A lot of commentators seem to think that the folks living and working in middle America’s formerly industrial areas are a bit dumb, or at least stubborn, for staying put.
Just move, they say. Take charge of your life, pack up, and go to the most economically productive places.
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But, it turns out, the world is more complicated than that. If your average working-class guy moves to a big city, he will likely become poorer for it.
“Traditional economics says people living in these struggling towns should just move,” a Washington Post writer explained two years ago. “Many of the United States’ urban centers (and surrounding suburbs) are booming. If jobs are plentiful in Denver (unemployment rate: 2.6 percent) and Salt Lake City (unemployment rate: 2.8 percent), then Economics 101 suggests it’s time for a big migration west from the Rust Belt to the Boom Belt.”
Cities have jobs. They have synergies. They have generous social services. Why don’t these struggling people in Youngstown just move to Denver? If they’re still struggling, well, it’s their fault for choosing not to keep up.
But a new study from Philip Hoxie, Daniel Shoag, and Stan Veuger at the American Enterprise Institute destroys that easy story. In short, the study finds that a person with no college education is bound to find life less affordable if he moves to a high-density or a high-productivity city because higher housing costs outstrip higher wages in such places.
“The urban wage premium for low-skilled workers declined between 1970 and 2015,” the authors note, citing MIT economist David Autor. That is, moving to a big city doesn’t increase a blue-collar worker’s pay as much as it used to. But guess what has increased? The urban housing-cost premium.
The AEI scholars calculated wages-minus-housing-cost over time for different demographics in different types of cities. In 1970 and 1980, a more dense location meant better wages-minus-housing for both college-educated and non-college-educated adults. Today, denser places are a good deal for the college-educated, but they’re a bad deal for non-college folks.
More importantly, this is true on the score of economic productivity, if this study’s methods are sound. The salary premium of the most productive places in the U.S. is smaller for non-college workers than is the living cost premium.
In short, “for non-college workers, there is now, on average, an urban wage penalty after accounting for the cost of shelter.”
It looks like someone wanting to help the struggling workingman in Youngstown, Ohio, will need to offer better advice than “just move to a thriving city.” Also, it looks like booming cities need to clear away obstacles to new housing.
