The Economics Story: … Dorset Incomes

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 Visiting Professor in Economics at the Universities of Bath and Plymouth.

See: www.strategiceconomics.co.uk

The ONS has just released its latest statistics on gross disposable household income (GDHI) at a regional and sub-regional level.  The new figures are for 2012 and they reveal some interesting facts about the structure of our local economy.

In SW England as a whole, GDHI was £90.3 billion in 2012.  Dorset County’s (DCC) figure was £7.6bn and Bournemouth and Poole’s (B&P) was £5.6bn.  Together, they represented nearly 15% of the regional total.  It is more interesting, however, to look at the GDHI figures in terms of a ratio to the size of the population: it would be silly, for example to compare the Dorset total to that of Hampshire without considering the number of people that the income totals are spread over.

So, in 2012, the SE average GDHI per head was £19,126 whereas the SW total was £16,914.  These compare with an England average of £17,066 i.e. above and below respectively.  For DCC, the GDHI per head figure was £18,237 whereas for B&P, the figure was £16,777.  Our neighbours in Hampshire county and Southampton recorded £19,201 and £13,488 respectively.  In Wiltshire, Somerset and Devon, the numbers were £17,965, £17,059 and £16,679 respectively.

In index terms (UK average = 100), SW England’s GDHI per head ranked fourth out of twelve in the United Kingdom and was very close to the average (100.7).  DCC’s index was 108.6 and B&P was 99.9.

Having looked at the raw data, we need to bring out the economic stories.  There are three main ones.

1.  DCC and B&P are close to the UK average, comparing favourably with many other regions (outside the South East) and most parts of the South West.  Indeed, within the SW region, the DCC’s index of 108.6 was higher than anywhere else!  B&P’s index ranked sixth out of the twelve areas (see table below).

2.  DCC easily outperforms the B&P conurbation on the income measures.  This is often the case: populations in more rural areas can appear ‘richer’ than those in neighbouring towns and cities.  This is at odds with the equivalent output data (gross value added or GVA per head) for which urban areas usually outperform more rural areas.  It can also seem odd intuitively – surely, most of the high paying jobs are in the cities?  We can square this circle by considering commuting and employment status. 

a) In many places, (including Dorset), there is quite a lot of commuting in and out of local conurbations.  In simple terms, high earners often work in town but live in the country.  Hence, GDHI per head measured at the places of residence can bias the numbers one way (towards rural) whereas GVA per head measured at the place of work can push the other way (to urban).

b) The employment structure is often very different in urban and rural areas.  There are high and low paid jobs in both but the mix may vary significantly.  Moreover, from the unemployment statistics, we know there are proportionately more jobless living in towns and cities and there can be more low earners at the two ends of the age range – more young and old people in the towns. 

Both factors can tend to bring GDHI per head down in the conurbations relative to their rural hinterlands.  To see how common this is, as well as between DCC and B&P, just look at the comparisons in the table above for a) Devon versus Torbay and Plymouth, b) Bristol versus Gloucestershire and Somerset, and c) Swindon versus Wiltshire.

3. The third story has yet to be revealed by our look at the statistics.  How are things changing over time in relative terms?  Interestingly, there are marked contrasts in our Dorset area.  The 108.6 index for DCC was the highest since 2006 and four points above the 2009 low.  In contrast, the 99.9 index for B&P was the lowest since 1996 and 5.6 points below the peak of 2006. 

These contrasting trends are very interesting, suggesting the conurbation is slipping down the relative incomes league whereas the county is rising.  Please note, this does not mean B&P’s GDHI per head is falling (although, in real terms, incomes have not increased much in recent years).  It means incomes in B&P are not rising as fast as elsewhere – i.e. B&P residents are relatively ‘poorer’ whereas DCC’s are relatively ‘richer’.  The long downturn since 2008, when some wage and non-wage earners have been under severe pressure, is bound to be part of the explanation. 

If an upturn is now underway, it will be interesting to see whether the conurbation regains lost ground.  Normally, this would be my expectation but not much has been ‘normal’ recently and it may take some time.

Professor Nigel Jump, 6th June 2014