What is the purpose of economic growth? The answer to this question should be clear and obvious: to raise the living standards of all citizens.
But our approaches to growing local economies haven’t always done this. It’s time for a different approach. Local leaders should can grasp it when developing their local industrial strategies by putting inclusive growth at their heart.
To loosen the grip that poverty has on people’s lives, we can no longer rely on old assumptions that prosperity will trickle down. A rising employment rate is no longer helping families out of poverty as it once did, and people in many parts of the country are locked out of opportunities to access good jobs.
We need to take more active decisions about how people can benefit from and contribute to a growing economy. That means delivering inclusive growth that loosens the grip of poverty for people stuck in low-paid, poor-quality work or who are unable to find a job.
There is a substantial body of evidence that simply driving up output growth and the number of jobs in an economy is not guaranteed to improve living standards for people in or at risk of poverty.
Government has challenged local areas to identify priorities across the five foundations of productivity identified in their local industrial strategies. Towns and cities looking to benefit from the Stronger Towns Fund or the soon-to-be-announced Shared Prosperity Fund will also have to show how they will address those priorities.
Whilst it’s true that boosting productivity can help improve living standards, too often our efforts are only about the shiny and new, focusing on cutting-edge firms and technological innovation. Yet some of the biggest opportunities to boost productivity lay in our low pay sectors, such as retail and hospitality, and in the long tail of low-productivity firms.
If we are to improve the living standards of the shop assistants, baristas and care workers that live in towns and cities across the country, then we need to put more effort into policies that will benefit them. Pursuing productivity-enhancing interventions to help workers, such as increased on the job training or better management practices, should be a priority.
Achieving inclusive growth will require much greater attention being paid to the broader outcomes that policies will deliver when they are being designed. For example, rather than just focusing on how many jobs that are being created, local areas must consider the quality of those jobs and how poorer people might be able to get into them.
This type of approach was taken in San Antonio in Texas, where their growth strategy targeted sectors which had better quality jobs, crucially in areas where the city already had strengths. Connected to this was a supply side strategy which supported citizens in getting the skills needed to get into the new jobs. Importantly, it had a strong focus on how poorer people could be supported into good jobs that were in-demand and well paid.
This is just one example of the type of intervention that might be needed to deliver more inclusive growth. At the Joseph Rowntree Foundation, we’ve put together a series of examples in a new briefing of how local industrial strategies could approach this, drawing on the government’s foundations of productivity. It includes ideas on policies from creating effective basic skills programmes to business support services that improve the quality of jobs.
Local leaders can use the opportunity of local industrial strategies to be explicit about how they intend to improve their local economies and the differences that will make to people’s lives. Our briefing provides some ideas for how this could be approached, and we’re keen to work with places that share our ambition.
Mike Hawking, policy and partnerships manager, work, the Joseph Rowntree Foundation