The Geography of Employment Polarisation in Britain

This paper investigates the regional and subregional patterns of employment polarisation in Great Britain. Extending recent econometric evidence for employment polarisation at the national level, the focus of analysis is to examine the geography of this polarisation. Methodological issues on how we define and measure ‘job polarisation’ are presented and plausible theories for explaining this polarisation are reviewed. It has been suggested that low-quality jobs, defined either as low-paid jobs or low-skill jobs, depend increasingly on the growth of employment and wages of high-quality jobs. The presence of a growing high-income workforce in the economy generates consumer demand for local services leading this way to an increase in the low-skill employment sector. As these local services refer mainly to the non-traded sector of the economy, this hypothesis implies physical proximity of the low-skilled and high-skilled jobs. Therefore, in the empirical part of the paper, econometric techniques are used in order to investigate the location of job polarisation. Specifically, we examine whether employment polarisation happens within regions or just across regions and test further for such evidence at the subregional level and neighbouring localities. New Earnings Survey (NES) microdata that span over a long time period and are workplace-based are used for such purposes. Furthermore, evidence for dependency of low-skill jobs on high-skill ones at the local level and possible urban-specificity of the phenomenon are investigated. Taking into account the importance of employment shifts, changes in median wages of the different jobs and within job-inequality for explaining the increase in earnings inequality in GB in the recent decades, the contribution of employment polarisation to the actual rise in inequality is examined. Additionally, the paper examines whether employment polarisation patterns are associated with regional differences in the labour force composition.