Quote:
Originally Posted by Sidd Finch
You like to assign one reason to this: Wages are higher because productivity is higher here.
Okay. I guess waiters, janitors, and bus drivers here are sooo much more productive than in any other city. And lawyers, I-bankers, and hedge fund managers too. So I'll accept the higher productivity as a reason (even as I contradict its existence by posting here).
But, I tend to believe that there are multiple factors that contribute to most results. So, higher costs are one such factor: You have to offer people higher salaries here, because otherwise they won't come here, where they know that $x doesn't go nearly as far as it goes where they live.
I also believe that the higher costs are a bigger part of this. Perhaps your workplace is one where the powers-that-be think, "We could pay our secretaries $x per year, but they are just so much more productive in the Bay Area that we'll voluntarily pay them 150% of $x." I think most businesses would prefer to pay as little as they can to retain people -- and that "as little as" number moves higher when the cost of living moves higher.
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Obviously, it's much more complicated than what I said -- I was trying to offer a simple answer to the good question, why would all those people contribute more to GDP if they were in those cities rather than elsewhere?
Since the authors come from Chicago and Berkeley, they probably have anticipated the sorts of reactions you outline -- but I don't know, because I haven't had time to read the thing yet. Maybe on my long flight tomorrow.
