In June, I pondered whether the post-covid economic landscape may require young people to reverse the decades long trend of migration into cities in order to rediscover prosperity. It’s a hypothesis that is supported by new research from MIT’s Work of the Future task force, which suggests that the urban success story seen since World War II is struggling to maintain itself.
The paper highlights how by 1980, college graduates in urban job markets were earning around 40% more than college graduates in less urban markets. Similar discrepancies emerged for non-college graduates. This situation began to flip around that point, however, such that from 1990 through to 2015, the wage advantage for non-college workers in most cities in America fell by half.
“It used to be [cities] were a magnet for people who were less fortunate, fleeing discrimination or underemployment, and served as an escalator for upward mobility,” the researchers say. “Today, urban workers without college degrees are moving into lower-paid services rather than higher-paid professional jobs. And the extent to which that is occurring is larger among Blacks and Hispanics.”
Priced out
The research highlights how a growing number of people without college degrees are being priced out of the most popular cities. The paper suggests that even without rising house prices, the change in wages alone would be enough to price many people out of urban life.
As in many developed countries, employment in the US has become concentrated in high-education, high-wage occupations, and then low-education, low-wage jobs, with the middle becoming hollowed out. It’s a generational shift from the 1980s, when work was evenly divided between high, medium and low-skilled work.
It’s a shift that has predominantly been felt by those without college degrees, as the number of well paid jobs available to them has dwindled. Indeed, in 1980, roughly 43% of non-college workers were in medium-paying jobs, and 18% in high-paying occupations. Now, this has fallen to 33% in medium-paying jobs, with those jobs increasingly requiring a degree.
Focused on cities
It’s a transition that the MIT paper finds is overwhelmingly focused in cities. The authors analyzed 722 “commuting zones” across America from 1980 through to 2015. Across the country, urban workers without a college degree saw their wages fall by 7% compared to their non-urban equivalents. Among those who didn’t complete high school, this fall was 12%.
Most of these jobs were in manufacturing and clerical fields, which have largely disappeared from cities, whilst becoming a larger share of jobs in non-urban areas.
“Cities have changed a lot for the less educated,” the researchers say. “In the past, non-college workers did more specialized work. They worked in offices alongside professionals, they worked in factories, and they were [performing jobs] they didn’t have outside of cities.”
The authors advocate a more carefully calibrated minimum wage in cities to help overcome these challenges. They cite previous examples of this working in terms of raising wages without causing substantial job losses.
Of course, such measures are not in themselves without costs, but perhaps the important point to take from the paper is that cities have problems that cannot be explained away by blaming the lack of affordable housing. That may provide a push away from cities, but the changes in wage distributions are detracting from the pull of cities in the first place.
“Cities have become much more expensive, and housing is not the only factor,” the authors conclude. “For non-college workers, you have a combination of changing wage structure and then rising prices, and the net effect is making cities less attractive for people without college degrees.”
