The unique economic conditions brought on by the COVID-19 pandemic led to a slight decline in wage inequality, but that wasn’t enough to reverse long-term trends. To understand why, we need to see how wage inequality varies across U.S. metro areas. Large urban areas tend to have higher wage inequality, driving a large share of its growth for the nation. Although wage inequality continued to rise after the pandemic for many of these cities, where it had already been highest, smaller cities away from the coasts saw wage inequality decline, which led to the slight, nationwide decline.

These regional and metro-level differences in wage inequality are creating diverging economic outcomes not only for households within regions but also between regions. Recognizing this divergence can help us formulate public policies to better address inequality.

This article appeared in the Second Quarter 2024 edition of Economic Insights. Download and read the full issue.

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