Mapping gaps: Geographic inequality in productivity and living standards

Published on Incomes and Inequality

Regional inequality is a hot topic, particularly since the EU referendum exposed huge voting divides between London, Scotland and Northern Ireland, and the rest of the UK. This report examines the relative economic performance of UK regions and nations since the 1960s, and the extent to which this has driven differences in household living standards.

 

  • On the key productivity measure of output per worker, the UK is the most geographically unequal G7 country, with even greater inequality than the US. Across the UK, output per hour worked varies by around 56 per cent between the most and least productive parts of the country (London and Wales respectively).
  • A different picture emerges when looking at typical household incomes after housing costs across the UK regions and nations. This is partly due to the state reducing gaps through redistributive policies, and because geographic income inequality has fallen over the last 30 years.
  • There are positive and negative reasons for falling geographic inequality. Rising employment in recent years has helped to reduce the variation in employment rates across the UK, while a higher minimum wage has helped to reduce geographic pay gaps.Less positively, rising housing costs have borne down most heavily on living standards in London and the South East.