Economy of Wales - Regional Variations

Regional Variations

In recent years, Cardiff, the northern and southern coastal belts and some rural parts of Wales have experienced the biggest increase in employment, while the South Wales Valleys and other industrial towns have suffered a decline. This pattern probably reflects a combination of

• the increasing importance of quality of life factors in location decisions;
• the greater role played by the largest conurbations as centres of service sector businesses and
• the effects of skill-biased technical change on the demand for labour, disadvantaging "skills poor" declining industrial districts.

Average earnings and employment vary considerably across Wales. They are both generally higher in east Wales, especially in urban areas, but lower in south west Wales and the Valleys, although earnings in Bridgend and Neath Port Talbot, which are still centres of skilled manufacturing employment, are relatively high. In north and north west Wales, earnings are low but the employment rates are above the Welsh average.

A significant part of the earnings (and value added per job) variations within Wales are due to structural factors such as economic mass and occupational mix rather than like-for-like lower pay or productivity. Cardiff, with 324,800 people, benefits from its capital status, a hinterland in south east Wales and good connections to London, the Greater Bristol area and the M4 corridor. Cardiff is the primary location for service sector activities in Wales, with 26% of Welsh service sector output and 22% of Welsh service sector employment, compared to 19% of all employment in Wales. North east Wales benefits from proximity to Cheshire, Greater Manchester and Merseyside and there is significant cross-border commuting. The Valleys and the western areas of Wales have less economic mass and are more distant from major economic centres. These are some of the poorest regions in Europe and qualify for Objective One funding.

Many parts of Wales suffered from a continuous decline in heavy industry over the 20th century, culminating in the virtual disappearance of coal-mining in the 1980s. The demise of 'smokestack' industries left a legacy of high unemployment, and although unemployment has declined in recent years, unemployment in West Wales and the Valleys still tends to be higher than the Welsh average and economic inactivity (a form of hidden unemployment) continues to be a major problem in these areas. Merthyr Tydfil and Neath Port Talbot have some of the largest proportions of people in the UK not working due to long-term illness or disability, though some believe that in reality many people classified as "unable to work" through sickness are low-skilled workers encouraged to exit the labour market by the benefits system as well as declining demand for their skills.