Five (plus one) key aspects for measuring inclusive growth

By José Reis

There is no doubt that local areas are paying increased attention to inclusive growth. Metro Dynamics recently launched an Inclusive Growth Toolkit to help places assess the inclusive growth outcomes of interventions or investments. The number of positive responses received from across the country is testament to the fact that places are taking inclusive growth seriously, and are set on developing adequate responses to the issues faced in their area. A number of places have even created senior positions dedicated to inclusive growth, such as a West Midlands ‘Lead Economist for Inclusive Growth and Public Services’ or a ‘Director of Inclusive Growth’ in Barking and Dagenham.

Perhaps the most interesting case I’ve come across is Breakthrough Basildon – an independent Commission launched by Basildon Borough Council to explore barriers to prosperity across different communities in the Borough, and to work on ways of enabling inclusive growth. 

Last week, I had the opportunity to take part in one of the first meetings of the Commission. I was invited to join a panel of experts and local council and community leaders to set out a local vision for inclusive growth. I was tasked with sharing my views on how to measure inclusive growth.

This question couldn’t be more timely. There is widespread agreement that it is no longer enough to simply measure the performance of a place in terms of overall economic output. Inclusive growth is about tackling social and spatial inequalities, and the starting point is to understand how different social groups and different places can share the benefits of growth and achieve sustained improvements in wellbeing. And yet, it is still not completely clear how we can appropriately measure local areas’ performance against the principles of inclusive growth.

It’s not hard to understand why. This task will require a very different approach to measuring growth, which considers a broader set of aspects, takes a distributional perspective, investigates different places at high granularity and over time, and uses a diverse range of detailed data, often from less traditional, likely non-comparable, sources: all at the same time. In short, the sort of stuff analysts’ nightmares are made of.  

Nonetheless, good progress has been made to develop tools to measure inclusive growth or some of its features, including work by the RSA Inclusive Growth Commission, the OECD, the World Economic Forum, and the Joseph Rowntree Foundation, to name a few. But, despite the indisputable merits of these contributions, I believe we are not yet completely able to tackle the issue in the breadth and detail required. This is particularly the case when measuring inclusive growth below the regional level, in local areas like cities, towns or neighborhoods.

Metro Dynamics, is developing an approach to measuring inclusive growth at the local level. This is still a work in progress and I am conscious of the challenges of the task ahead, from the very definition of what constitutes inclusive growth, to the difficulty in finding appropriate data at the right spatial level.  But from the work we have developed so far, I would like to highlight five aspects that I believe are vital in any exercise which measures inclusive growth. A successful framework to measure inclusive growth in local areas needs to:

1.       Be multidimensional

Any assessment of inclusive growth needs to be broad in scope, taking into account not only economic performance, but a wider set of issues including earnings, quality of work, health, education, social exclusion and discrimination, participation and civic engagement, housing quality, quality of place, the environment, etc. And it will probably necessitate going beyond traditional indicators and including aspects that might be more subjective or harder to measure (social mobility, access to opportunity, happiness, quality of life…).

2.       Focus on inequality

The concept of inclusive growth is distributional in nature.  An assessment of how the benefits of growth are spread across different groups of people needs to consider inequality in two dimensions:

  • Social inequality: considering different social groups, in terms of income/wealth but also age (providing opportunities in all stages of a person’s lifecycle) gender, ethnicity/nationality, and disability.
  • Spatial inequality: considering how the benefits of growth are distributed across different places, measuring differences between and within cities and regions, and often looking at very small areas (e.g. neighborhoods).

3.       Consider change over time

It’s important to measure not only how inclusive a place is today, but whether it is becoming more or less inclusive. Inclusive growth should be seen not as an end goal, but as a process within which there’s room for continuous improvement, even in the least inclusive areas.

4.       Be policy-oriented

Inclusive growth is not just a diagnosis of inequality or poverty. When selecting what features of inclusive growth to measure, it’s important to focus on those that can be acted upon and think about specific policy actions that could be developed to improve them. The exercise of measuring inclusive growth should be about identifying and describing a problem as well as about identifying the elements or conditions that can provide a route to greater inclusion.

5.       Be concrete and accurate

To help develop effective policy interventions, the analysis of inclusive growth needs to focus, as much as possible, on concrete issues. This is often a challenge because it is hard for an analytical framework to be at the same time comprehensive and detailed. Additionally, the higher the detail required, the harder it usually is to find good quality data. Furthermore, the whole process needs to be rooted in a strong understanding of the specific local characteristics (e.g. economic, social, labour market, institutions, infrastructure, etc.). It should also be underpinned by a strong evidence base using accurate data analysis.

Since some of these aspects require a high level of local knowledge and a carefully considered trade-off between breadth and detail, a successful framework to measure inclusive growth will most likely need to be tailored to the specific characteristics, challenges and priorities of the area. So, there is an intrinsic sixth key aspect: to be bespoke. A good framework to assess inclusive growth in one place, may not be the most appropriate elsewhere.

Applying and reconciling all six aspects in practice is an extremely challenging task. A significant challenge is the risk of losing focus: in trying to be comprehensive in scope we risk losing the ability to measure features in sufficient detail. This may limit the capacity to provide an accurate understanding of local issues and to develop efficient policy actions. And there are of course many other challenges: from lack of appropriate and/or accurate data; the fact that inclusive growth deals with some aspects which are subjective or not usually measured; and that such a comprehensive analysis will most likely be highly resource-consuming (in terms of time, labour and processing power).

But the fact that inclusive growth is quickly gaining currency within different levels of local government, and that some of the UK and the world’s most respected organisations are investing their time and effort into defining and measuring its different aspects, gives me confidence that the next few months will bring important progress in the way local areas are assessed against the principles of inclusive growth. We will certainly do our part.