Big metros: where private sector employers spend most

I want to complete this series of posts on private sector employment earnings (both wages and employer paid benefits) per capita with a look at data by size of metro. In many ways this is the most interesting findings in our latest progress report.

First a reminder from the earlier posts. Private sector employers pay for productivity, not cost of living. If the same quality work can be done in Bangladesh compared to Manhattan the work is going to Bangladesh. End of story!

There continues to be a conventional wisdom about the economy that small town America is where self reliance and the private economy is the strongest. And big metro America is where big government dominates with a high proportion of government employment and folks receiving government transfer payments. Wrong! In fact the exact opposite is the case. Big metros are where private sector employment earnings per capita are the highest, the proportion of per capita income from private sector employment earnings the highest and the proportion from government revenue (both government employment and transfer payments) the lowest. As you can see in the table below, its not close.

CSAs and nonCSA MSAs Private employment earnings per capita share of per capita income from private employment earnings share of per capita income from government revenue
3.0 million or more $28,768 64.2% 26.1%
1.0 million to 3.0 million $22,684 60.2% 31.7%
500,000 to 1.0 million $19,577 54.9% 34.4%
200,000 to 500,000 $18,800 52.9% 36.7%
under 200,000 $17,203 51.2% 40.4%

Metros of three million or more are the big winners. By far the most concentrated in private sector employment earnings and the least dependent on personal income from government payments. At the opposite extreme, metros with populations of 200,000 or less have the smallest private sector employment earnings, the lowest proportion of their personal income from private sector employment earnings and are, by far, the most dependent on government revenue for their personal income (more than an astonishing 40%). Makes one think twice who is “on the dole”, doesn’t it?

A core characteristic of the most prosperous states across the country (except for a few benefiting from high energy prices) is that they are anchored by even higher prosperity big metro(s) with a vibrant central city. For Michigan that means that first and foremost metro Detroit and the city of Detroit and secondarily metro Grand Rapids and metro Lansing and their central cities must work if the state is going to be prosperous. If we are to build a prosperous Michigan we need state policy to make our three biggest metros and their central cities the priority. At the moment the exact opposite is the case. That needs to change.

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