College Educated Workers Congregate Together

All across the country, communities “are dividing themselves into two distinct groups, with college-educated workers increasingly clustering in desirable places that less-educated people cannot afford.”[1] Describing this trend, Rebecca Diamond, Assistant Professor of Economics at the Stanford Graduate School of Business, explains: In 1980, the average college graduate earned 38% more than the average high school graduate. By 2000, the college-high school graduate wage gap increased to 57%, and by 2011 it rose to 73%. At the same time, workers have become increasingly spatially segregated by education. Cities that initially had a large share of college graduates in 1980 increasingly attracted larger shares of college educated workers from 1980 to 2000, while cities with relatively less educated populations in 1980 gained few college grads over the following 20 years. The increasingly “highly educated cities” also experienced higher wage growth for both low- and high-skill workers and substantially larger increases in housing costs. The economic trajectories of these increasing high skill cities are diverging from those with fewer college graduates.[2]

This phenomenon produces a significant domino effect for both economic development and quality of life. Describing the economic benefits for communities, as well as families, of producing large numbers of college graduates, Diamond states:

Increasing a city’s share of college graduates also leads to local productivity increases for both college and non-college workers, driving up all workers’ wages. For example, increased physical proximity of educated workers may lead to better sharing of ideas, faster innovation, or faster technology adoption driving up wages of college grads. Further, low skill workers’ wages can also benefit as the increased college share drives demand for local goods and services, creating jobs for the less skilled.[3]

Diamond notes that in 2000, “the most productive city for college graduates was San Jose, CA, followed by Ventura-Oxnard-Simi Valley, CA, San Francisco-Oakland-Vallejo, CA, New York-Northeastern NJ, and Hartford-Bristol-Middleton-New Britain. These cities are the hubs of many of the most productive industries such as high tech in Silicon Valley and San Francisco and finance in New York.”[4] Conversely, the city most productive for low skill workers in 2000 “was Riverside-San Bernardino, CA, followed by Flint, MI, Detroit, MI, Las Vegas, NV, and Tacoma, WA.”[5]

Explaining the difference between these two sets of communities, Diamond writes:

Riverside-San Bernardino, CA is where many of the largest manufacturing companies have chosen to place their distribution centers. These centers transport finished goods and materials from the ports surrounding Los Angeles to destinations around the US. Shipping and distribution provide many relatively high paying jobs for low skill workers here. While Flint and Detroit, MI rank as the second and third most productive areas in 2000, they are also in the top 10 for cities which have experienced the largest productivity declines for low skill workers from 1980 to 2000. In 1980, Flint and Detroit, MI were the most productive cities for low skill workers, but as American auto manufacturing has lost market share, wages and jobs have fallen here.[6]

Growing a city’s number of college graduates also impacts quality of life, as Diamond notes: “Increasing a city’s share of college graduates causes increases in the quality and variety of the local retail market including increases in per capita amounts of clothing stores, bar, restaurants, movie theaters, and grocery stores. College share increases also lead to declines in property crime rates and pollution levels.”[7] In fact, Diamond emphasizes that college-educated workers, because they earn higher wages, have more choice on where to live, and often are willing to pay higher housing prices in exchange for access to high wage labor markets and “an array of more desirable amenities.”[8]

[1] Parker, C.B. (2014, July 8). America’s cities are increasingly segregated by education, Stanford economist says. Stanford Report. Retrieved from  http://news.stanford.edu/news/2014/july/college-grads-cities-070814.html

 [2]Diamond, R. (2014). U.S. workers’ diverging locations: Policy and inequality implications. SIEPR Policy Brief, July. Stanford Institute for Economic Policy Research. Retrieved from http://siepr.stanford.edu/?q=/system/files/shared/pubs/papers/briefs/PolicyBrief-7-14-Diamond_0.pdf

[3] Ibid.

[4] Diamond, R. (2013, December 18). The determinants and welfare implications of US workers’ diverging location choices by skill: 1980-2000. Unpublished paper. Stanford University, 26. Retrieved from http://www.stanford.edu/~diamondr/jmp_final_121813.pdf

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Ibid.