Tees-ing out the issues

Published on Shared Growth

On 4 May voters in the Tees Valley will go to the polls to elect the region’s first ‘Metro Mayor’. He or she will wield new, if limited, powers affecting the whole region. But more important, in many ways, than the specific hard power of decisions the new mayor can directly control is the opportunity of soft power that a successful mayor will harness to outline an economic vision for the area. Successfully exercising soft power however requires a focus on what are the one or two things a mayor wants to achieve. So what should the new mayor prioritise?

In October 2015, a week before it was decided that Tees Valley would get a mayor, it was announced that the SSI steelworks in Redcar would be closed, ending nearly a century of steel production at the plant. Its closure had a big impact upon Redcar and the wider region with nearly 3,000 people losing their jobs. Importantly however, this immensely damaging development was thankfully, in some respects, an aberration – between 2009 and 2016 advanced manufacturing employment grew by 35 per cent and 5,000 high-tech jobs were created in Middlesbrough, Stockton, Redcar and Cleveland. Other parts of the region saw similarly impressive growth, high-tech employment grew by 47 per cent in Hartlepool and by 84 per cent in Darlington; around 2,000 more high-tech jobs were created across the two local authorities over the period.

This growth has fed through into productivity too – the Tees Valley outperforms many similarly sized city regions in the North and Midlands. Analysis of firms in the region by the ONS suggests that because of the high-proportion of high-tech manufacturing firms, businesses in the Tees Valley are more productive than those in Manchester, Liverpool, Sheffield, West Yorkshire, and the North East.

The simplistic stereotype of the region as one scarred by industrial decline therefore needs some qualification. High-tech industries and advanced manufacturing, while facing specific challenges, have been a bright spot in the region’s economy recently.

Unfortunately, while the economy in the region may be delivering for those high-skilled workers that can take advantage of opportunities in sectors such as oil and gas, chemicals, renewable energies and advanced manufacturing, the share of workers employed in these industries is relatively small. Fewer than one in ten workers are employed in manufacturing. Three times as many people work in retail, wholesale, administration, and hospitality. For too many employees in these sectors pay prospects are poor and for those out of work employment prospects are among the worst in the country. Therefore the new mayor, while he or she should obviously support advanced manufacturing, should prioritise these wider challenges on jobs and pay.

Jobs

At 68.4 per cent the employment rate in the region is well below the UK average and that of many other city regions. Indeed only in Liverpool and the West Midlands is it lower. Tees also has a big problem in getting people into work. The region’s unemployment rate – at 7.5 per cent – is the second highest of any city region, behind the West Midlands. Helping more people into work is a must for the new mayor.

The mayor will have some levers to pull to do this. Local leaders will ‘co-design’ the new Work and Health programme with DWP, providing an opportunity to shape the programme to meet local needs (although Tees will not be involved in commissioning providers). They will also be able to create smaller pilot programmes to support specific groups.

In terms of those groups most in need of support young people and ethnic minorities stand out. The region has recognised this and launched the Youth Employment Initiative in May 2016, a two-year programme using £20 million of EU funding to help young people into work. It is important that this and other initiatives are a success. Only half of people with a BAME background are in work in the region, compared with two-thirds nationally. Similarly only 54 per cent of young people are in work, compared with around 60 per cent for the other city regions.

Transforming outcomes for those struggling to find work and engage with the labour market involves connecting people with jobs and equipping them with the right skills. In terms of hard powers the new mayor will have control of bus franchising in the region and can use this to connect people in relatively isolated parts of the region to jobs. Research by JRF suggests that the Tees Valley is relatively unique in that the majority of deprived neighbourhoods are disconnected from areas with large numbers of jobs. In terms of soft powers the new mayor should work with other Northern leaders and Transport for the North to raise infrastructure spending and improve pan-Northern connectivity. Although he or she will have less power over skills, the mayor should help employers in the region take advantage of the new Apprenticeship Levy and help education providers get the most out of the impending changes to post-16 technical education.

Pay

Getting people into work is part of the challenge, helping them to progress up the pay scale should be the mayor’s other priority. Hourly pay for residents of Tees Valley is around £11.08, more than a pound less than the UK average. Only in the South Yorkshire region is pay lower. The prevalence of low pays means that by 2020 around one in five workers in the Tees Valley will be paid the National Living Wage (NLW). While this means workers disproportionately benefit from rises in the NLW, it also means that the minimum wage will become less of a wage floor and more of a going rate for a large proportion of the workforce. Further effort is needed to increase the opportunities for workers to progress up the pay scale. The challenge will be greatest in sectors such as wholesale, retail and hospitality, which tend to have fewer clear routes for those at the bottom of the pay scale to progress.

In the long-run raising pay in the region will involve attracting more well-paying firms and training more young people to take advantage of the opportunities these firms can provide. Unfortunately Tees Valley has a dearth of graduates – only around 20 per cent of the working-age population in the region has a degree compared to around 30 per cent nationally. Furthermore, of the graduates that the region produces, relatively few choose to stay in the region after graduating. Tees Valley retains around 7 per cent of graduates that attend one of its universities, about half the rate of Greater Manchester. While the new mayor will have limited influence over education (though he or she will be fully responsible for the 19+ skills budget by 2020) local government should work to improve the attractiveness of the region as a place to stay after graduating and as a place for firms to invest.

Many critics of Metro Mayors point to the limited powers they have to make a difference. But the Mayor of London has shown that soft power can be just as potent as direct influence. Boris Johnson made regular trips to the US, China and the Middle East to drum up investment in the capital, while Sadiq Khan recently called on all London’s Premier League football clubs to pay the Living Wage. The new mayor can provide similar economic leadership for the Tees Valley. Part of this is recognising the benefits that firms like INEOS and Conoco Philips bring to the region. But it is also about remembering that success will be measured not just by the presence and expansion of such firms, but if the pay and employment prospects improve for the majority of residents.