The Washington Post Wonkblog highlights recent academic research that identifies rising returns to some college degrees, and rising amenities in those communities that are popular with degree-holders, amenities that are priced accordingly.
Census data suggests that in 1980 a college graduate could expect to earn about 38 percent more than a worker with only a high-school diploma. Since then, the difference in their wages has only widened as our economy has shifted to bestow greater and greater rewards on the well-educated. By 2000, that number was about 57 percent. By 2011: 73 percent.

These figures, though, reflect only part of the inequality that has pushed the lives of college and high school graduates in America farther apart. As the returns to education have increased, according to Stanford economist Rebecca Diamond, the geographic segregation of the most educated workers has, too — and not by neighborhood, but by entire city.

This effectively means that college graduates in America aren't simply gaining access to higher wages. They're gaining access to high-cost cities like New York or San Francisco that offer so much more than good jobs: more restaurants, better schools, less crime, even cleaner air.
That's the down-side of the emergence of the Creative Class.  Five years ago, I noted, "One, the premium to locating in the most creative communities bids up rents. That produces an arbitrage opportunity, even in recession."  Apparently, though, gentrification leads to a more valuable bundle of urban services, something that has value to Creative Class types.
Diamond also found that as cities increased their share of college graduates between 1980 and 2000, they also increased their bars, restaurants, dry cleaners, museums and art galleries per capita. And they experienced larger decreases in pollution and property crime, suggesting that cities that attract college grads benefit from both the kind of amenities that consumers pay for and those that are more intangible.

Add all of those things together, Diamond says, and the problem isn't simply that the wage gap between high school and college graduates increased by 50 percent between 1980 and 2000. The economic well-being gap — including access to places with a better quality of life — grew even wider.
In the research -- summarized here -- the people of modest means get priced out.
Sure, the San Francisco tech worker has to spend a larger share of his income on rent than a low-skilled worker in Oklahoma City. But all of the added amenities of living in San Francisco outweigh that higher cost. It's not that high school graduates don't also value restaurants, cleaner air and less crime — but they may not be able to afford to live where those amenities exist. They're more likely to make decisions about where to live based on affordability. College graduates, on the other hand, have the luxury of picking a city with amenities in mind.

If you run a city, all of this suggests that you might want to work hard to lure college grads.

"When you have more college grads, all of these amenities seem to improve in your city," Diamond says. "But that may be at the expense of kicking out lower skilled workers to other cities."

It also comes at the expense of other cities that may lose their college grads. What happens to Toledo and Baton Rouge without them?
On the other hand, I remain skeptical of cities going after Creative Class amenities as a way of attracting Creative Class employers who will hire Creative Class workers. Countervailing forces, including congestion and bid-rent curves remain at work.  In my view, though, it won't help Toledo or Baton Rouge (a state capital, with a major university, even if it is a football factory??) to simply let the lower-skilled workers behave badly.  We've seen that at work in Chicago, with the accompanying stratification into a lake-side quasi-gated community with gangland war-zones south and west.  Professor Diamond's research, however, appears to be confirming Virginia Postrel's fears that the agglomeration economies are self-reinforcing, which I discussed here.  (I noted, in passing, that people don't have to pass judgement on yobbish neighbours if they live someplace the yobs can't buy into.)

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