Spatial disparities across labour markets

We consider disparities across local labour markets in Great Britain. Disparities in wages and employment rates are large and persistent, although smaller than 20 years ago. These disparities largely reflect the concentration of high-skilled workers, who would have better labour market outcomes wherever they live. This concentration is driven by differences in the demand for, and supply of, skills and the self-reinforcing interaction between the two, which is particularly pronounced in the highest-wage areas and at the upper end of the wage distribution. The highest-paid jobs are concentrated in London and a handful of other areas and wage disparities are mostly driven by the higher-paid. Places that offer higher earnings also have higher rents, which may entirely offset gains in earnings. Consistent with this, people in higher-paid places are no happier than those in lower-paid places.