Going separate ways: spatial sorting by education, work, and real income in the USA since 1970

Advanced economies have undergone enormous structural change in work, income distribution, and the skills of the working population over the past half century. These changes have driven changing geographies of people and households, which are sorted across regions according to their work and incomes. A key previous finding is that high-skill workers have been increasingly concentrating in large metropolitan areas, earning significant wage premiums, while returns to low-skill, lower-wage work shows less spatial variation and tends to be tied to local demand for nontradable services. However, this bipartite division loses considerable information. In this paper, we therefore use a tripartite division (high-, medium-, and low-skilled) to shed additional light on the changing spatial reality of population sorting. Our research generates robust evidence that medium-skill workers have been increasingly spatially separated away from high-skill workers. The middle-skilled and the high-skilled are much less exposed to one another than was the case in the past, a reality that is lost when using only two groups. In addition, we show how spatial sorting of the three groups has affected their relative economic welfare, by documenting shifting real incomes for the three groups in the places where they are dominant. This reflects systematic differences in how their housing costs and their wages evolve relative to each other, an effect of occupational wage differences, on one hand, and spatial sorting on the other. Even though sorting of the middle group in the direction of smaller noncoastal areas does reduce the gap in real incomes relative to the gap when such workers remain in high-skilled places, the American landscape remains stubbornly far from real income convergence between the groups.