Should higher education, and governments that fund it, be more concerned about the benefits to individuals or the benefits to an area?

This morning’s report from the Institute for Fiscal Studies (IFS) is the latest to point out that young, highly skilled people tend to move to cities (where they can expect to earn more). Indeed, some 40 per cent of the variation in average pay across places is due to these patterns of mobility – and the effect is becoming more pronounced.

As always with LEO data (which, as you may have suspected, underpins this report) there is a time lag – we are looking here at a cohort born in 1985-86 and graduating in 2012-13, by 2019-20 (the last year under analysis) they would be around 32.

For this cohort (as for most) there are huge differences in the average rates of pay by locality of domicile (we are using travel to work areas here, LEO does not contain data about the place people work). As you would expect, in areas with better pay there are more graduates and better graduate pay – indeed a better graduate premium. In the main this is areas within commuting distance of London, with Whitehaven (a nuclear industry hotspot… in a good way) the only English exception.

There are a few other well-paying areas (Reading, Oxford, Cambridge, Bristol) for graduates but London rapidly pulls away as graduates enter their 30s. And again, better opportunities and better earnings are the key.

This may be great news for graduates – who can access high-quality well-paid jobs, and have largely already moved on from their home town to attend university. But it is less good news for “home” travel to work areas. Areas that gain from this migration are as you might expect (London, big student cities like Leeds and Bristol), but the loss of graduates is acute in places like Lincolnshire, Cornwall, and parts of Yorkshire.

There’s no evidence of a reverse effect with graduates returning in later life. While many graduates that moved to London do move out of London before the age of 32, this tends to be towards other prosperous areas in the South East.

All this means that, by the time the cohort reached 32, some 40 per cent of geographical earnings inequalities within that group were due to migration. And early data from younger cohorts suggests that graduates are becoming even more likely to move.

The report concludes that:

Policies to raise educational attainment in deprived places are unlikely to boost local economic performance on their own. Without local opportunities – good jobs that are well matched to workers’ skills, and productive firms providing those good jobs and training and development pathways – high-skilled people will continue to leave for places offering better prospects. Those who are not able or willing to move will not be able to make full use of their skills. Reducing economic disparities between places therefore requires bringing opportunity to people – not just raising skills, but building places where skills are rewarded.

The UK is an international outlier in terms of encouraging young people to leave home in order to study – and huge regional inequalities mean that incentives are there to ensure graduates move again to earn and live. The combination of these two factors is what makes “levelling up” so hard.