Regional productivity: wage inequality and inclusive growth

Authors: Leaza McSorley*, GLasgow Caledonian University
Topics: Economic Geography
Keywords: productivity, economic geography
Session Type: Paper
Day: 4/7/2019
Start / End Time: 8:00 AM / 9:40 AM
Room: Cabinet Room, Omni, West
Presentation File: No File Uploaded

This paper critically and empirically examines one of the fundamental assumptions about productivity: that increased productivity results in higher wages. This project innovatively frames this within a broader diagnostic framework - considering the implications of the pay-productivity link for achieving inclusive growth and societal well-being. The OECD (2016) highlight the risk of a ‘vicious cycle’ of continued labour market polarisation, whereby the gains of any productivity improvements will be concentrated in certain sectors and benefit certain groups of workers, with the lower skilled end of the labour market potentially losing out. Increasing horizontal inequalities; between and within regions and between different social groups (particularly emerging inter-generational inequalities) may act to undermine strategies targeted at boosting productivity. The paper focuses on i) critical evaluation of theoretical explanations of pay inequality, wage stagnation and productivity ii) empirical data analysis of UK wage differentials and output, regional variations, composition of workforce, labour supply, sectoral analysis iii) detailed case study of Scotland: applying the data analysis within the Scottish policy framework, and providing practical policy insights as to challenges and solutions to inequality, wage stagnation and productivity stagnation. The paper argues that the objective of returning to pre-crisis trend levels of productivity growth seems unlikely until the shifting labour market dynamics and structural social inequalities are addressed.

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