The Opportunity Escalator

Start with location

The Opportunity Escalator starts with a place where new jobs are going to be created. It could be an urban centre or an out-of-town industrial or commercial site.

Establish a local labour force

From that place, we consider who can get to the site to work from where they live. This could be restricted to people using public transport, or could include driving.

We use this to understand who is in the local labour force.

Understand the local labour force

Once we know who is in the local labour force, we can start to understand the sorts of skills they are likely to have, given the jobs that they do.

It is at this point that we can start to consider how good a match any particular industry will be for the local labour force.

Match a new industry to the existing labour force

The most complicated part of the exercise comes when we consider how good a fit a new industry is for the existing labour force.

It helps to break this down into steps.

Pick an industry

First, we pick an industry - perhaps one that has been chosen as part of a top-down industrial strategy.

Understand the occupations in that industry

We then work out the types of jobs that are likely to be created in that industry, based on the proportion of each occupation in that industry at other sites around the UK.

Find similar occupations

For each of those occupations, we look for similar occupations in the local labour force.

To do this, we follow a novel academic approach^[1] that tries to understand the similarity between jobs using detailed data on the tasks regularly undertaken in different jobs, the entry requirements for those jobs and the skills and experience required to do the jobs.

[1] Mealy, del Rio-Chanona, Farmer, 2018. What you do at work matters: New lenses on labour.

Find similar occupations

Consider the tasks regularly undertaken in a job. We can use these to determine how similar two jobs are. We show this here by drawing similar jobs closer to each other and pushing dissimilar jobs further apart. Jobs that are grouped into the same high-level job families by statisticians are coloured the same. They generally end up together, as they have many tasks in common. But links across job families become clearer too.

Now that we have created this 'jobs space', we can use it to find workers in the local labour force that are good matches for the jobs in the new industry. In doing so, we can make choices about how large a gap in skills requirements to tolerate and how much of a wage increase might tempt people to move from their existing job to a new role.

In the case of the East Midlands Inclusive Growth Commission, this was used to think about how targeted skills interventions could help people step up into better paying jobs.

Measure skills and wage gaps

For every match between an incoming job and a worker in the local labour force, we can look at the gaps in skills and the increase in pay they could attain if they could close that skills gap and get the new job.

Measure skills and wage gaps

This considers the skills gaps in one specific pairing, between an incoming job and an existing job in the local labour force.

Aggregate to assess the overall impact

Finally, we can aggregate up across all the pairings of new and existing jobs to get a sense of the aggregate skills gaps and the impact on the local wage distribution of closing those gaps and helping people move into better jobs.

Aggregate to assess the overall impact

Aggregating up the skills gaps shows the most common skills gaps that need to be filled and can be a useful input to skills strategies that aim to accompany any particular industrial strategy.

Aggregate to assess the overall impact

And aggregating across the potential pay increases gives a sense of the impact on the overall wage distribution.

This chart shows the current national wage decile for workers who are matched to jobs in the new industry. And it shows how many deciles they could move up the wage distribution if they could close the skills gaps and move into the new jobs.

In the example shown, the industry in question would mainly provide opportunities for people at the lower end of the wage distribution.

Using the Opportunity Escalator

The Opportunity Escalator can help understand how well suited a particular industry is to providing opportunities for particular people in particular places.

It comes to life when we start using it to think through different scenarios. For instance, for a given location, we can ask which industry would have the biggest impact on people at the lower end of the wage distribution? This question was often on the minds of the East Midlands Inclusive Growth Commission, along with questions of what skills support will be needed to help people into new jobs.

Or, again for a given location, we could ask how improved transport links could spread opportunities to more people. And how much easier would it be for a new industry to find the right workers with better transport links?

We can make the link to the housing market too. If a new industry will create new jobs in the area, we can look at the range of wages that is likely to create and think through how it will increase demand for different types of housing in the area, given existing transport links. How might that change with better transport links? Or a new housing developments that might also be under consideration?