The relationship between city size and industrial wage levels

Abstract

A fair ly close posit ive corre la t ion between income and/or wage levels and city size has been observed for some t ime in this country, and in the l i t e ra ture a good deal of attention has been paid to this relat ionship. 2 A number of explanations have been offered for the existence of the relat ionship, such as demc)~raphic differences between large and smal l c i t ies , the tendency for a higher percentage of the labor force to be unionized in large ci t ies , and the fact that the sma l l e r ci t ies tend to c lus te r in the South where education and skill levels tend to be re la t ive ly low, in par t because of the re la t ively great concentration of black labor in Southern ci t ies . Implicit in most of the studies is the thought that if the proper var iab les are identified, such as those r e f e r r e d to above, and others , there would exist no relat ionship between city size per se and income or wage levels . Often not explicit ly recognized in e a r l i e r studies that have examined the city s ize-wage level relat ionship is the thought that large ci t ies have re la t ive ly high wage ra tes because such c i t ies have had re la t ive ly high wage levels in the past, and therefore movement to these c i t ies and away from smal l e r ci t ies and ru ra l a reas has been going on for some time. It is general ly expected that such movement will tend in the long-run to el iminate wage differentials , except for the psychic and t ransportat ion costs associated with movement. That the different ials pe rs i s t in spite of the sizeable migrat ion that has occur red suggests that the adjustment to equil ibr ium has not been complete. However, if labor demand as well as labor supply is a posit ive function of city size (or population), then the movement of a given individual or group of individuals f rom a re la t ive ly small (low-wage) city to a re la t ive ly large (high-wage) city will tend to reduce the wage differential between the c i t ies only if the supply shift that resul t s f rom the movement dominates the demand shift, so that downward p r e s su re is placed on wage ra tes in the large city and upward p re s su re on wage ra tes in the small city. If this is not the case, then there may be no longrun tendency toward wage equalization due to migrat ion. 3 (This does not say