London’s rapid growth fuels our polarised job market

Sebastian Burnside
Follow Sebastian
Jobs at the top and the bottom of the skill ladder have boomed in London since the crash
Jobs at the top and the bottom of the skill ladder have boomed in London since the crash (Source: Getty)

Last year was another successful one for the capital’s job creation machine.

Employment rose by 2.5 percent in 2015, beating the UK-wide rate of two percent, providing work to another 107,400 people. But these gains weren’t evenly shared. Since 2008 London has seen phenomenal growth of very high and very low skilled jobs, whilst those in the middle haven’t done as well.

At the top end there are now 19 per cent more people working in managerial and professional occupations than there were back in 2008. London is renowned for its strength in finance, technology and professional services, so it is no surprise that those parts of the economy are doing well.

This success means that over half of London’s workers are in occupations that are classed as high skill. Success at the top therefore matters for a lot of people.

Read more: Why some economists aren't happy the employment has reached a new record high

What about the two million workers not in a high skilled job? Here there’s good news and bad news.

There has been especially strong growth in low skilled occupations, with employment amongst roles like cleaners and waiting staff up 5.7 per cent during 2015. This recent surge has pushed the total number of low skilled jobs in London up 17 per cent above its 2008 level. That contrasts enormously with the rest of the UK where such employment is still below its previous peak.

Employment growth, 2008-2015

For London it is those in the middle who seem to be losing out, with medium skilled employment up 6.5 per cent over the last eight years, a far lower growth rate than either extreme of the labour market. The recovery has been less kind to the administrators and assistants who tend to fill these roles.

What explains this polarisation? Two factors are at play, technological change and rapid population growth. Firms of all shapes and sizes are using the current wave of technology to transform their operations and analyse data in more sophisticated ways.

But making these changes is a substantial industry in itself. IT specialists and project managers are amongst those most in demand and have seen rapid job growth in recent years.

Once firms have adopted these new technologies, new opportunities are opened up. Data needs to be analysed and customers targeted in more precise ways, cue rising demand for marketing and sales directors to exploit these techniques.

Read more: The finance jobs of the future

Previous waves of technology have also replaced workers in some roles and this one is no different. We can clearly see the impact in sectors like retail, as shops employ fewer people to man the tills.

Similar changes are happening across all sectors but they appear to affect low and medium skilled jobs disproportionately. That’s not true for all jobs, ride-hailing apps and online shopping have lifted the demand for drivers, but these pockets of strength are more than offset by losses elsewhere. Indeed, across the UK low and medium skilled employment is broadly in line with its 2008 level, whilst there has been a 12.5 per cent rise in high skilled jobs.

So what makes London special? Why has growth in low skilled jobs been so much stronger here than anywhere else?

The answer lies in the sheer force of its expansion. London’s population rose by over a million people in the last 10 years. Over the next decade it is predicted to do much the same. Servicing an extra million people in such a short time frame requires a lot of extra cooks, cleaners and servers.

An automated domestic assistant has long been an aim for technologists around the world, but until it materialises London’s phenomenal growth will continue to boost jobs at both ends of the scale.