Picture a young couple weighing a job offer in a big, bustling metro area. The pay is good, the career ladder looks tall, and the energy is hard to resist. But they are also thinking about starting a family, and a quieter, smaller town keeps tugging at them. They assume the thriving city that is good for their careers will also be good for their future kids. A new study suggests that assumption may be backward.
In a working paper from the National Bureau of Economic Research, two researchers set out to answer a question that sits at the heart of that decision: do the places that build skills and earnings during adulthood also build them during childhood? Their analysis offers evidence that the answer is generally no. The places that do the most to lift adult earnings tend to be the places that do the least for the long-run prospects of the children growing up there.
The puzzle behind the move
The study was conducted by Ben Sprung-Keyser of the Wharton School at the University of Pennsylvania and Sonya Porter of the U.S. Census Bureau. Their starting point is a striking fact about American life: people tend to stay close to home. Roughly 70 percent of young adults live at age 26 in the same local area where they grew up. That means most people are shaped twice by the same place, first as children and then as working adults.
To untangle these effects, the authors break a person’s wages into three pieces tied to location. The first is what they call a “location wage premium,” which is essentially the going price of labor in a given place. Two equally skilled workers can earn different amounts simply because one lives somewhere that pays more. The second piece is adult human capital, meaning the skills and earnings growth a worker picks up over time by being in a particular labor market. The third is childhood human capital, the lasting boost (or drag) on adult earnings that comes from the environment a person grew up in.
Here, “human capital” is just economist shorthand for the skills, knowledge, and habits that shape what someone earns. The goal was to measure how the childhood version and the adult version of this relate to each other across the country.
Separating the price of a place from its effect on people
The researchers worked with de-identified Census and tax records, organizing the country into 741 “commuting zones,” which are local areas that function as labor markets. To estimate the wage premium of each zone, they tracked people who moved from one zone to another and watched how their pay jumped at the moment of the move. A sudden raise after relocating, holding the worker’s underlying skills constant, points to the premium attached to the new place.
A natural worry is that movers are not random. Maybe people headed to high-paying cities were already on the rise for reasons that have nothing to do with the city. To check this, the authors used an unusual source of relatively forced moves: the wave of people who left New Orleans after Hurricane Katrina in 2005. Out-migration from the city jumped more than fivefold the year after the storm, suggesting most of these moves were not driven by career calculations. When the researchers compared the place premiums calculated from these displaced residents to those from ordinary movers, the two lined up almost exactly. That alignment suggests the standard estimates are picking up the real effect of places rather than hidden differences among the people who choose them.
High location premiums showed up where you might expect: the dense corridor along the Northeast, the San Francisco Bay Area, and energy-producing regions like the Bakken oil fields in North Dakota.
Big cities build adult skills
Next came adult skill growth. Instead of looking at the one-time pay bump from a move, the researchers followed the trajectory of wages year after year in each location. They found that spending time in large, dense, highly educated places is associated with steadily rising wages over time. Six years of exposure to one of the 50 largest commuting zones was linked to a gain of roughly 0.46 income ranks, and the effect grew in a fairly straight line with each additional year.
To make sure this pattern was not an artifact of who stays put, the authors used people who moved more than once. They showed that estimates built from long-term residents could predict the wage changes of these multi-time movers almost one for one. The pattern fits long-standing theories about cities, which hold that big, skilled places generate knowledge spillovers that help workers learn and earn more.
The tradeoff appears
The hardest part was isolating the childhood effect. Because children who grow up somewhere usually work there too, simply tracking kids who moved would blend the childhood environment together with later labor market exposure. The authors built on a method that uses the age at which a child’s family moved, since a child who arrives earlier gets more years in the new place. They then subtracted out the location wage premium and the adult skill effects to leave behind the influence of the childhood environment alone.
With all three pieces measured, they compared childhood and adult effects across places. The result was a tradeoff. The authors estimate that each one-rank increase in earnings tied to a place’s adult labor market is associated with about a half-rank decrease in earnings tied to its childhood environment. To put it in dollars, they calculate that roughly each additional dollar a parent gains from a strong adult labor market trades off against about 51 cents in their child’s eventual earnings.
This pattern tracks closely with city size. As commuting zones get larger, adult skill growth tends to rise while childhood human capital tends to fall.
Why bigger places may be harder on kids
The researchers caution that they do not have experimental evidence on what drives this tradeoff, so they looked for characteristics with the right “signature”: traits that move with city size and that push adult and childhood outcomes in opposite directions. The factors that fit point toward what the authors describe as physical and social fragmentation.
Shorter commute times and lower income segregation were both linked to stronger childhood outcomes and weaker adult ones. Larger cities tend to have longer commutes, more income and racial segregation, and more residential churn. The authors connect these to older ideas about community and social connection, suggesting that smaller, more tightly knit places may transmit skills to children more effectively even as they offer adults less room to climb. They also find the tradeoff is weaker for higher-income families, which they interpret as a sign that wealthier parents can partly shield their children from the downsides of big-city life.
People may not see it coming
One of the quieter findings concerns whether anyone is acting on this tradeoff. The researchers checked local rents and found that location wage premiums are heavily baked into prices, with rents rising more than dollar for dollar with the local pay premium. But the childhood and adult skill effects barely show up in rents at all. When they examined migration, they found that young adults under 30 tend to move toward places that are worse for childhood human capital, with only a brief window around the birth of a first child when families lean the other way.
Taken together, the authors suggest that people may simply be unaware of how strongly place shapes skill-building across a lifetime. The study stops short of telling families where to live, and the authors stress that more work is needed to pin down the causes behind the tradeoff. But the core message is that the qualities that make a place good for a career and the qualities that make it good for raising children do not appear to travel together.
