https://cpes.org.uk/om/files/original/6e1bac1dd838a9ba4147f117cc8557a5.pdf 7b144a206f8f267c934eeaa7561f6a40 Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Cambridge Economic Policy Review Volume 6 No 2 Creator An entity primarily responsible for making the resource CEPG Date A point or period of time associated with an event in the lifecycle of the resource July 1980 Text A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text. Text Any textual data included in the document Chapter 2 Regional income This chapter examines differences in the levels and growth of income across regions. It shows how personal disposable income varies due to differences in wages, private transfers such as profits, dividends and rent, grants and social security benefits and taxes. A further source of variation, when incomes are measured per head of population, is found to be the dependency ratio (the proportion not working to those working). The analysis relies on the set of regional accounts given in the Appendix. It must be emphasised at the outset that the accounts themselves are provisional; figures quoted here for 1966, in particular, are least reliable. The analysis reveals a significant convergence of both wage incomes and per capita incomes with problem regions moving up to the national average and the richer regions, notably the South-East, moving down towards the national average. The system of taxes and social security does bring about some redistribution of incomes among regions, particularly from the South-East and to Northern Ireland, but it has not been responsible to any significant extent for convergence of incomes. The main regional contrasts examined in more detail in subsequent sections are shown in Table 2.1. Of the four problem regions in the North of the UK which suffered emigration, only Northern Ireland has had a markedly low average level of per capita income. The low level of income per capita in Northern Ireland reflects, at least in part, a higher ratio of dependants (children, old people, inactive or unemployed) to those at work. Conversely, of the four regions in the South and East only one, the South-East, has an aboveaverage level of per capita income; in this region the ratio of dependants to workers is particularly low. Table 2.1 Income per capita in problem regions and dynamic regions relative to UK average, 1966-1978 Increase in employment, 1966-78 (percentage difference from UK average) Net immigration of working age, 1966-78 (percentage of working age population, difference from UK average) Number·of dependants per 100 workers (difference from UK average) Personal disposable income per capita (relative to UK= 100) 1966 1978 1966 1978 Problem regions Northern Ireland Scotland North North-West + 5.8 - 0.4 + 0.3 - 5.8 -10.1 - 4.5 - 3.8 - 3.0 +56 +40 +12 + 7 +15 + 8 - 2 +5 -27 -19 -8 -2 -13 -6 -7 - 3 Intermediate regions Wales West Midlands Yorkshire and Humberside - 0.8 - 3.9 - 2.0 + 1.9 - 0.7 - 1.8 +20 +23 -19 - 8 - 1 +1 -13 -9 +3 +1 -5 -5 Dynamic regions East Anglia South-West East Midlands South-East +15.3 + 7.4 + 4.6 - 0.1 +14.5 + 8.8 + 3.6 + 0.3 +28 +13 +17 +15 +4 +3 -11 -15 0 -7 -5 -3 -5 -5 +15 +10 29 , The other region where per capita income has been high, the West Midlands, has also had a low proportion of dependants. The lack of correlation between per capita income and job opportunities partly reflects the degree to which migration has accommodated regional differences in the growth of employment. As will be shown below, the distribution of per capita income has tended to become more equal among regions. This has happened because of a convergence of levels of productivity and wages as well as a narrowing of differences in dependency ratios. Differences in job opportunities have been neither the result nor the cause of major differences in productivity or wage levels among regions. The tax and social security system has redistributed income from rich to poor regions, but only to a minor degree. The income differences which persist are mainly those between employed and unemployed, and the elderly and people of working age, which are to be found within every region as well as among regions. Personal income is a very incomplete measure even of the economic aspect of relative living standards. For one thing, the figures used here make no allowance for regional differences in the cost of living (a shortcoming which we shall in future make some attempt to rectify). Apart from this a substantial part of regional expenditure -notably public services and investment - is not financed from personal income. The last part of this chapter summarises differences in the relationship between total spending and income among regions. These differences are quite large. On the other hand, not all of the expenditure fmanced by government or business within each region should necessarily be regarded as a specific benefit to the region. For example, whether an army camp or an oil refinery is seen as a benefit or a disbenefit in the region where it is located is a