland Larne 2.5 Northern Ireland Magherafelt 2.4 Northern Ireland Limavady 2.0 Northern Ireland Strabane 1.8

Concentration of financial services, 2003 Ten most concentrated areas % of Total Region Unitary Authority Employees Greater London City of London 46.5 Greater London Tower Hamlets 25.1 Scotland Edinburgh, City of 16.0 Eastern Norwich 13.5 Eastern Southend-on-Sea 13.3 South East Reigate and Banstead 12.8 North West Chester 11.6 South West Bournemouth 11.6 South West Poole 10.7 South East Worthing 9.5 Ten least concentrated areas % of Total Region Unitary Authority Employees South West Forest of Dean 0.7 Yorkshire & Humber Selby 0.7 South West Purbeck 0.7 East Midlands Corby 0.7 Northern Ireland Castlereagh 0.7 East Midlands Daventry 0.6 Northern Ireland Antrim 0.6 West Midlands North Warwickshire 0.5 North East Teesdale 0.5 East Midlands Bolsover 0.4

MFG Employment & Per capita GVA 26.00 y = 0.1285x 2 - 3.8255x + 41.586 24.00 GVA per Head 2003 R 2 = 0.9467 22.00 20.00 18.00 16.00 14.00 12.00 10.00 5 7 9 11 13 15 17 19 MFG Emp Share of Total Emp

Concentration of manufacturing, 2003 Ten most concentrated areas % of Total Region Unitary Authority Employees East Midlands Corby 36.6 North West Pendle 35.2 Wales Flintshire 34.4 North West Fylde 33.9 North East Sedgefield 33.7 North West Copeland 33.3 Wales Blaenau Gwent 31.6 North West Ribble Valley 31.0 North East Derwentside 29.9 Wales Caerphilly 29.5 Ten least concentrated areas % of Total Region Unitary Authority Employees South West Weymouth and Portland 3.8 Greater London Kensington and Chelsea 3.8 Greater London Barnet 3.5 South West Bournemouth 3.2 Greater London Westminster, City of 3.1 South West Isles of Scilly 3.1 South East Epsom and Ewell 2.8 Greater London Lambeth 2.6 North East Castle Morpeth 2.4 Greater London City of London 1.1

Conclusions • There is a clear positive return to education at every level: •Personal •Regional •National •At regional level the % of graduates in the private sector has a large impact on average wages and hence on productivity and per capita GVA •The main task for regional economic development should be to attract graduate-employing firms. Many of these are to be found in financial and business services.