One of the criticisms that cities – especially successful cities – often receive is that they only work for high-skilled people. We have seen this happening recently in the US, where
Amazon had to cancel plans to locate part of its headquarters in New York for fears it would only benefit high-skilled workers. Yet, what is often forgotten is that high-skilled jobs also create a lot of opportunities for people with few or no qualifications.
How? In economics, this process is called
‘the multiplier effect’. When new businesses that sell their goods and services to regional, national or international markets move to a local area, they bring money into the local economy. This creates demand for shops, restaurants and cafes and jobs in these local businesses. This is why, for example, Canary Wharf isn’t just full of bankers – it is populated by Pret and Starbucks outlets on the ground floors of its skyscrapers to meet the needs of the workers above them.
But how many new jobs in these local services are actually created? In
our recent work, we found that in the period between 1998 and 2015, for every 10 new jobs created in businesses that trade outside the local area, 11 new jobs were created in local services businesses such as cafes and restaurants.
But we also found that it is high-skilled businesses that trade outside the local area, such as engineering and financial services firms, that have a much bigger multiplier effect. Indeed, over the same time period, the creation of 10 new jobs in these high-skilled businesses has led to the creation of 17 new jobs in local services. That’s because these firms bring even more money into the local economy.
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