matter of individual points of view. Determinants of personal income per head We shall measure factors influencing the level of personal income per head in each region relative to averages for the UK as a whole. Table 2.2 shows the make-up of national average figures in 1975. Income generated by production is given by valueadded per worker, including gross profits and rent. This may be used as a crude comparative measure of productivity across regions. A large part, employment income, is directly transferred to households in each region. To this must be added net personal receipts of profit income, dividends and interest as well as rent (including imputed rent of owner-occupiers). Finally, to arrive at disposable income we add grants and social benefits paid out by the government and subtract income taxes and social security contributions. It will be seen that, for the UK as a whole, the various transfers roughly cancel out so that personal disposable income is nearly equal to income from employment and self-employment. On the other hand disposable income per capita is just under half the average level of income from employment per worker because on average each worker must directly or indirectly support at least one other person. Productivity and employment income The average level of value-added per worker has been rather uniform across regions in the UK and tended to converge even more closely in the 1970s (see Table 2.3). The main difference is between the South-East, where productivity has been 6-10% above average, and Northern Ireland, where productivity outside the industrial sector has been some 15% below average in money terms. In the East and West Midlands industrial productivity per worker appears to be some 10% below average (this probably reflects the specialisation of these regions in labour-intensive branches of manufacturing). Overall, leaving aside the South-East and Northern Ireland, value-added per worker lies within a very narrow band (95-100% of Table 2.2 Average income per capita in the UK, 1975 Population {thousands) Workers: civilian employees, armed forced and self-employed- full-time and part-time (thousands) Workers/population(%) Value-added per worker (excluding offshore) less profits and rent per worker Income from employment and self-employment per worker Income from employment and self-employment per capita of population plus net profits, dividends, interest and rent per capita equals personal income per capita before income tax and social security plus grants and social benefits per capita less income taxes and social contributions per capita equals disposable income per capita (£per capita) 55,962 24,828 44.37 3,759 674 3,085 1,369 + 145 1,513 + 184 392 1,305 30 · Table 2.3 Value-added per worker by region relative to UK average, 1966-78a Industry 1966 1973 1978 Northern Ireland Scotland North North-West Wales West Midlands Yorkshire and Humberside East Anglia South-West East Midlands South-East 95 93 97 98 100 101 99 100 96 99 100 101 105 100 101 90 93 91 97 93 97 110 96 96 99 92 101 99 92 91 106 110 108 RMS deviation from mean (including SE and N. Ireland) 5.2 5.3 4.7 (excluding SE and N. Ireland) 5.2 3.6 3.9 a Value-added at factor cost. See Appendix for definitions. (index, UK average= 100) All sectors 1966 1973 1978 86 90 88 94 98 100 98 98 97 96 98 99 92 97 97 98 96 96 97 94 95 100 98 97 93 91 98 98 96 97 109 108 106 5.4 4.5 4.0 2.5 2.2 1.4 the national average). In particular value-added per worker in the North-West (where employment declined most) has been as high as or higher than in most other regions. The distribution of average employment income per worker among regions very closely follows the distribution of value-added per worker. Again the only significant departures from the national average have been in Northern Ireland (where it has been 10% below average) and the South-East (6-10% above average). However the distribution of employment income per capita of population is much more unequal and has followed a different pattern (see Table 2.4). The disparity between Northern Ireland and the South-East is much accentuated; in 1978 the gap was still 35% of the national average, having been as high as 48% in 1966. Moreover there are significant differences among other regions (although these have tended to fall through time). In Wales employment income per head remained 13% below average in 1978. The West Midlands had a 10% aboveaverage figure in 1966 but by 1978 had fallen back to a near-average position. Dependants There are regional differences not only in the size but also in the composition of the dependent population (see Table 2.5) which need to be taken into account in income comparisons. In the problem regions of the North (including Northern Ireland) the number of old people per 100 workers is about average. The higher number of dependants in these regions is mainly a matter of unemployment, low activity and, especially in Northern Ireland's case, a larger number of children. In Wales, although the dependency ratio is