A businessman checks his phone in Charlotte, North Carolina.
A businessman checks his phone in Charlotte, North Carolina. Carlos Barria/Reuters

Bigger metros are drawing a larger share of higher-skill workers, especially in industries that require more education.

America is not only becoming economically unequal, it is becoming more geographically unequal as well. Large superstar cities like New York and Los Angeles have outsized concentrations of finance, media, entertainment, and creative industries, while knowledge and tech hubs like San Francisco, Boston, Washington, D.C., and Seattle have outsize concentrations of talent, technology, and knowledge industries. Just 20 metros of 360-plus metros across the country have fully formed knowledge and creative economies, as new kind of winner-take-all urbanism defines our economic landscape.

But what lies behind this new and increasingly unequal geography? A new study on NBER on “The Comparative Advantage of Cities” by economists at Columbia University and the University of Chicago takes a deep dive into this issue. The study looks closely at the distribution of talent and skill across the U.S. metros. It focuses on two measures of skill—one based on level of education and the other based on the occupation and kind of work people do. While most economists have typically measured skill or human capital by educational attainment, I have long argued that occupation provides a more refined measure of actual relevant workplace skill. The study examines the distribution of skill across 270 metros across 9 levels of education and 22 occupational categories (such as Computer & Mathematical, Community & Social Services, or Cleaning & Maintenance) across 19 separate industries—for example, educational services, health care and social assistance, or manufacturing.

Educated people gravitate to bigger cities and metros

Talent and skill unequivocally have concentrated in larger cities and metro areas, according to the study. Generally speaking, larger cities attract more educated people, not just those with college degrees, but those with advanced degrees.

This pattern holds for those with high school degrees, college grads, and those with advanced master’s and professional degrees, a group that makes up more than 85 percent of the population. Only at the extreme tails of the distribution, with people with less than a high school education or a Ph.D., does the relationship between weaken.

On the one hand, larger cities have relatively large concentrations of people who did not complete high school. There are several reasons for this. As the study points out, larger cities and metro areas are home to large concentrations of unskilled immigrants. (U.S.-born people with less than a high school degree are less likely to live in big cities.) But larger cities and metros have also long had substantial concentrations of poverty and disadvantage as well. And larger cities also offer better pay and more opportunity as well as better social services for less-educated groups.

On the other hand, larger cities have smaller-than-predicted concentrations of the most highly educated Americans—those who hold Ph.D.s. As the study points out, this is a relatively small group, making up just one percent of the workforce. But this pattern is driven by the relatively spread out locations of college professors or post-secondary teachers. Colleges and universities are located across the country, and academic jobs are hard to come by. Academics go where the jobs are: I held positions in Buffalo (SUNY Buffalo), Columbus (Ohio State University), and Pittsburgh (Carnegie Mellon) for the first two decades of my career. Outside of academia, Ph.D.s in other occupations and industries are more concentrated geographically.

High-skilled occupations and industries concentrate in bigger cities and metros

This is the even bigger contribution of the study. There has been a raft of research showing that the U.S. labor market has become more homogenous and spread out across places. These studies find that this dispersal of job opportunities—that fact that people can get the same sorts of jobs in most places—is a significant part of the decline in the number of Americans who are moving around. But that belies the fact that the most high-skilled and high-paying jobs, and the most advanced, highest value industries are strikingly concentrated and geographically uneven.

The chart below shows the pattern for industries. It compares the skill levels of 19 industry sectors (along the X axis) to the population elasticities—in other words, their tendency to locate in bigger metros (on the y axis). Take a close look at the upper right-hand corner of the chart—that’s where you can see industries that are both highly skilled and highly concentrated geographically, like finance, technology, and company management.

(Donald Davis and Jonathan Dingel/NBER)

Overall, we see a similar pattern across entire industries. The biggest sixteen industries attain their maximal size in New York. The three exceptions are manufacturing (second-largest Los Angeles), mining (tenth-largest Houston), and forestry, fishing, hunting, and agriculture support (thirteenth-largest Seattle). But overall, what this chart shows is that higher-skilled industries tend to pull from larger places, rather than demonstrating a kind of specialized form of industry.

The next chart makes the same kind of comparison, this time occupations—the jobs workers hold, providing a picture of where talent is located (as opposed to industries). This chart compares the skill levels of 22 key sets of occupations (along the X axis) to the population elasticities—in other words, their tendency to locate in bigger metros (on the y axis). Again, look closely at the upper right-hand corner of the chart—which shows occupations that both highly skilled and highly concentrated geographically.

(Donald Davis and Jonathan Dingel/NBER)

In the far upper right-hand corner of the chart, we find computer and mathematical occupations—the backbone of the computer science, software, artificial intelligence and machine learning industries. Also up here is architecture and engineering, life sciences, arts and entertainment, sports and media, and legal, financial, and business occupations. In a word, the highly skilled occupations that make up the knowledge, professional, and creative class. These are also the occupations that not only concentrate in larger metros, but also drive innovation and economic growth across metros.

What kind of occupations are more spread out? Among higher skilled occupations, we see education and library occupations, healthcare workers, and community and social services—much of that related to the eds and meds industries that are spread across the country. Education, healthcare and community services follow population. Among less-skilled occupations we find fast-growing jobs in food preparation and service, and healthcare support, along with traditional blue-collar jobs in production (factory work), maintenance, construction, and transportation.

Overall, the study finds highly skilled occupations are overwhelmingly located in large metros. As the authors point out, 19 of the 22 occupations “attain their maximal size” in New York, while Los Angeles leads in production (manufacturing) and San Francisco leads in architecture and engineering. Fresno, in the heart of California’s agricultural belt, leads in farming, fishing, and forestry.

***

All this speaks to this new shift in our economy, where the larger cities with big pools of high skilled talent garner extreme concentrations of industries and occupations. This drives our new “winner-take-all” urbanism and the rising geographic inequality of winner and loser cities and metros we see today.

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