Richard Florida argues cities increase levels of inequality

Richard Florida, dubber of the Creative Class, argues that data shows that cities exacerbate levels of inequality:

“Something fundamental has changed in our economy, and it’s happening at the metropolitan level,” explains Baum-Snow. “If we want to understand what’s causing the wage gap, we now know we need to look at the unique economies of our larger cities,” adds Pavan.

Both the U.S. and the world have grown increasingly spiky, with our socio-economic divide increasingly overlaid with a growing economic geography of class.  Big cities like New York and LA have attracted wealthy people not just from America but from around the world.  This trend reflects the growing advantages of geographic clustering or agglomeration.  The larger and more populous a city or region, the more likely it is to have the human capital and economic ecosystems required to support the most advanced — and hence the highest-paying — technologies and industries.  Bigger cities attract more innovators, more entrepreneurs, and more highly skilled and ambitious people in general, and provide a fluid environment where these individuals can combine and recombine their skills. Big cities also generate powerful economies of scale and scope, resulting in higher rates of innovation, new firm formation, and productivity.  They attract better-educated, better-trained, more-experienced workers, driving up wages.

At other side of the spectrum, manufacturing, which once clustered in and around large cities and metros, has shifted to less expensive suburban, exurban, and off-shore locations. And large cities have become home to a large and growing contingent of lower-skill, lower pay service jobs — from childcare and food preparation to retail sales and personal services.  Taken together these factors have in effect divided or bifurcated the labor market in big cities into highly paid “creators” and much lower-paid “servers.”

On the other side, Florida also shows a (very modest) correlation that city size is related to higher wages. But overall, Florida argues that cities draw both the uber-wealthy and those who “serve” the city.

Florida doesn’t present much data here so we would need more analysis in order to figure out what is going on. Does this argument present a  counterpoint to these two articles about the future of cities and suburbs in Foreign Policy last fall? It is hard to tell – Florida also says that cities are centers of innovation and entrepreneurship. And even if cities do have extreme levels of inequality, do they benefit larger society enough to offset the inequality within their borders?

(Interestingly, both Florida’s data and the study he cites use metropolitan areas to mean cities. This makes a lot of sense: central cities and suburbs should be viewed more often as single, interdependent units. Would the inequality be even more pronounced if the analysis was limited to central city borders?)

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