above-average in all categories, the largest factor is a comparatively low activity rate for women of working age. In the South-West there are larger numbers of old people. In the West Midlands the low dependency ratio reflects high activity and a belowaverage proportion of old people. In the South-East, in addition to high activity rates there are comparatively few children. In a complex way, and perhaps often with long time lags, there is a tendency for dependency ratios to reflect differences in job opportunities relative to population. Thus in Northern Ireland whose employment shortfall is due to natural growth of population, the lack of jobs is compounded by the fact that workers have larger families to support. In dynamic regions it is to be expected that activity rates will be high, raising earnings per person or per family. It might also be expected that problem regions would have above-average proportions of old people, although this does not appear to have been true in the UK. Although differences in dependency ratios are the main source of disparities in per capita income, the differences are still on the whole surprisingly small. Transfers of personal income The pattern of income per head is little modified by transfers in aggregate. Comparing employment income per capita with disposable income per capita (Table 2.6), it can be seen that transfers bring the SouthEast down 2-3% towards the average and raise the relative income level in Northern Ireland by 3-5%. Wales and the South-West also benefit relatively from transfers. 31 Table 2.4 Income from employment and self-employment by region relative to UK average, 1966-78 (index, UK average =100) Per worker 1966 1973 1978 Per capita of population 1966 1973 1978 Northern Ireland Scotland North North-West 86 91 92 94 98 100 94 96 97 99 100 101 69 74 78 88 93 96 88 91 93 95 94 95 Wales West Midlands Yorkshire and Humberside 94 97 96 100 97 98 95 94 96 86 89 87 110 102 101 96 92 95 East Anglia South-West East Midlands South-East na 94 93 111 a 98 99 97 107 97 98 97 106 86a 88 92 117a 94 94 96 115 92 92 96 113 RMS deviation from mean (including SE and N. Ireland) 6.0 3.8 3.4 (excluding SE and N. Ireland) 2.5 1.6 1.6 12.1 9.3 8.2 7.2 3.4 3.6 a Estimates of total income from employment and self-employment in East Anglia and the South-East in 1966 used in this and the following tables differ slightly from those based on CSO estimates in the Appendix, since the latter have several implausible implications. Table 2.5 Dependants per 100 workers by region relative to UK average, 1978 Childrena Old peoplea Inactiveb Northern Ireland Scotland North North-West +24 -2 + 4 -1 +2 0 + 2 +1 +13 +2 +3 0 Wales West Midlands Yorkshire and Humberside + 5 +6 0 -4 +1 0 +12 -3 0 East Anglia South-West East Midlands South-East + 2 +2 0 +8 + 2 -1 - 5 -1 +9 +8 +4 -6 a Children aged under 15, old people aged over 65. b Balance of inactive of working age, less employed and self-employed over 65. Unemployed +5 +3 +4 +2 +2 -1 0 -1 0 -1 -2 Total +40 +7 +8 +5 +23 8 +1 +13 +15 +3 -15 Estimates of net personal receipts of profits, dividends, interest and rent by region in the Appendix have been derived as residuals and are too unreliable to be a basis for inference, except perhaps in their implication that the South-East has higher per capita receipts than most other regions. However the other part of transfers, namely those which occur through the tax and social security system, is better measured and shows a remarkably stable pattern of redistribution. Regional differences in receipts of grants and social benefits have been 32 minor (although increasing in importance as real benefit levels were improved). But income tax has produced a substantial effective transfer from the South-East to most other regions, notably Northern Ireland (see Table 2.7). The relationship between expenditure and income Thus far we have examined the regional distribution of personal income. However a considerable part of regional expenditure, notably public services and Table 2.6 Personal income by region relative to UK average, 1966-78 Northern Ireland Scotland North North-West Wales West Midlands Yorkshire and Humberside East Anglia South-West East Midlands South-East RMS deviation from mean (including SE and N. Ireland) (excluding SE and N. Ireland) Income from employment and self-employment per capita 1966 1973 1978 69 74 78 88 93 96 88 91 93 95 94 95 86 89 87 110 102 101 96 92 95 86 94 92 88 94 92 92 96 96 117 115 113 12.1 9.3 8.2 7.2 3.4 3.6 (index, UK average = 100) Personal disposable income per capita 1966 1973 1978 73 79 81 92 93 98 87 92 94 93 96 97 87 92 91 103 100 101 95 93 95 100 96 93 95 97 97 95 96 95 115 112 110 10.0 7.4 6.7 5.0 2.5 2.8 Table 2.7 Tax and social security transfers by region, 1966-78 (receipts per person relative to UK as a whole,£ per capita at 1975 prices) Grants and social benefits 1966 1973 1978 Income tax and social contributions3 1966 1973 1978 Northern Ireland Scotland North North-West - 5 +15 + 8 +19 +11 +16 0 + 9 +16 0 +11 +15 +120 + 