7 - The Crisis of Inclusion

Summary

What of the broader moral and political case for knowledge-driven growth, predicated on its ability to deliver social mobility, equality of opportunity and a fairer distribution of economic rewards? In light of the shortfall of knowledge work already identified, it should come as little surprise that the inclusivity of knowledge-based growth has fallen short too: if being included means securing a well-paid knowledge job, then there are not enough of these jobs to go around. Even if we define inclusion more modestly, as the ability to access these jobs on an equal footing, it is unclear whether policy-makers have delivered. A 2018 report into social mobility by the OECD noted that opportunities for people to move up and down the income distribution have decreased across the developed world since the 1990s, with the highest earners more likely to remain highly paid and the lowest earners more likely to remain poorly paid than they were two decades before, with your parents’ education and occupation increasingly decisive in shaping your own life chances.

This chapter explores why the social inclusion agenda has faltered. It begins by examining the uneven geographical distribution of opportunity, before turning to the relationship between education and economic success. Does what you earn really does depend on what you learn? Or are other factors – access to capital and social networks, for instance, or the competitive structure of certain knowledge-intensive sectors themselves – to blame for rising inequality?

The landscape of opportunity

Knowledge-based growth was seen by some of its 1990s advocates as a solution to the problem of regional economic divergence, and in particular to the loss of jobs in former industrial heartland regions arising from globalization. Yet, far from reversing these trends, the knowledge economy era has witnessed a further deepening of regional economic inequalities. For example, in the USA, whereas prior to 1980 cities with lower wages saw faster wage growth (and thus convergence with their more affluent counterparts), post-1980 this trend has stalled, with some higher-wage cities – such as Boston, New York and San Francisco – pulling further away from the pack. Similar patterns are replicated across western Europe.

Why has this happened? Much as academic theorists of endogenous growth and increasing returns originally anticipated (in contrast to many cheerleaders of the knowledge economy among the political class and the professional commentariat), knowledge-intensive businesses have tended to cluster together in large cities and their surrounding regions.