Data Insight: What can data tell us about wages in the Western Gateway Area?

This Data Insight by Damian Whittard, Van Phan, Anni Caden, Felix Ritchie and Peter Bradley explores labour market dynamics in the Western Gateway Area (WGA). The article focuses on pay, and considers the extent to which the WGA’s priority sectors influence earnings. It presents findings by exploring deidentified data from the Annual Population Survey (APS) and the Annual Survey of Hours and Earnings (ASHE).

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Summary

With the current UK Government focus on driving regional economic growth and creating good jobs for every part of the country, there is a need to better understand the nuances of local labour markets. This paper contributes new evidence on the WGA’s labour market by examining de-identified data from the APS and ASHE.

This paper provides insights into regional labour market dynamics, with particular focus on five WGA priority sectors. Notably, the report explores the extent to which these sectors have contributed to levels of pay.

This evidence indicates that there is a raw pay premium of over four per cent for workers in the WGA compared to the national control group, while the priority sectors account for approximately seven per cent of the pay premium. The pay premium is unevenly spread over the region, with workers in Wiltshire experiencing a pay penalty to the national average. At a sector level, workers in the advanced manufacturing and engineering sector in the WGA earn approximately 1.6% more than those working in this sector nationally.

What we found

In terms of the descriptive analysis, the report indicates:

• Wages are highest in London and the South East and lowest in the North East of England
• Regional analysis reveals that, between 2004 to 2022, wages rose broadly in line with each other over this period
• The minimum wage has risen faster than the median wage. This indicates that lower-paid workers are receiving a larger share of the overall wage distribution over time, which is going some way to reducing wage inequality
• Since 2014, the proportion of those receiving low pay (defined as earning less than two thirds of the national median wage) has declined sharply
• Wages in the WGA and its sub-regions are generally above the national comparator group (excluding Greater London)
• Individuals in the West of England received consistently higher wages than other areas of the WGA
• In 2022, the average wage was approximately 11% higher in the West of England than in Gloucestershire
• Wages in the West of England are primarily driven by those working in the City of Bristol and South Gloucestershire.

While the empirical analysis revealed that:

• There is a raw pay premium of working in the WGA compared to the national control group. This is a raw gap of 4.3%, which reduces to 2.3% when controlling for all observable factors
• Priority sectors account for approximately 7% of the WGA pay premium, which suggests supporting these priority sectors has the potential to further drive regional wage increases and economic growth
• Wages in each of the five priority sectors are substantially higher than in other sectors. The reason is beyond the scope of this research, but this is likely to be due to a combination of factors including high demand for skilled labour, specialised qualifications and skills, and higher productivity
• The pay premium is unevenly spread over the region: five of the seven sub-regions receive a pay premium, while North Somerset is in line with the national average. Workers in Wiltshire (excluding Swindon) experience a pay penalty
• The priority sectors contribute to the pay premium for four upper tier local authority areas, but are less important to three of the sub-regions (Bath and North East Somerset, North Somerset and Wiltshire)
• Workers in the advanced manufacturing and engineering sector in the WGA earn approximately 1.6% more than those working in this sector nationally
• Although individuals working in the digital industries sector earn more than other sectors on average, those working in this sector in the WGA are approximately 3.1% below the national average for this sector. The difference may be explained by the regional sub-sector composition, but is worthy of further investigation.

Why it matters

The analysis supports recommendations around tailoring support for the individual needs of each area, while understanding that there are important benefits – such as higher wages and economic growth – that spillover to the other sub-regions of the WGA.

This report provides evidence to suggest that the priority sectors, as identified by Futures West, are worthy of specific support in an attempt to drive up living standards and productivity growth. These sectors play an important role in the economic health of the region and well-being of its population. As such, ways of supporting and encouraging their future growth should be a priority for regional policymakers.

In addition, policymakers should focus resources on leveraging the strengths of each sector, while also fostering partnerships between sectors to encourage the sharing of knowledge and management practices across regions.

Finally, the research also demonstrates these datasets can be used to better understand regional labour markets. This can contribute to a more robust evidence base for policymaking.