The Urban Wage Premium is Disappearing in U.S. Micropolitan Areas

12 Pages Posted: 31 May 2020 Last revised: 30 Jun 2021

See all articles by Shade T. Shutters

Shade T. Shutters

Arizona State University (ASU) - School of Complex Adaptive Systems

J. M. Applegate

Complex Systems Research Group

Date Written: May 13, 2020

Abstract

A key driver of urbanization is the pursuit of economic opportunities in cities. One such opportunity is the promise of higher wages in larger cities, a phenomenon known as the urban wage premium. While an urban wage premium has been well-documented among U.S. metropolitan areas, little is known about its existence among micropolitan areas, which represent an important link between rural and dense urban areas. Here we measure the power law scaling coefficient of aggregate annual wages versus workforce for both U.S. metropolitan and micropolitan areas over a 35-year period. We take this coefficient to be the magnitude of the urban wage premium within a type of urban area and find the relationship is superlinear in all years for both area types. While both areas once had similar wage premiums, the premium in micropolitan areas has declined in the era of globalization while the premium across metropolitan areas has generally increased. This growing gap between micropolitan and metropolitan wage premiums is highly correlated with a divergence in voting behavior, with micropolitan voters having become increasingly conservative. Finally, we speculate that if urban dwellers respond to the COVID-19 crisis by migrating, the trends we describe may possibly change significantly.

Keywords: urban scaling, urban wage premium, power law, urban-rural divide, globalization

JEL Classification: J31, R10, O40, O51

Suggested Citation

Shutters, Shade T. and Applegate, Joffa, The Urban Wage Premium is Disappearing in U.S. Micropolitan Areas (May 13, 2020). Available at SSRN: https://ssrn.com/abstract=3615171 or http://dx.doi.org/10.2139/ssrn.3615171

Shade T. Shutters (Contact Author)

Arizona State University (ASU) - School of Complex Adaptive Systems ( email )

PO Box 872701
Tempe, AZ 85287-2701
United States

Joffa Applegate

Complex Systems Research Group ( email )

ECA
1031 S Palm Walk
Tempe, AZ 85281-270
United States

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