The London conundrum: higher salaries versus increased living costs
Living in London is a prospect that has always polarised opinion. To some, it is the opportunity to dwell in one of the most exciting and vibrant cities in the world, with a wealth of employment, cultural, culinary, historical and sporting attractions making it a great place to live.
To others, London is crowded, noisy, polluted, impersonal and, above all, expensive, making it a place to relocate away from rather than move into.
Of course, opinions may be coloured by one's starting position, with born-and-bred Londoners used to everything that comes with life in the capital and many living elsewhere having a negative image of anything within the M25.
Quite aside from the lifestyle appeal, people who move to London primarily do so for economic reasons. However, this requires finding somewhere to live, which is for most people the biggest financial challenge that living in the capital brings, whether seeking to buy or rent.
The balancing act involved has been highlighted by the Resolution Foundation thinktank's Earnings Outlook, which was published on March 28th. The survey looked at how pay growth, while often expressed in average pay rate increases across the workforce as a whole, can be much larger when people move jobs, not least as higher pay is a prime motivator for doing so.
It found that moving to London for a job, not surprisingly, brings the greatest salary boost, with this being worth an 18 per cent jump in 2015-16. This represents an increase on the 15 per cent bonus in 2007-08.
However, before workers heading to the 'big smoke' can start counting their extra cash, they have to factor in living costs.
Indeed, despite the increased boost to income gained from taking up a London job, living costs, including those of renting or buying, more than cancel it out. For this reason, the number of people moving to the capital for work has not risen over the last decade.
Overall, the Resolution Foundation noted, the impact of higher living costs is such that, even though pay is £5 an hour more in London, people living in the south-west are still better off.
Nor are matters any better in the adjacent south-east, as housing costs are also high there, not to mention the extra commuting costs of travelling to and from London jobs.
The Foundation concluded that this sends out two messages: firstly, that something needs to be done about productivity away from London in order to ensure more of the high-paid, attractive jobs are located elsewhere. But it also called for action to address housing costs in the metropolis.
Senior economic analyst at the Resolution Foundation Steve Clarke said: “It says something about the scale of London’s housing crisis that even 20 per cent pay rises can’t persuade more people to move to jobs in the capital."
This picture is compounded by the latest long-term figures on rental costs across the UK. A survey by Rightmove has shown these have jumped by 25 per cent in London, compared with 16 per cent across the rest of Britain.
Of course, the picture is a little more complicated than that, with huge variations. Even in London, for instance, there has been very little change in fashionable areas like Barnes and Chelsea, while Hackney has seen a 63 per cent increase, the highest in the country, which Rightmove attributed to the economic benefits of the 2012 Olympics.
Similarly, while the list of the top ten areas for rent rises includes Edinburgh and Dundee, most of them are in Kent and Hertfordshire, demonstrating that for renters commuting into London from the home counties, costs remain very high and rising.