Time to Go Home?

In the US, why are the rich getting richer and the poor getting poorer? Part of the answer has to do with where you live. Economist Ronni Pavan says, "Our results show that overall up to one-third of the growth in the wage gap between the rich and the poor is driven by city size independent of workers’ skills." In other words, if you leave the big city and move to the country or to the nearest MIDsized city, you’re likely to get a better job.

Using US Census data and American Community Surveys from 1980 to 2007 across the entire United States, Pavan found that the larger the city, the wider the wage gap among its workers. In other words, the country’s largest cities, New York, Los Angeles and Chicago, are home to the greatest extremes in incomes, while midsized cities experience relatively less wage inequality and rural areas the least. So what’s behind the mega income gap in megacities? Some urban dwellers are experiencing soaring salaries.

Pavel’s co-researcher, Nathaniel Baum-Snow, says, "Something fundamental has changed in our economy, and it’s happening at the metropolitan level." Larger metropolitan areas, more so than their smaller counterparts or rural areas, have experienced rapid growth in wages within all skill levels. From high school dropouts to professionals, many workers in large metropolitan regions have enjoyed fatter paychecks. At the same time, the bottom has fallen out of the lower end jobs, especially in bigger cities. While wages have always run higher in cities, prior to 1979, wage inequality was roughly equal regardless of where workers resided. Not so today. Now the local economy–specifically the size of the metropolitan area–PREDICTS wage inequality. So if you moved to the big city in order to get a better job (but didn’t get one), it may be time to go home.

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