Wales should be centre-stage in attempts to ‘level up’ Britain

Wales needs to move centre-stage in the UK’s ‘levelling up’ agenda as its strong performance on jobs has not been matched on pay packets, leaving the country struggling to reduce its living standards gap with the rest of the UK, according to a major new Resolution Foundation report published today (Wednesday).

The report – From Locking down to levelling up – includes a comprehensive assessment of living standards across Wales over recent decades, how the country has been affected by the crisis, and the challenges it faces in rebuilding its post-pandemic economy.

It argues that despite Wales being one of the poorest areas of the UK, it is often overlooked in ‘levelling up’ debates in Westminster, and that closing Wales’ living standards gap with the UK should be a priority for policy makers in both Cardiff and London.

The report finds that Wales has managed to halve its employment gap with the UK. That gap, which opened up after the 80s and 90s recessions and was between 4 and 5 percentage points throughout the early and mid-1990s, has been reduced to just 2 percentage points by 2019.

However, this progress on closing employment gaps has not been matched when it comes to pay. Typical hourly pay across Wales was 9 per cent lower than the UK average last year, at £12.20 compared to £13.30, a gap that hasn’t changed in since the 1990s.

Wales’ enduring pay gap – which persists despite a welcome fall in low-pay across the country – is primarily down to a dearth of jobs in high-paying sectors, such as ICT, finance and property, professional and scientific activities. These sectors account for just 12 per cent of jobs in Wales, compared to 17 per cent across the UK.

The Foundation’s analysis shows that the household incomes gap between Wales and the UK have fallen from 10 per cent in the mid-1990s to 7 per cent in 2018-19. However lasting pay gaps mean that typical household incomes in Wales are still, at £22,300 a year, the second lowest of any UK nation or English region.

The report shows that more progress has been made on reducing living standards gaps within Wales. Employment has grown fastest in traditionally low employment areas such as Cardiff and Gwynedd, while a fast rising minimum wage has seen pay grow fastest in low pay areas like Bridgend and Caerphilly.

Looking at the impact of the pandemic in Wales, the Foundation notes that the jobs hit has been of a similarly magnitude to the rest of the UK despite slightly tighter lockdown restrictions

This is in contrast to the well above average falls in employment seen in Wales during the recessions of the 1980s and 1990s. Alongside a return to high unemployment post-pandemic, the report identifies a number of challenges facing Wales.

First, the Foundation notes that a growing share of its younger workforce work in retail, hospitality and leisure – the low-paying sectors that have been hit hardest by the crisis. Currently, over half (52 per cent) of workers in their early 20s work in these sectors, up from 44 per cent among those born a decade earlier.

Second, over a third (35 per cent) of non-pensioner households across Wales will lose over £1,000 next year if planned benefit cuts go ahead. This leaves over 300,000 Welsh households at risk of a large income drop in April, unless the Chancellor changes course.

Third, the Foundation notes that the typical age in Wales is – at 42.5 – older than the UK average of 40.3, and that the country is growing older faster too. This means the challenges of adapting to an ageing population are particularly acute in Wales.

The Foundation says that reducing unemployment swiftly while coping with the pressures of ageing population and creating new opportunities for younger workers will lie at the heart of whether Wales really can close its living standards gap with the rest of the UK over the next decade.

Charlie McCurdy, Researcher at the Resolution Foundation, said:

“Wales is one of the poorest areas of the UK and yet it is disgracefully often overlooked in debates around tackling geographical inequalities. That needs to change as the progress Wales’ has made in closing employment gaps is in contrast to stubbornly high living standards gap with the rest of the UK.

“But as well as addressing longer-term living standards struggles, Wales faces a more immediate challenge in tackling fast rising unemployment. With a large concentration of young workers in low-paying sectors like hospitality, this pandemic will leave a lasting mark on the Welsh labour market.

“Creating new opportunities for younger generations and raising productivity, while also adapting to a rapidly ageing population, will hold the key to Wales to enjoying stronger living standards growth over the coming decade.”