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‘Big Smoke bonus’ of moving to London for work has grown to almost 20 per cent over the last decade

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Here’s why

The typical pay rise associated with moving to London for work has increased to 18 per cent, but high housing costs are limiting the overall income gains from moving to a new job in the capital for many, according to the Resolution Foundation’s Earnings Outlook published today (Wednesday).

The latest Earnings Outlook looks at prospects for pay growth in 2018, and focuses on both the frequency of job moves and the typical pay rises associated with them. Job mobility is a leading indicator of pay pressure, and a useful barometer of the wider health of the jobs market.

The Outlook shows that the proportion of people voluntarily moving jobs has been recovering in recent years after a sharp fall in the wake of the financial crisis. In the last three months of 2017, around 290,000 people moved jobs, compared to just 110,000 a quarter in the depths of the crisis.

However voluntary job moves remain far less frequent than they were back in the early-2000s, and are down 15 per cent on their pre-crisis average.

Moving jobs is associated with bigger pay rises than staying put, at 7.3 per cent vs 2.5 per cent respectively. Even bigger typical pay rises are associated with moving regions for work, at 8.4 per cent, and the biggest pay rise of all is the ‘Big Smoke bonus’ of moving to London, which attracted a typical pay rise of 18 per cent in 2015/16.

The ‘Big Smoke bonus’ is up from 15 per cent in 2007/08, and is now double the size of the next biggest typical pay rises, which are moving to the South East (9%) and the East of England (8%).

In contrast, the moving-regions pay rise across most of the North has fallen over the last decade, and is now below 5 per cent in the North East and Wales.

The Foundation notes that while the premium for moving to the capital has grown over the last decade, the share of people migrating to London has stayed the same, at around a fifth of all moves.

It says that is likely due to the high living costs, noting that once housing costs are taken into effect, typical incomes in London are actually lower than those in the South West, despite hourly pay being £5 higher in the capital.

Overall, the living costs push factor away from London and the South East, coupled with the falling pay returns from moving around most of the rest of the country, help to explain why people are more reluctant to move regions for work than they were before the crisis.

The Foundation says that the noticeably higher wages in London than elsewhere in the country and much higher housing costs should act as a double warning to policymakers of the need to both support productivity growth across the country, and tackle high housing costs in the capital.

Stephen Clarke, Senior Economic Analyst at the Resolution Foundation, said:

“A key route to a big pay rise is to move jobs, particularly if you voluntarily move to a different part of the country for work.

“The biggest pay rise of all is the ‘Big Smoke Bonus’ of moving to London, which attracts a typical pay rise of almost 20 per cent. But despite this huge premium, people are no more likely to move to London for work than they were before the crisis.

“Of course there are plenty of positive reasons for people being comfortable working where they are. But it says something about the scale of London’s housing crisis that even 20 per cent pay rises can’t persuade more people to move to jobs in the capital.

“The uniquely high pay bonus associated with moving to London is also a pretty damning indictment of the scale of regional economic imbalances throughout Britain.”




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