Talent Clustering: A Wide or Narrow Benefit?

Analysts have observed that over the last few decades a growing gap has emerged between those American cities attracting high numbers of college grads and those at the other end of the spectrum. "But," says Florida, "a key question remains: Who benefits and who loses from this talent clustering process? Does it confer broad benefits in the form of higher wages and salaries to workers across the board or do the benefits accrue mainly to smaller group of knowledge, technology, and professional workers?"

"The University of California, Berkeley’s Enrico Moretti suggests a trickle-down effect, arguing that higher-skill regions benefit all workers by generating higher wages for all workers. Others contend that this new economic geography is at least partially to blame for rising economic inequality."

Working with Charlotta Mellander and his team from the Martin Prosperity Institute, Florida finds that: "On close inspection, talent clustering provides little in the way of trickle-down benefits. Its benefits flow disproportionately to more highly-skilled knowledge, professional and creative workers whose higher wages and salaries are more than sufficient to cover more expensive housing in these locations. While less-skilled service and blue-collar workers also earn more money in knowledge-based metros, those gains disappear once their higher housing costs are taken into account."

See the article for a more detailed explanation of Florida's analysis.