East of England Regional Economic Strategy

Headline regional ambitions

Inequality

By more effectively harnessing the talents of all, raising lower-quartile gross earnings to 60 per cent of the regional average, would reverse the rise in wage inequality seen in recent years and promote economic inclusion.

While prosperity has increased in the East of England over the past five years, the outcomes for those at different earnings levels has varied greatly (see Figure 10). The increase in average real wages has been driven largely by those at the top end of the wage distribution. In contrast, the gross earnings of those in the lowest quartile have barely kept up with inflation.^xiii A large number of factors have influenced wage differentials, including educational attainment, off-shoring of both manufacturing and services, technological change, the skills premium, international price movements, immigration and sectoral change. ^{xiv xv}

Research puts skills attainment at the heart of these phenomena: as the balance of jobs shifts away from lower to higher-level skills requirements, the premium on higher-level skills is increasing. Recent studies also find that differences in the type and quantity of workplace training undertaken by employees have contributed to growing wage inequality: highly skilled workers typically undergo more training than lower skilled employees, and the financial return is greater too.^xvi

Growing inequality can exacerbate social exclusion and will need to be addressed if the East of England is to harness and develop the talents and creativity of all. The RES therefore sets the ambition of raising lower-quartile earnings to 60 per cent of average earnings over the lifetime of the strategy and thereby reversing the decline seen in recent years. A progression in skill levels will be among the key tools for achieving this.

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