For a long time we have said that investing in education is key to employment and to the future of our communities and society. The trouble is we have not been able to prove it. Some comparative studies have suggested the higher levels of investment in high quality initial vocational education and training in Germany as opposed to the UK is because German companies have a longer term accounting for the returns on investment. In turn, this may be because of the higher proportion of industrial capital in Germany whilst in the UK investment capital is much higher.Equally Return on Investment (ROI) studies are usually look over a relatively short period. Also such studies are generally conducted on a micro level – looking at the return on investment for individual enterprises, rather than on communities or society as a whole.
A new UK study by the Centre for Cities provides a fascinating new insight.
As their web site explains: “The research, which uses Census data to understand the economic stories of our cities in 1901, also compares how cities have progressed across measures like population, employment, and wages to understand how some cities have become more successful than others.”
The report, Cities Outlook 1901, “highlights the extent of the long term scarring effect that poor skills can have on a city and the people who live there. The research shows that the skills spectrum across cities in 1901 is mirrored in their economic strength today. Seven out of eight of the best performing cities today had above average skills levels in 1901; while 80% of cities with vulnerable economies in 2012 fall into the bottom 20 cities for skills levels in 1901.”
Skills, they say, “are the most important factor determining long-run urban success, and therefore are a key area for policy intervention.”
The policy implications drawn from the report are quite general and modest. But they are important, nevertheless.
Cities Outlook 1901 illustrates the way that lack of investment is compounded over time. Failure to invest in skills or infrastructure in 1901 had knock-on long-term impacts on a place and its people over decades,while targeted investment in infrastructure and ongoing investment in skills succeeded in helping some places and people improve performance.
For policymakers seeking to learn lessons from the past when confronting today’s economic challenges, three themes stand out:
1. Short-term cuts in expenditure on the key drivers of urban success are likely to result in a big bill in the medium to longer-term.
2. Skills are the biggest determinant of success for cities, and are critical to the life chances of individuals.
3. Targeting investment in infrastructure can have a significant impact upon the economic prospects of a place.