The Economics Story … Dorset ASHE

Insight on the current state of the economy and how it relates to Dorset by Nigel F Jump, Chief Economist of Strategic Economics Ltd (a Dorset Company) and Professor in Regional Economic Development at Bournemouth University.  See: www.strategiceconomics.co.uk

The ONS has released its latest Annual Survey of Hours & Earnings (ASHE), providing data on employee pay across Dorset and its hinterland for April 2015.  The table below summarises some of the key local numbers on wage rates.  The data provides median and mean averages for all employed (not including self-employed but taking into account part-time and full-time hours) by residence and workplace within each geographical area. 

These two different averages can be used to assess the skewed nature of the pay distribution.  Generally, ‘means’ are higher than ‘medians’, reflecting the way the very highly paid in an area pull up the mean average.  For workers, this effect is particularly noticeable in Bournemouth where the mean is £85 per week higher than the median.  By residence, it is larger than for most in Poole (£91) and largest in Christchurch (£104).

Source ONS

Generally, in Dorset, pay rates are higher at residence than workplace, implying some influential local commuting effects.  This is especially true for Weymouth and Portland, where the differential between the relative medians is huge (£92).  The exceptions to this rule are Purbeck and Poole: the relative takers of commuters.

On each of the four measures, all Dorset’s area pay rates are below their respective national averages.  Compared with the SW average figures, pay tends to be above average in the south east of Dorset (the broad conurbation) and lower elsewhere.  All Dorset, however, has relatively low pay compared with respective SE averages.

Amongst the SW LEP areas, Dorset ranks fourth of the six on both residence and workplace employment medians and means.  As usual, the overall pattern is that places north and east of Dorset area have higher pay rates than those to the west.

Comment

Relative average pay rates across Dorset are fascinating in their own right as an indicator of comparative living standards.  But, they are also an important measure of relative underlying economic performance and potential. 

First and foremost, over time, pay rates reflect the productivity of jobs and, in turn, this hints at local sector characteristics and business competitiveness.  The very low relative median workplace pay rate in Weymouth and Portland (£286), for example, indicates a rather weak economy and stands in stark contrast with the pay levels reached in Poole (£414).  In theory, such large differentials would be expected to be exploited by employers, with them shifting or investing more in the former relative to the latter to take advantage of relatively ‘low’ costs.  However, such pay differentials tend to persist even in the long run.  In practice, industries and workforces tend to ‘cluster’ in a way that encourages high pay jobs to be associated spatially with other high pay jobs and skills.

It is these kind of effects that the local development community must struggle against.  The economic fundamentals of a place can only be changed significantly with major investment in highly productive capacity.

Professor Nigel F Jump, 26th November 2015