Younger workers in England encounter significant wage disparities based on geographic location rather than personal qualifications, according to new research highlighting regional pay inequalities.
Data from the Resolution Foundation reveals substantial earning differences across England, with London workers earning nearly double their counterparts in areas like Liskeard, Cornwall. The analysis examined over 11 million early-career workers throughout England.
The research indicates these wage gaps stem from workplace location rather than worker characteristics. Early-career employees face approximately 5% “place-based pay penalties,” potentially costing around £1,300 annually when moving from high-paying markets like Harrogate to lower-paying areas such as Dudley.
These findings challenge previous assumptions about regional wage inequality. Earlier studies suggested pay differences resulted from varying demographics between regions or local job market size. However, the new analysis demonstrates that larger job markets don’t automatically generate higher wages.
Cambridge workers, for example, earn 23% more than those in similarly-sized Leicester, indicating factors beyond market size influence pay levels.
The study identifies firm location decisions as a primary driver of regional pay disparities. Companies choosing to establish operations in certain areas directly impact local wage levels, suggesting that relocating higher-paying firms could boost regional earnings.
London maintains wage premiums across all sectors, with full-time workers averaging £59,120 annually compared to £31,692 in Liskeard, according to official data.
Research director Greg Thwaite explained: “England is beset by stark and persistent geographic wage inequalities, with Londoners’ typical earnings twice as much as those living in places like Liskeard or Cromer.”
He noted that assumptions about demographic drivers of wage gaps are incorrect: “It’s often assumed that people are driving these divides but, in fact, place-based pay penalties are rife across England.”
The research quantifies the impact on individual workers: “A typical early career worker could lose out on £1,300 a year just because of where their job is located.”
The Resolution Foundation recommends several policy responses to address these disparities. These include encouraging housing development, particularly affordable housing, in higher-paying regions and supporting expansion of well-compensated firms into various English regions.
Thwaite outlined potential solutions: “Policymakers at local, regional and national levels can address these divides by creating the conditions for high-paying firms to locate to their areas, while avoiding an arms race between regions in subsidies for firms.”
The research emphasizes housing as a barrier to worker mobility: “Moving to higher-paying areas can hugely boost young people’s career earnings, but housing is a major barrier to making these moves.”
The foundation advocates for policy intervention to reduce housing obstacles, suggesting that “Policymakers should do more to bring these housing barriers down.”
The analysis represents a significant departure from traditional explanations of regional wage inequality, focusing attention on structural factors rather than individual characteristics as primary drivers of pay disparities across England.
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