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Cities once were an economic escalator for people. No matter how much education you had, city jobs paid better than small town jobs.
Cities were an “escape route for the underemployed residents of rural areas,” wrote one urban economist. Cities and their higher wages sucked people in from the countryside and the people who arrived in the great urban areas rode the escalator up.
That used to be true. It isn’t any longer. And one recommendation to deal with this economic shift is to encourage people to move out of big cities to smaller towns and rural communities.
In a new study, MIT economist David Autor finds that since 1980, people with less than a college education have been steadily moving out of the country’s major metro areas. Why? Because the urban wage premium — the economic escalator of urban opportunity — has stopped. And it has shifted into reverse.
Those with at least a college-degree are still moving into metro areas, Autor writes in his report, “The Faltering Escalator of Urban Opportunity.” For the most part, those highly educated workers are still earning a premium. For those people, city life means earning more.
But those without a college degree in cities have seen their real wages decline over the last 30 years.
Until 1980, urban areas and their higher wages pulled people in. Both college-educated workers and those with no college earned more than similarly educated people who stayed in rural areas.
The pull of people from the countryside produced higher wages and a slew of songs about giving up the “plow in the field” for a job in town. My favorite is the Tompall Glaser and Harlan Howard lament “The Streets of Baltimore.”
Higher wages continued to pull people into urban areas until the 1980s. Then the escalator slowed, sputtered, and reversed, according to Autor.
There are several culprits in this story of declining wages for those with less than a college degree, according to Autor. Factory work was automated. Office work was computerized. Labor intensive work was sent to other countries where wages were lower.
As a result, the middle has been dropping out of the job market since 1980. There has been an increase in high-pay work for those with education. And there has been an increase in the number of poorly paid jobs in services, restaurants and maintenance. But middle-income jobs have disappeared.
Those with college degrees continued to earn more as the size and density of the city increased. But for people without college degrees, the urban premium disappeared.
From 1980 to 2015, Autor finds, for those without a college degree “real urban wages fell by 3 percentage points among workers with some college; by 7 percentage points among workers with a high school diploma; and by fully 13 percentage points among workers with less than high school.”
That amounts to a lot of people. In the most-educated cities, less than half of the working age adults has a college degree.
The pull of higher wages from places like Baltimore, Chicago and Atlanta disappeared – and rocketing housing costs in urban areas further diminished the advantage of cities. In many of the nation’s high-flying cities, when you include the cost of housing, non-college workers saw their real wages fall from 1980 to 2015.
The urban economy has polarized, Autor writes. There are jobs for the educated that pay well. And there are jobs in low paying service sector jobs. And there is little in between.
This decline has “been even more pronounced for Blacks and Hispanics than for whites, and, distressingly, most pronounced for Black males,” Autor found.
Most disconcerting is the experience of Black male college graduates. Their employment share in medium-paying occupations fell by 7 percentage points, and their share in low-paying occupations rose by almost 5 percentage points. Thus, despite high levels of educational attainment, they exhibited downward occupational mobility in urban versus non-urban labor markets.
What to do? Autor notes that people are already voting with their feet. There is a “slowing inflow of non-college workers into urban labor markets.”
The MIT economist also recommends that cities enact higher minimum wages to make up for what the market has failed to provide.
Finally, Autor suggests that policies might be adopted that encourage people to move to less urban places.
“Bearing in mind the diminishing earnings opportunities facing non-college workers in U.S. cities,” Autor writes, “policymakers might consider fostering moves to neighborhoods that are not only less impoverished but also less urban than might have seemed warranted some decades earlier.”
Bill Bishop is a contributing editor and a co-founder of the Daily Yonder. He is the author of “The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart.”