For rural dwellers, urban environment has always presented unique challenges and fascinations. This is primarily because of the reason that urban life offers more opportunities to its residents, both in terms of finances as well as chances to growth. There was a time when the rural people use to move, putting it more technically migrated, to urban areas in search of better job opportunities, thus getting access to higher wages. There is a concept of wage premium that is linked with big metropolitan cities. It is precisely this concept working behind the notion that the earnings of workers tend to be higher in cities that are huge, in terms of their population density. Henceforth, this is the main idea that is discussed in the referenced research article.
The research article titled “ Urban Wages: Does city size matters” penned down by Carroll and Ayala , is one such attempt where the writers have tried to reinvestigate this issue. They have explained in depth the dilemma of paying higher in the developed cities. The basic needs of life of every individual remains same regardless of the type of environment one lives in. Therefore, the wages should be fairly given to everybody. There is a lot of research material available that has thrown light on the relationship between the size of the city and the wages that persons receive. Literature provides enough supportive material that can be used as a reference to draw the conclusion that wages are higher in big cities.
With the passage of time, this hypothesis emerged as having several different dimensions. One such notion included productivity along city size as a major determinant to higher wages. It was interesting to know that wages of the labor force was documented to be higher in the cities having enormous supply of human capital. This enormous supply of human capital resulted in more productivity because of externalities, knowledge spill overs and learning by doing.
Now, the contrast came at a point when it was discovered that the cities with higher amount of human capital, are the ones that cannot be classified as the big cities. Statistics reveal the fact that such cities, with an abundant supply of human capital, does not account for more than 1. 5 million inhabitants. This is the main question that the writers of this paper have tried to probe into, stating that whether city size is still the prime motive for higher wages. Hence, in lieu of this fact, the researchers have tried to question that if the aspect of human capital is controlled, does city size is alone enough to explain the variations in wages. Apart from this, the author also answers the question what are the urban productivity advantages, possible competence gains followed by cost savings resulting from vicinity pf consumers, workers and suppliers.
The sample for the study includes 1. 6 million male workers, being employed in 100 densely populated cities of the country, obtained from 5 % Public Use Micro data Set (PUMS) of the 2000 US census of population. The authors have taken help from the ordinary least square (OLS) estimation technique for the purpose of getting a true picture of the results. The estimated results of the study have been successful in answering the question put forward in this research. Having a deep insight on the results, paints a picture where it is registered that increasing the human capital by two folds results in a percentage increase of 2% in labor market hourly wages.
However, controlling the human capital aspect, an addition of one hundred thousand inhabitants in the labor market, results in an increase of 0. 12 % in the hourly wages of the labors at the market. Hence, it will not be wrong to conclude that city size is still the main determinant of higher wages of labors. This research article is a valuable insight on the issue. The writers have been successful in presenting the issue and its problem in a simple and convincing manner.
Echeverri-Carroll, Elsie L, and Sofia G Ayala. ” Urban Wages: Does City Size Matter? .” Urban Studies (SAGE) 48, no. 2 (2011): 253-271.