In Developing Urban Economies, Wages Matter

While many urban economies in the United States and EU are showing signs of economic recovery from the financial crisis of 2007–2008, and on average unemployment has declined precipitously in the United States and slowly but steadily in the EU, nonetheless, beneath such ostensible improvements there are still growing tensions and anxieties that critically affect the economies and societies in transatlantic cities. Specifically, we know that parallel to growth, wages at the bottom end of the income distribution have stagnated in the United States and the U.K. since the 1980s (and to varying degrees across continental Europe). We know that in the United States, at the top of the distribution, the share in total gross income of the top 1 percent increased by one-half between 1979 and 1992 with the U.K. experiencing a similar “Inequality Turn” post-1979. At the same time, income and wealth inequality has drastically increased over the last three decades, in the United States and in the EU, the problem of precarious or vulnerable and under-paid forms of work and the significance of skills differentials has been emerging too.

The problem is, as the European Foundation for the Improvement of Living and Working Conditions has recently reported, these macro-level changes translate at the local level into more than half the population having difficulty meeting basic household expenses in 11 EU member states. Indeed, households in seven EU countries — Croatia, France, Greece, Ireland, Italy, Slovakia, and Spain — say their living conditions have not returned to their before 2007 crash levels.

In the context of developing urban economies, from the perspective of GMF’s Urban and Regional Policy Program, the question is what, if anything, can cities do to address the consequences of falling or stagnating wages and precarious work through local economic development initiatives?

Emphasis is naturally placed on job and skills creation when developing local economies. The issue of wages (as well as the type and quality of work) is not necessarily a central part of urban economic development discussions. Here, we argue that it needs to be because in short, we know that money matters to individuals’ ability to provide for themselves and their children. Indeed, the lack thereof, for example, adversely affects children’s health, educational, and behavioral outcomes (Cooper and Stewart, 2017). This in turn has long-term economic and social implications that affect communities, and by extension, the cities in which people live.

Moreover, these social, economic, and even spatial implications for local communities contribute more broadly to increasingly fragmented and polarized societies. Aside from their inherent value, social mobility and economic opportunity are key pillars for stable communities and the wider polity. An equitable and inclusive economy is one that is less vulnerable to the inflammatory nationalism and could mitigate the urban-rural and intra-city cleavages fueling the nativist rhetoric resonating with some suburban and rural communities as well as with residents of neighborhoods within cities that are economically and/or socially disadvantaged. We have seen variations of these dynamics and growing polarization take shape in the United States, French, Dutch, and German elections of the past year and a half.

Given these developments on both sides of the Atlantic, and in a context of increasing urbanization more globally, cities are well positioned to take the lead. With more than 75 percent of U.S. and EU populations living in cities and large cities representing 85 percent and 67 percent of their respective GDP (McKinsey Global Institute, 2012; European Commission, 2014), it is clear that cities need to be on the frontline of more inclusive economic development policies. For this reason, over the next year GMF’s Urban and Regional Policy Program is convening a Transatlantic Taskforce composed of experts, thought-leaders, and practitioners, to explore policies that can help cities be more engaged and effective in addressing the intersection of jobs, skills, and wages in the development of inclusive metropolitan economies.

We recognize that any platform that seeks to address jobs, skills, and wages together is not an easy task. That indeed, each issue on its own is highly complex, let along bringing them together to find a coordinated solution to what is, in many ways, an age-old problem. We also know that it is necessary to explore the limitations and challenges cities face from a governance, regulatory, and capacity standpoint when thinking about how city-level policy and practice can address stagnant wages and precarious work within the larger regional, national, and supranational policy frameworks. But it is because of the staggering amount of evidence that suggests that the current economic framework is not working for a percentage of the working age population in both the United States and Europe that GMF is exploring these critical set of issues transatlantically.

Taskforce Members

Evelyn Burnett, Vice President of Economic Opportunity, Cleveland Neighborhood Progress

Shawn Escoffery, Program Director, Strong Local Economies, Surdna Foundation

Dr. Bela Galgoczi, Senior Researcher, Economic, Employment and Social Policies, European Trade Union Institute (ETUI)

Renato Galliano, Director of the Urban Economy and Employment Department, City of Milan

Ted Howard, Co-founder and President, Democracy Collaborative

Matthew Jackson, Deputy Chief Executive, Centre for Local Economic Strategies (CLES)

Susan Longworth, Senior Business Economist, Community Development and Policy Studies, Federal Reserve Bank of Chicago

Dr. James Meadway, Economist and Policy Advisor, Shadow Chancellor of the Exchequer

Marissa Plouin, Coordinator, Champion Mayors initiative at Organisation for Economic Co-operation and Development

Paco Ramos Martín, Executive Director for Employment Strategies, Barcelona Activa

Chantel Rush, Program Officer, American Cities Practice, The Kresge Foundation

Dr. Faiza Shaheen, Director, Center for Labour and Social Studies

Nathaniel Smith, Founder and Chief Equity Officer (CEqO)/CEO, Partnership for Southern Equity

Scot Spencer, Associate Director, Advocacy and Influence, Annie E. Casey Foundation

Art Wheaton, Director, Western NY Labor and Environmental Programs, The Worker Institute, Cornell University