This Is Why Kids Born in Big Cities Make More Money As Adults Than Others
Being born in a big city is no guarantee of starting life with a silver spoon in one’s mouth, but it can have significant advantages. In the United States, for example, 87% of the country’s population lives in 1,253 mostly urban counties, and the median household income for those counties was $59,970 in 2017, according to the Census Bureau’s American Community Survey for the period 2013 to 2017. Among the 11.5% of Americans who live in mostly rural counties (1,185 counties), the median household income is $47,020.
While being born in a rural county does not prevent a person from moving to a city and reaping the economic rewards cities offer, being born in a big city is a distinct advantage, according to new research published in March in the Journal of Urban Economics. Researchers Clément Bosquet and Henry G. Overman of the Université Cergy-Pontoise and the London School of Economics, respectively, looked at data collected between 1991 and 2009 in the British Household Panel Survey seeking a link between the size of a person’s birthplace and how much they earn as adults.
The short answer is that the elasticity of wages due to a city’s size is 6.8%. That is, income is nominally 6.8% greater in a large city than in a small or rural one. For a person born in a large city, the elasticity of wages is 4.2%. That means that being born in the big city has a bigger impact on adult wages than just moving to the big city. Being born in a large city improves a person’s opportunity for higher pay by about two-thirds over a person who moves to the big city.
What could be causing this effect? Bosquet and Overman suggest a number of possibilities but settle on two as the most likely. First, the possibility that “individual characteristics vary with birthplace size because spatial sorting of parents [why they chose to live where they do] and the intergenerational transmission [the transfer of parents’ characteristics to their children] of characteristics.” Second, birthplaces influence past and current city size and the city’s labor market.
While incomes are rising across the United States, especially in metro areas, some areas are bucking the national trend — these are the 10 cities where incomes are shrinking the fastest.
One startling result the researchers noted is that they found “no direct role for differences in childhood educational outcomes, other than through the sorting of parents.” The role of education is indirect in that “parental characteristics help determine educational outcomes and parental characteristics are correlated with city size.” Living in a major metropolitan area has countless benefits — they are hubs of employment, international travel, and shopping — but it also comes at a price. Here is the cost of living in America’s major cities.
In Britain, the researchers found, nearly 44% of individuals work only in the same place they were born. For those who have passed only their general certificate exams (O-levels, at the age of 15 or 16), 48% work only in the place where they were born.
If, as the data shows, the size of one’s birthplace matters, the effect is greater for those born in the city than for those who move there later in life. Bosquet and Overman report that 79% of children born to parents with professional jobs are born in a city. Kids with parents in professional jobs are, on average, born in cities that are 50% larger than kids born to parents with other occupations.
In their conclusion, the authors explain what they found: “First, birthplace size is linked to parental social class so that some of the link between wages and birthplace size is explained by the sorting of parents. Once we control for parental social class, there appears to be no additional role for education. Second, current city size is correlated with birthplace size creating a link from birthplace to current location. As current city size influences wages (as a result of agglomeration economies) the effect of birthplace on current city size is the second mechanism through which the effect operates. …”
Because educated professionals sort themselves into big cities, children born in big British cities are likelier to have more highly educated parents. The advantages attached to these kids are significant and lasts a lifetime. Who needs a silver spoon?