Pay scales, benefit rates and social housing rules all quietly reward staying in low-productivity regions, even when moving would raise wages, productivity and growth.
The other aspect here is that nationwide public sector wage settlements also dampen incentives for private sector activity to move to certain regions because the public sector sets the wage bar above a level that is profitable for private firms.
To respond to Albert Wright, it might benefit the regional economies (and fiscal balance) if the public sector tailored wages more to varying regional living costs, thus making certain regions more attractive for inward investment and thereby lifting both incomes and employment opportunities more widely across the regional population.
If the cost of labour per hour is reduced and we assume that the work done by the employee is the same, the benefit is we now get the same work for less money,
However, when GDP and GVA are calculated by some statisticians they assume there is no change to productivity in the case of civil servants and the pay they get represents the value they create.
The whole area of "productivity" is very difficult to measure and understand, particularly in the service sector.
So the answer is for everyone to reset their home areas and move to overcrowded cities like London?
Most people cannot afford to take the chance due to high transport and accommodation costs.
I wrote about this in my earlier blog: https://davidstarkie.co.uk/regional-economic-disparities-across/ but Len has delved into the numbers more than I did.
The other aspect here is that nationwide public sector wage settlements also dampen incentives for private sector activity to move to certain regions because the public sector sets the wage bar above a level that is profitable for private firms.
To respond to Albert Wright, it might benefit the regional economies (and fiscal balance) if the public sector tailored wages more to varying regional living costs, thus making certain regions more attractive for inward investment and thereby lifting both incomes and employment opportunities more widely across the regional population.
Should the Government in areas of low wages pay their employees less to improve productivity?
Why would it improve productivity?
If the cost of labour per hour is reduced and we assume that the work done by the employee is the same, the benefit is we now get the same work for less money,
However, when GDP and GVA are calculated by some statisticians they assume there is no change to productivity in the case of civil servants and the pay they get represents the value they create.
The whole area of "productivity" is very difficult to measure and understand, particularly in the service sector.
Thanhs, yes I follow that reasoning. In truth you reduce wages you will get strikes :)
The IEA via Len has provided yet another angle on things I hadn't thought of. It brought to mind Leonard Tebbit and his bicycle.