Income growth lower in Norwegian cities
Income disparity between urban and rural areas is decreasing in spite of the much higher levels of education in cities.
- Income growth has actually been less pronounced in cities than in outlying districts for quite some time now. On average, the income gap between urban and rural regions has been shrinking over the last 40 years, says Professor Jørn Rattsø of the Norwegian University of Science and Technology (NTNU).
He has studied Norwegian municipalities and labour market regions in the period 1972-2008.
Most people live in cities
Professor Rattsø points out that the level of education is much higher in big cities than elsewhere in the country. Young adults are drawn to cities in the pursuit of education and end up staying there. Cities have become high-pressure areas with sharp competition between businesses for workers and expertise.
Population growth and rising education levels in Norwegian cities are by and large the same as in other European nations.
- Are cities really experiencing the highest growth rate in population but not in income?
- Yes, that’s correct. Initially, we thought that income growth would accompany the population increase. More people and more businesses create the foundation for a broader-based labour market, greater specialisation and improved conditions for knowledge sharing. People and businesses alike benefit from close cohabitation, says Professor Rattsø.
Reduced by 30 per cent
Income levels in urban areas remain higher than in outlying districts. It is the trend over time that surprises Professor Rattsø. If this trend continues, urban and rural regions will end up at approximately the same level. He cites the Oslo-region as an example.
- In 1970, income was almost 70 per cent higher than the national average. Today, that figure has fallen to approximately 40 per cent. With the exception of Stavanger, rural regions have been closing the gap on urban regions. It is puzzling that cities are not demonstrating higher growth of income.
According to Professor Rattsø, education does not appear to provide much of a return when viewed in a regional context.
- We know that for individuals. the financial return on an education is low due to uniform wage levels in Norway.
But is it only the most highly educated who end up in cities?
- While big cities have the most residents with higher education, they also have the greatest number of low-wage residents. The income gap is actually wider within an individual city than between urban and rural centres. Some might claim that rising immigration is a factor. However, immigration is first and foremost a significant factor for Oslo. It does not explain lower income growth rates in other large cities, says Professor Rattsø.
Growth in the districts
- The cause must surely also be partly based on positive regional developments?
- It has long been the case that people – and especially young adults – move from rural areas to cities in order to seek education. It is not the most qualified who stay behind. Yet the outlying regions hold two advantages. The first is that many are able to make a profit on local natural resources. The wealthier regions have industrial segments linked to energy production, salmon, marine resources and petroleum exploration and production. The other advantage is that Norway’s public sector is large and has a solid wage base. In certain districts the public sector dominates the local labour market.
"Everyone" has an education
The main picture which emerges is that education levels have become more balanced in the period studied by Professor Rattsø. Prior to 1970, the general level of education in Norway was much lower, with higher education being even more of a distinct urban phenomenon.
- Almost everyone completes upper secondary education – even in rural areas. In addition, institutions of higher education have been established all over the country. This also helps to explain how the rest of the country has kept pace with the trend in income growth.
Professor Rattsø’s project is not directly aimed at evaluating policy.
- However, our conclusion that big cities and our high level of education yield little in terms of economic return should be of concern to researchers and politicians alike, says Professor Rattsø.
Of international relevance
Professor Rattsø stresses that analysis of developments over time always entails certain methodology-related challenges. The research group has experimented with different urban population growth models and statistical tools while estimating causal factors.
- The study has attracted interest internationally. Both European and US researchers wish to learn more about how cities in other countries operate. Unfortunately, Norwegian cities are a bit on the small side to be of much use in international comparisons, Professor Rattsø explains.
The project "Municipal and regional economic development: An analysis of educational levels” was headed by Professor Jørn Rattsø of NTNU in the period 2006-2011 (including one year of deferment). The project was funded under the DEMOSREG programme at the Research Council of Norway.
Facts about the DEMOSREG programme:
The Research Council’s research programme, Democracy and Governance in Regional Context programme (DEMOSREG), seeks to generate knowledge about the local and regional consequences of national and international development trends. Particular emphasis is given to research related to policy-making and governance.
(Translation: Glenn Wells/Carol B. Eckmann)
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