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Two Americas: The geographical wage gap has stopped closing

Adapted from Brookings; Chart: Naema Ahmed/Axios

The most prosperous areas of the U.S. are maintaining their wealth, and the poorest places are stuck in poverty after decades of economic progress, according to a new report by the Brookings Institution's Hamilton Project.

The big picture: For decades, there was convergence between the states with the highest and lowest median wages, and the fastest economic growth generally belonged to the counties with the lowest median earnings. But those trends have ended. As depicted in the charts above, the closing of the gap between higher and lower income regions has ended — and even reversed course in some areas.

Americans are no longer moving as often as they did, and the highly-educated are flocking to and staying in tech and financial hubs, Jay Shambaugh, one of the report's authors, tells Axios. "By and large, places have gotten stuck."

The backstory: Over the past several decades, companies and industries moved to cheaper land and labor. The invention of air conditioning made it easier to run manufacturing plants in the South, and improved roads and transportation systems allowed for expansion to the middle of the country. At the same time, Americans moved toward higher wages and better jobs.

  • But that's no longer the case. Due to increased home values in desirable locations, the technology boom and other factors, people can't always afford to move to areas that are better off economically. If their hometown experiences an economic shock like the collapse of an industry or a depression, people aren't leaving like they did in the past, Shambaugh said.
  • Meanwhile, the prospering counties and states are continuing to benefit from the tech boom. "The economy depends even more on people with college degrees," according to Shambaugh, and "the places that were more highly educated 30 years ago have extended their lead."

The exceptions are states and counties in the midwest, which used to be the middle of the pack for household earnings, have plummeted toward the bottom. And the Upper Great Plains region, which includes North Dakota, is experiencing a boom largely due to the fracking industry.

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