The Inequality Puzzle in U.S. Cities

Richard Florida in The Atlantic:

What lies behind the inequality of American cities? The conventional explanation blames the rise of the globalized, knowledge economy which has eliminated family-supporting factory jobs and cleaved the workforce into high-paying, high-skill and low-paying, low-skill jobs. But, as I wrote in my previous post, wage inequality only explains a very small part of income inequality.

How to explain this apparent discrepancy? What other factors lie behind rising inequality across America's cities?

To answer that question, I reviewed several powerful theories that try to explain persistent economic and social disadvantage across cities.

The first focuses not just on trends in skills and wages, but on shifts in populations. Christopher Berry and Edward Glaeser noted the divergence of human capital levels across cities in 2005. In his book, The Big Sort, Bill Bishop shows how America is becoming increasingly sorted and divided by skill, economic position and political differences. Writing in the magazine, I dubbed this the "means migration."

A detailed study published by the National Bureau of Economic Research found inequality to be higher in larger cities and metros (which attract more highly skilled people). Size (measured as population) alone accounted for roughly 25 to 35 percent of the total increase in economic inequality across metros over the past three decades, after other key factors were taken into account.

A second calls attention to declining rates of unionization. In The Great U-Turn, economists Bennett Harrison and Barry Bluestone blame the attack on and the decline in unions for undermining wages not just for unionized workers but for reducing the so-called wage floor for workers in the broader economy.

A third focuses on the intersection of race, poverty and economic disadvantage.