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The census doesn’t have good comparable data to make these calculations before 1980. But other evidence suggests that the cost of living has come to vary dramatically across the country in ways that weren’t historically true.
The median rent in metropolitan Washington, in other words, wasn’t always twice the median rent in Louisville. In the past, Diamond said, higher-wage cities attracted more workers, driving up the supply of labor and driving down the high wages that drew them to those cities in the first place, counteracting some of the inequality the nation is now experiencing.
Shifts in industry
So what’s changed over the last several decades? Obviously, industry has. Good-paying jobs that didn’t require a college degree have been vanishing.
Cities like Boston, meanwhile, have shifted their labor demand away from such jobs and toward college grads who now work in industries like biotechnology or medicine. Detroit, once a mecca of a good manufacturing jobs, has had a harder time with that same transition.
Now, not surprisingly, those cities with a higher share of college grads yield higher wages for them, too. Diamond found that a 1 percent increase in a city’s college employment ratio corresponded with a 0.3 percent increase in wages for college graduates.
A higher share of college graduates also yielded higher wages for workers without college degrees, likely because employers have to pay them more to keep them in higher-cost cities.
Sure, the San Francisco tech worker has to spend a larger share of his income on rent than a low-skilled worker in Oklahoma City. But all of the added amenities of living in San Francisco outweigh that higher cost.
It’s not that high school graduates don’t also value restaurants, cleaner air and less crime — but they may not be able to afford to live where those amenities exist.
They’re more likely to make decisions about where to live based on affordability. College graduates, on the other hand, have the luxury of picking a city with amenities in mind.
This also comes at the expense of other cities that may lose their college grads. What happens to Toledo and Baton Rouge without them?