Simon Kuper wrote an excellent commentary this weekend on why journalists need to get out of their city bubbles and talk to real citizens who represent more typical life experiences. As he notes, “Today, most remaining journalists live in metropolitan enclaves such as Brooklyn, north London and central Paris, and look like the elites they cover.” It’s difficult to understand how a voter in Iowa feels if you live/work/play all within two miles of Fort Greene.
Let’s go back to the reason why many of those from outside urban beltways are so upset: for those without a college degree, there are fewer jobs and wages are going down. Real median household wages (in 2014 dollars) are nowhere near their pre-Crisis peak, and people are predictably upset.
As Derek Thompson recently noted in the Atlantic, herein lies the paradox of this slow-growth, high-inequality state. Job growth and wages have shrunk outside of cities, while opportunity has expanded within cities. However, the math doesn’t work for people to follow the jobs into cities. It’s far more expensive, relative to the level of wages, to live in a city. It makes more sense for people to keep lower paying, lower productivity jobs outside of cities, because their real take-home wages and standard of living are higher.
There’s obviously a cost to this, and it’s huge. Economists Enrico Moretti and Chang-Tai Hseih studied the impact on restrictive housing policy in cities like San Francisco and New York. The authors note,
Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%.
That’s U.S. GDP, not just GDP of these cities. If per capita GDP in the U.S. is $50,000, that’s an annual increase of $4,500 per person. And better yet, this would likely disproportionately benefit those lower on the income scale – those who have been most impacted since the Financial Crisis – because it increases the availability and pay of jobs on the lower end. This is likely at the expense of wealth tied up in home values by rent-seeking, NIMBY urbanites.
It’s is likely true that many exurbanites and ruralites wouldn’t want to suddenly adopt the lifestyle of living in a city, but if housing rules changed overnight and families could improve their standard of living by taking the higher-paying, higher-productivity jobs in cities, I’m guessing many would.
All this is to say, Kuper is right. We do need to better gauge the political and social temperature inland from the coasts. After all, how can we solve problems through the political process without qualitative inputs from those who are actually most affected by our economic problems? It is additive to our base of knowledge that we have the ability to fund research, but econometric models done by statistics and economics PhDs at Washington think tanks are only part of the solution (though many argue a large part of the problem).
However, there’s an inherent disconnect between what is being promised by these populists (higher GDP growth) and the economic reality (current low levels of productivity growth and low population growth). Changing tax policy alone won’t increase GDP growth. If we want to boost GDP growth, we have to increase productivity. To increase productivity, we have to increase the number of people in high-productivity jobs. And even for less-highly-educated workers, high-productivity jobs are in cities.
It’s a two-way street: the urban mice have to better understand what’s happening outside of major cities, and must walk the walk when it comes to policies that likely benefit the nation, even if at their own expense. But the country mice can’t expect an improvement in living standard if they handcuff themselves to an outdated, more rural economic model.
Populists can stand to learn a bit more about the changing economic dynamics of global cities. Hopefully that shouldn’t be too hard – after all, it’s an urban, Ivy League educated property developer who is leading the anti-cosmopolitan charge.