"The Oft-noted Hollowing Out of the Middle Class is a Metropolitan Phenomenon"
Income inequality is increasingly a phenomenon driven by big cities.
It used to be the case that there was greater income inequality in rural areas than in metropolitan ones. Big cities and surrounding communities typically had a substantial middle class. Rural areas, on the other hand, had limited economic opportunities, and the wealth of a few individuals—such as owners of local industries or large land holdings, were outliers in rural parts of the country who would drive measures of inequality.
As Michael Petrilli writes in the WSJ, this is no longer the case. Dramatic increases for high-wage workers are driving increases in income inequality in major cities, such that income inequality is now just as much an urban phenomenon as a rural one. He writes:
In other words, the oft-noted hollowing out of the middle class is a metropolitan phenomenon. As the middle shrinks, big cities are increasingly divided between a highly educated, growing upper middle class and a low-wage, poorly educated service sector.
According to Petrilli, this has some important policy implications.
First, the American workers facing the greatest disadvantages today are poorly paid service employees living in big metropolitan areas, especially the thriving ones. As urbanist Richard Florida has pointed out, they face the double whammy of low wages and high living costs. They're also suffering the worst effects of Covid-19, one of many health and social implications of inequality.
As many policy analysts have noted, a consequence of increasing urban wealth is an increase in housing prices. This can make things particularly difficult for power-income workers.
Petrilli thinks this also has implications for education:
it should be no surprise that well-educated urbanites earn lofty salaries. For educators, this means that a focus on "college for all"—or at least "college for most"—may make sense in big, creative-class cities. It really is hard to make a decent living in blue America's urban enclaves without significant higher education. But it's less determinative in small towns and rural America, where two-year degrees and industry credentials go further than they do in large cities. High schools in red America would be smart to make high-quality career and technical education a much bigger part of their offerings. They can prepare students for the plentiful job opportunities in their communities that don't require a four-year degree.
Whether these are the necessary policy implications is certainly open for debate, but it seems clear that the increase in income inequality in major cities is a phenomenon that matters, and policymakers should consider how existing policies exacerbate this trend.