Is the north really dependent on public sector jobs? Actually, it’s not so simple

May 17, 2012

A fairly commmon idea in Westminster is that the government’s attempt to bring spending under control and reduce the the size of the public sector workforce will disadvantage the north of England compared to the richer south east. The conventional view is that more of the jobs in the north, Scotland Wales and Northern Ireland are in the public sector – based on figures like the ones in the chart above. There will, people assume, be a bigger political backlash in those regions.

The first thing to notice is that the reduction in the proportion of jobs in the public sector is happening at different speeds in different places. The reduction is bigger in places like Northern Ireland, the West Midlands, the East of England and the South West. It is smaller in Yorkshire and Wales.

But is it as simple as people make out? These are pretty big areas and there are differences within them. And is it that some areas have a normal proportion of private sector workers, but an abnormally large number of public sector workers? Or would it be closer to the truth to say that there are a normal number of public sector jobs, but just an unusually small number of private sector workers? Some places might have less of both types of job than average, and others more.

The Office For National Statistics (ONS) explored all these questions in a great paper a few months ago. They point out that things also look different if you run the numbers based on where people live, or where they work. For example, on the basis of where people work, outer London has relatively few jobs. But that’s because the people who live there are commuting into inner London.

The horrible looking chart below shows three things. What proportion of the jobs in that area are in the public sector (in blue); the proportion of people who live in that area and work in the public sector (red) and what proportion of the jobs in that are based in that area are in the public sector.

(Click to expand)

(The figures represent the difference from the national average in each region)

On the face of it, the convention wisdom looks roughly right. In the home counties and inner london the proportion of all jobs that are in the public sector is less than 20pc. But at the other end of the scale, out in the Scottish Highlands and Islands, West Wales, and Northern Ireland, more than 30pc of all jobs are in the public sector.

But even just looking at the share of jobs that are in the public sector – the picture is not so neat. Cheshire, North East Scotland, Lincolnshire and North Yorkshire have a smaller proportion of jobs in the public sector than the national average. Manchester is pretty much smack on the national average.

If you look at the proportion of people who work in the public sector, instead of the ratio of public sector to private jobs, the differences around the country look a lot smaller. In fact, of the 37 regions here, 33 (or 89 pc) are within plus or minus three percent of the national average rate (just under 18pc).

So it is not the case that the north has some kind of soviet-style economy, with everyone working for the government (an impression some Londoners are under).

What’s really happening, as the ONS point out, is that public sector jobs are (relatively) evenly distributed across the country but private sector jobs are not. They note that:

This is not a surprising result. Many jobs in the public sector are in health, education or public administration and these jobs are likely to be spread relatively evenly across the country in order to serve local populations. By contrast, there are a number of private sector occupations in which firms are not required to locate adjacent to their customers and this gives them a freedom to choose where in Britain (or elsewhere) they wish to locate.

You can see the same thing in the chart below. One way of looking at it is that the public sector isn’t big enough to soak up large variations in the size of the private sector.

There are exceptions to this even spread of course. In the highlands nearly a quarter of people work in the public sector. In Inner London it’s practically half that rate: just thirteen and a half percent. But these are the most extreme cases.

Comparing the different measures brings out some interesting patterns. And the impact of reducing public sector employment in different areas could depend on all three.

For example, comparing my home county (West Yorkshire) to the national average, more of the jobs are in the public sector relative to the private (25.3pc rather than 23pc). But actually, less people who live there work in the public sector than the national average (16.4pc compared to 17.7pc). Then again, more of the jobs based in the area are in the public sector (public sector workers are commuting in from somewhere else). So is West Yorkshire unusually “dependent” on public sector jobs? None of the differences to the national average are that enormous.

Comparing the three measures reveals other interesting patterns.

Quite a lot of people who live in North Yorkshire are in the public sector but commute somewhere else to do their jobs (the West Riding?).

There are lots of public sector jobs in inner London, but they are done by people who commute in. (I am on the bus with them each morning, sneakily trying to read top-secret government papers over their shoulder). The people who actually live in inner London are overwhelmingly in the private sector.

But haven’t successive governments tried to move public sector jobs to depressed regions? Public sector employment rates are generally higher in areas where less people work in the private sector. But the relationship is quite scattered (as shown below). Some areas are have lots of both types of jobs, and some have few of either.

If you were to zoom in further, to the local authority level, the picture becomes even more of a patchwork. The ONS produced some maps showing such local private and public employment rates. You can – sort of – make out a north-south pattern in public sector employment rates (on the right). But it is not very neat. And the private sector employment rate (on the left) doesn’t really have much of a pattern at all.

What conclusions could you draw from all this?

The north south divide is less simple than is made out. Firstly within each region there are huge variations. And the differences have more to do with the size of the private sector than the public sector.

Variations in the rate of employment are much bigger than variations in the rate of public sector employment, and if the government can get growth going, the private sector should be able to take up the slack left by the public sector.

The government should be more worried by high unemployment outside the south east, rather than a backlash from sacked public sector workers in the north. When we recently looked at why people vote in different ways in different parts of the country, differences in the unemployment rate were the most important single factor. In fact where the local authority unemployment rate is 1pc higher, controlling for all other factors, respondents are 8pc more likely to vote Labour rather than Conservative. For the government, getting unemployment down isn’t just morally, but also politically, essential.

This article originally appeared on The Daily Telegraph’s website

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