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We use matched employee-employer data from the UK to analyze the wage premium to working in an innovative firm. We find that firms that are more [research and development] R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We develop a simple model where complementarity between workers in high-skilled occupations and workers in some low-skilled occupations increases with the firm's innovativeness. The model yields additional predictions about training, tenure and outsource which we show empirical support for in the data.

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This report discusses the institutions and policies needed to sustain UK economic growth in the world economy of the 21st century. The authors focus on three long-term investments – skills, infrastructure and innovation. The report begins with an overall analysis of the UK’s economic story to date. Then, in each of the three main chapters, the authors describe why each investment matters for growth and offer a diagnosis of what is argued as the UK’s failure to invest sufficiently. This analysis underpins the report’s policy proposals, which are organised into two groups: core and supplementary. At the end of each main chapter, the authors ask why adequate policy solutions have not already been implemented. Finally, a case is made for a new measure of economic progress and the structures at the heart of government that are needed to drive the growth agenda forward are discussed.

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