Housing Costs vs Wages

Here’s a great chart from the Urban Institute illustrating how housing costs and wages vary from place to place. It suggests that a typical worker in Oklahoma City or Chicago could increase his or her wages by relocating to Greater Washington or the Bay Area, but that he or she would wind up giving back most of the gains in increased housing prices. I sometimes hear people cite these facts to argue that the earnings gap somehow isn’t real. That, however, is a mistake. Workers in New York are paid more or less according to their productivity and bargaining power the same as workers everyplace else. Employers aren’t handing out extra money to workers in high cost cities just to be nice. If housing costs declined in expensive cities, then real wages would rise and more workers would be able to avail themselves of the opportunity to live and work in high-wage areas.