Cities Play Role in Wage Inequality
The United States has a higher degree of wage inequality than almost any other Western industrialized country. The average American CEO brings in more than 10 times what he or she would have earned in the 1970s and 300 times more than the average worker. A new study from researchers at the University of Rochester and Brown provides a surprising explanation: City size is one the main drivers of wage inequality.
“Demographic groups and industries disproportionately located in larger cities experienced larger increases in their wage dispersion in larger cities than in smaller cities,” authors Ronni Pavan and Nathaniel Baum-Snow write in their study.
In cities like New York, Los Angeles, and Chicago, capital and technology are more readily available; the labor pool is larger; and markets are more accessible. In other words, it’s much easier to get incredibly rich in a big city than it is in the rural countryside. It’s also easier to command higher pay for higher skills, but harder to command average pay for mediocre skills.
“The skill premium has grown more in larger cities than in smaller cities and rural areas,” they write.
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