38 + 48 + 32 +117 +114 + 23 + 38 + 41 + 38 + 32 + 27 Wales West Midlands Yorkshire and Humberside +12 +21 +28 -12 -15 -16 +5 +8 +5 + 56 -7 + 23 + 56 -7 + 33 + 56 13 + 18 East Anglia South-West East Midlands South-East + 4 -10 -25 +10 0 0 + 1 -13 -24 -7 -7 -9 + 45 + 11 + 21 -72 + 20 + 18 + 38 -72 + 31 + 41 + 28 - 79 a + indicates below-average payments. nearly all fixed investment, is not financed directly from personal income. The pattern of regional expenditure per capita therefore differs from that of personal income (see Table 2.8). The North-West, West Midlands and Yorkshire and Humberside all have comparatively low total expenditure relative to income while the South-East, the South-West and now also Scotland and Northern Ireland have comparatively high total expenditure. Differences between income generated by production in each region and total regional expenditure are financed by a variety of transfers. On the government account, expenditure on public services, subsidies, grants and social security benefits is offset to a greater or lesser degree by indirect taxes and income tax levied in each region. The business sector contributes investment spending offset by retained profits. In addition the personal sector may borrow to finance 33 · Table 2.8 Personal income and regional expenditure relative to UK average, 1966 and 1978 (£per capita at 1975 prices) Personal income 1966 Regional expenditurea 1978 Personal income Regional expenditurea Northern Ireland Scotland North North-West -292 - 85 -140 - 76 -283 -125 -172 -149 -159 31 80 39 51 + 20 -139 -242 Wales West Midlands Yorkshire and Humberside -134 + 37 52 - 42 - 92 -184 -122 +8 63 -175 -188 -157 East Anglia South-West East Midlands South-East 5 + 14 58 +113 54 -182 +159 +253 95 - 42 - 68 +136 -13 +117 -171 +259 a Regional expenditure comprises private and public consumption and fixed investment all valued at 1975 market prices. Table 2.9 Regional balances relative to UK average, 1978 (£per capita at 1975 prices) Government expenditure and transfersa Business investment and transfersb Personal net borrowingc Excess of expenditure over value-addedd Northern Ireland Scotland North North-West +367 +28 +97 + 93 +39 -31 38 +62 -32 81 --49 --46 +492 +101 -6 -176 Wales West Midlands Yorkshire and Humberside + 52 -119 - 47 +36 -25 -10 -57 -1 -8 + 62 -187 -57 East Anglia South-West East Midlands South-East + 56 -16 +91 +228 +14 +25 44 -24 - 8 36 - 6 +34 +131 +267 76 8 a Public consumption and fixed investment plus grants and social benefits to personal sector less net indirect taxes less personal income tax and social security contributions. b Business fixed investment plus dividends and interest payments to personal sector less profits and rent earned in region. c Personal fixed investment less saving. d Regional expenditure (excluding stockbuilding) less value-added at market prices: equal to imports of goods and services less exports of goods and services less stockbuilding. investment (mainly house purchase) offset by savings deposited in the banking and insurance system. Table 2.9 gives estimates for 1978 of the net contribution of government, business and personal borrowing to the finance of expenditure in each region in excess of, or below, income generated by production in the region. 34 Estimated business transfers are small and, surprisingly, mainly in favour of Northern Ireland, Scotland and the North of England. Personal borrowing less saving results in a transfer in favour of Northern Ireland (where saving is low) and East Anglia (where house building is high). But by far the largest net transfers are those in the government account. These include the income tax and social security transfer discussed above. The figures are large mainly because of differences among regions in per capita spending on government services (including defence) and infrastructure. Northern Ireland, Scotland and Wales all have higher levels of public spending than England has. Within England, the South-West and East Anglia have positive net transfers. The NorthWest and West Midlands lose out heavily on the government account as well as on business transfers and net personal borrowing. Both regions have had low overall levels of fixed investment. The final column of Table 2.9, showing the excess or shortfall of regional expenditure over value-added in the region (relative to the UK average) is a measure of each region's relative per capita trade deficit. It should by now be clear that the pattern of these deficits has little to do with the competitiveness of production in each region, but depends mainly on government tax and expenditure decisions. 35 Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Chapter 2 Regional income Creator An entity primarily responsible for making the resource Members of the CEPG Source A related resource from which the described resource is derived Cambridge Economic Policy Review Volume 6 No 2, pages 29 - 35 Date A point or period of time associated with an event in the lifecycle of the resource July 1980