Despite successive governments placing emphasis on transport investment to drive growth, the lack of skills, R&D intensity and improving the crumbling civic realm should be more urgent priorities for the Leveling Up agenda, says James Blagden.
Conventional wisdom dictates that the UK’s economic history is characterised by periods of rapid growth driven by successive connectivity revolutions: the canal network in the 18th century, the railway network in the 19th century and the road network in the 20th century. All three coincided with sharp increases in national productivity.
To what extent might increases in connectivity drive up output and wages today? In theory, faster connectivity has the potential to support higher productivity, lower start-up and entry costs for firms, and potentially enable agglomeration effects for local economies. But does it in practice? And how should we measure connectivity?
Onward’s new paper, Network Effects, sets out a new door-to-door measure of connectivity based on the aggregate number of jobs that are reachable within different time horizons (15, 30, 60, 90 minutes) by both driving and public transport. It includes the time taken walking to and from the car or travelling to and from the station, derived from the official TravelTime API.
The headline finding is that, despite successive governments placing emphasis on transport investment to drive growth, connectivity has little bearing on average income.
Using a hierarchical linear regression, we find that the number of jobs accessible within 90 minutes by public transport only explains an additional 1.1 per cent of the variation in median incomes, after controlling for qualifications, industry mix and occupation. For comparison, the number of jobs within 60 minutes by public transport has an even smaller effect and access to jobs by car is not at all related to income. But statistical significance is sometimes over emphasised, so for practical purposes, let’s just say that variation in transport connectivity doesn’t really explain spatial differences in median income.
The main reason why some places have a higher median income than others is far better explained by qualification levels and the mix of occupations and industries than by connectivity to jobs. These three factors combined account for 81 per cent of the variation in median income.
Anecdotally, many people will live where they do because of the transport links that get them to work. Actually we find that proving it with the data is trickier. As with median income, access to more jobs at a national level does not tend to coincide with a higher-skilled population, or with an industrial mix skewed towards more productive sectors.
But splitting the data by region reveals a different pattern. In the South of England, it does seem to be the case that places with access to more employment opportunities are richer. In the North and Midlands of England, the trendline is completely flat, which tells us that there isn’t generally an earnings boost from density or connectivity.
We should therefore be cautious about proposing further transport investments to boost productivity and incomes – at least in the short term. The impact is likely to be minimal without addressing other economic fundamentals like education and the quality of jobs available. But that does not mean that some places are not being held back by weak connectivity at the moment. Academic evidence from the UK indicates that returns to densification are lower than in comparable economies like Germany or the US, as per the work of Philip McCann and Tom Forth, among many others. But it may still be the case that relatively poor connectivity is holding back growth in some parts of the country, especially cities.
To investigate this, we compared the number of jobs located within a given radius (5 miles), ‘as the crow flies’, to the number of jobs that are actually accessible within a 60-minute journey by public transport. The result of this analysis is that most second-tier cities are badly let down by their internal public transport infrastructure.
This gives us a ratio of ‘nearby jobs’ to ‘accessible jobs’. As the table below shows, in London there are an average 3.7 jobs accessible by travelling 60 minutes on public transport for each job located within a five mile radius. In other words, London’s transport network boosts access to jobs by 270 per cent. But in Greater Manchester, this figure is just 63 per cent, and public transport barely increases the number of reachable jobs at all for residents of the Sheffield City Region.
So it is clear that intra-city public transport networks are underpowered in some of Britain’s most important regional cities. But the problem appears to be particularly acute in the periphery of some Northern cities too.
Much of the difference in the number of accessible jobs is a function of density. We would obviously expect the aggregate number of jobs reachable for people in Camden to be greater than for people who live in Kendal: there are simply more people and jobs in Camden. But what about Mansfield and Aldershot – two towns with similar populations and broadly similarly sized local labour markets? Taking a few examples illustrates just how much divergence there is between towns in different parts of the country.
Halifax in Yorkshire and Mansfield in Nottinghamshire have similar levels of population as Aldershot in Hampshire. But, using public transport, you can reach twice as many jobs within 90 minutes from Aldershot (1.2 million jobs) than from Halifax (581,837), and over four times as many as from Mansfield (246,857). Aldershot is 30 miles from London, while Halifax is eight miles from Bradford and 14 miles from Leeds. Mansfield is 14 miles from Nottingham, 22 miles from Derby and 30 miles from Sheffield. Despite being further from London than the other two towns are from their nearest cities, good train links give residents of Aldershot many more opportunities.
This is not just a London effect. Telford and Bath have the same population and local employment figures. But where there are 563,869 jobs reachable within 90 minutes from Bath, Telford residents can only access 57,423. Bath is fairly close to Bristol and Swindon, and the public transport system facilitates access to those labour markets. But Telford’s relative isolation from the West Midlands conurbation will severely limit economic opportunity.
What does all this mean for policy? In the places we highlight, it is clear that weak transport connectivity is limiting. The Government is spending £19 billion of transport investment this year alone, and it is quite likely that much more capital spending will be announced in the Spending Review. Our data gives an indication of where that funding should go.
The findings demonstrate that the Government should ruthlessly target transport investment towards the intra-city networks of regional cities – especially Glasgow, Leeds, Manchester, Newcastle and Birmingham – and boosting public transport links to the towns in their environs.
But, contrary to historic Treasury orthodoxy, our data strongly suggests that transport infrastructure is not the best way to level up struggling places, and that the lack of skills, R&D intensity and improving the crumbling civic realm should be more urgent priorities for the Government’s Levelling Up agenda.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.