Member Article

Real wages in the North East beating rest of the country

Real wages in the North East, which take into account the cost of living, are challenging the rest of the country, a regional economist has highlighted.

Analysis from North East LEP chief economist Mauricio Armellini shows the gap in prices between the North East and London is greater than the gap in pay, meaning you can buy more for your pay in the region.

Mauricio hopes businesses will take confidence in the interpretations of ONS data, and hopes the findings will help combat ‘brain drain’ flows away from the North East.

The news is both positive for employees who are afforded a better standard of living and employers who are afforded a stable labour market.

The findings are based on median pay expressed in “North East prices” - that is the purchasing power of wages.

Mauricio told Bdaily: “It’s well worth earning a bit less in the North East, because you can actually buy much more with the same, or buy the same with less money.

“It’s a pretty important one for businesses wanting to recruit in the North East, who usually find that staff are attracted to London and higher wages.

“In many cases, those individuals are losing money in real terms, because they are going to a much more expensive place for just a bit more money.”

Ross Smith, director of policy at the North East Chamber of Commerce said: “This is something that is often underplayed when it comes to talking about the North East.

“This analysis will really help us demonstrate to people that living and working in the North East can afford you a great quality of life. It will be particularly important in encouraging graduates to stay in the region.

“We’ve always known that your pound goes further in the North East but until now many people have just looked at the basic figures - which show higher salaries in London.

“The NECC have been working on our ‘50 great reasons to live in the North East’ campaign, and this is just another string to that. It’s actually going to be difficult to keep it to 50.”

The findings follow another set of promising regional statistics which show labour productivity in the North East is growing at the fastest pace in the UK.

Separate North East LEP (NELEP) analysis of Gross Value Added (GVA) and hours worked data shows labour productivity in the NELEP area grew by 14% between 2009 and 2012.

In December, the ONS GVA figures for 2012 showed the region was ahead of the national average growth, with a 1.7% expansion compared to the 1.6% UK average.

Overall, North East GVA growth was the third highest of the UK regions in 2012 and expanded at double the rate of London and the West Midlands.

Mr Armellini said: “It’s not just a blip. The GVA growth shows that our area is producing more; the productivity growth shows that we are producing more with less. So it’s not just a quantitative improvement, it’s also a qualitative improvement.

“The LEP’s Strategic Economic Plan (SEP) is poised to take us further in this direction, creating more jobs and businesses, particularly productive businesses and up-skilling people to develop this part of the economy. Through the SEP we have identified GVA as being a really important measure. It is a key indicator of economic growth and of achieving our progress towards more and better jobs.”

This was posted in Bdaily's Members' News section by Tom Keighley .