Scaling of Inequality: Urbanization Favors High Wage Earners

6 Pages Posted: 10 Mar 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

Elizabeth Wentz

School of Geographical Sciences and Urban Planning

Michael Batty

University College London

Date Written: February 2, 2021

Abstract

As cities increase in size, total wages grow superlinearly, meaning that average wages are higher in larger cities. This phenomenon, known as the urban wage premium, supports the notion that urbanization and the growth of cities contribute positively to human well-being. However, it remains unclear how the distribution of wages changes as cities grow. Here we segment the populations of U.S. cities into wage deciles and determine the scaling coefficient of each bracket's aggregate wages versus city size. We find that, while total wages of all these categories grow superlinearly with city size, the effect is uneven, with total wages of the highest wage earners growing faster than all other wage brackets. We show that this is partly due to the predominance of high-wage jobs in larger cities. Thus, the effects of urbanization are mixed -- it brings higher average wages but with increasing inequality, thus inhibiting prospects for long-term sustainability.

Keywords: inequality, urban scaling, power-law, urbanization, sustainability

JEL Classification: J10, R30, D30, D63

Suggested Citation

Shutters, Shade T. and Applegate, Joffa and Wentz, Elizabeth and Batty, Michael, Scaling of Inequality: Urbanization Favors High Wage Earners (February 2, 2021). Available at SSRN: https://ssrn.com/abstract=3778929 or http://dx.doi.org/10.2139/ssrn.3778929

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

Elizabeth Wentz

School of Geographical Sciences and Urban Planning ( email )

Tempe, AZ
United States

Michael Batty

University College London ( email )

Gower Street
London
United Kingdom

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