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

• 30
• 20
• 10

10 20 30 40 GL SE EN SW EM WM NW YH NE WW SC NI

Region % Pt Difference from UK average

Components of Regional Differences in Per Capita GVA 2003

• 25
• 15
• 5

5 15 25 35 45 GL SE EN SW EM WM NW YH NE WW SC NI

Regions Percentage points

Commuting etc Dependency Rate Employment Rate Labour Productivity

Employment Rates: Difference From UK Average 2003

• 12
• 10
• 8
• 6
• 4
• 2

2 4 6 SE+GL EN SW EM WM NW YH NE WW SC NI

% point diff. from UK average

GVA per Head and Productivity

• 25
• 15
• 5

5 15 25 35 GL SE EN SW EM WM NW YH NE WW SC NI

Regions % point diff. from UK average

GVA per Employment GVA per Head

GVA per Employee (UK=100)

85 90 95 100 105 110 115 1 9 7 1 1 9 7 3 1 9 7 5 1 9 7 7 1 9 7 9 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 1 2 3

(UK = 100)

South N.East Wales Scotland N.Ireland UK

Regional Wages Closely Reflect Productivity

• 15
• 5

5 15 25 35 GL SE EN SW EM WM NW YH NE WW SC NI

Regions % point diff. from UK average

GVA per Employee Average Weekly Wages

LEVEL4/5 QUALIFICATIONS (% of all 16-74) & WAGES BY REGION

350.0 400.0 450.0 500.0 550.0 600.0 650.0 700.0 15.0 20.0 25.0 30.0 35.0 Level 4/5 as % as % of All People 16/74 Average Weekly Wages 2003

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

Highest Qualification of People 16-74 (percent) 2001

y = 8.3367x + 292.54 R2 = 0.532 300 350 400 450 500 550 600 650 9.0 14.0 19.0 24.0 29.0 % Graduates (2001)

Average Weekly Full Time Wage (£) 2003

London Cambridge Oxford

Edinburgh

Guildford and Aldershot Basingstoke Stoke Carlisle Doncaster Brighton Cardiff Craw ley

Aberdeen

Southampton Sw ansea Liverpool H l Loughborough Derby York Tyneside Sources: NES 2003, Census 2001 Manchester

Glasgow

Birmingham Bristol Belfast Rest of NI

Average Weekly Wages Reflect % of People Who Are Graduates

% of EMPLOYED WHO ARE GRADS in PRIVATE SECTOR vs AVERAGE EARNINGS 2001

Tyne Hants Cambs N Yorks Mersey Kent Mid Wales Derbys y = 12.085x + 268.89 R

2 = 0.8398

300.0 350.0 400.0 450.0 500.0 550.0 600.0 6.0 11.0 16.0 21.0 26.0 31.0 % PRIVATE SECTOR GRADS WEEKLY WAGE

London Berkshire Surrey Herts

MK, Oxon, Bucks Northumberland

Tees

Ches,Warringtn W of England Essex Birmingham and Solihull Durham

% of EMPLOYED POP 16-74 GRADS in PUBLIC SECTOR 2001 vs Av Earnings 2001

NI y = -3.031x + 444.66 R2 = 0.0047 300.0 350.0 400.0 450.0 500.0 550.0 600.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 London TOTAL Cambridgeshire Berkshire Surrey Mid Wales Essex Black Country Northumberland Hertfordshire Lincolnshire and Rutland

LEVEL 0 QUALIFICATIONS (% OF ALL 16-74) & WAGES BY REGION

350.0 400.0 450.0 500.0 550.0 600.0 650.0 700.0 25.0 30.0 35.0 40.0 45.0 level 0 as % all people 16-74 Average Weekly Wages 2003

Average Wages Low in Areas With High levels of Unqualified People

y = -5.7969x + 615.04 R2 = 0.3703 300 350 400 450 500 550 600 650 15 20 25 30 35 40 45 % with no qualifications (2001)

Average Weekly Full Time Wage (£) 2003

London Belfast Dudley & Sandw ell Guildford and Aldershot NI

Highest Qualification By Occupation Scotland 2001

0.0 20.0 40.0 60.0 80.0 100.0 Managers Professional Assoc Professionals Admin/Secretarial Skilled Trades Personal services Sales Machine Operatives Elementary percent

Graduates Other Higher Education

Highest Qualification UK 2003 Percent of Total

10 20 30 40 50 60

Agri Energy Manufg Constr Distribn Tranp,Comms Finance Public services Other services

Percent

Graduate Other HE

GVA per Head Closely Related To Employment in Financial and Business Services

R2 = 0.94 10 12 14 16 18 20 22 24 26 10 15 20 25 30 35 Employment in financial & business services (% of total) Total GVA per head (£000's)

GL NI EN SE SC NW SW EM NE WW YH WM

Concentration of business services, 2003

Ten most concentrated areas Ten least concentrated areas

Region Unitary Authority % of Total 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 Region Unitary Authority % of Total 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 Ten least concentrated areas

Region Unitary Authority % of Total 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 Region Unitary Authority % of Total 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

y = 0.1285x2 - 3.8255x + 41.586 R2 = 0.9467 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 5 7 9 11 13 15 17 19 MFG Emp Share of Total Emp GVA per Head 2003

Concentration of manufacturing, 2003

Ten most concentrated areas Ten least concentrated areas

Region Unitary Authority % of Total 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 Region Unitary Authority % of Total 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.