For most of the 20th century, the number of work hours declined for the majority of workers in the U.S. Beginning in the 1970s, however, this trend reversed itself and the number of hours worked per week began to rise.
This increase was most acute among highly educated, high-wage, salaried employees. Workers in the top quintile of wage earners, for example, experienced a significant increase in hours worked, while workers in the bottom quintile actually showed a decline in hours worked.
Research has shown that this change was likely due to an increase in “marginal incentives” that motivated the top-quintile workers to put in longer hours: Although these employees weren’t entitled to overtime, they could obtain huge rewards, such as large bonuses or raises and promotions, in exchange for the extra hours worked.
Exodus … and Back Again
During the past couple of decades, these high-wage, long-hours jobs have become increasingly concentrated in city centers. Many of them (predominantly at larger companies) were exported to the suburbs during the jobs exodus of the 1960s, 1970s, and 1980s. The reverse, however, has been occurring since the economic recovery in the early 1990s.
It’s not low-wage, low-skilled positions that are being brought back into expensive city centers; those jobs are still being sent to parts of the country (if not the world) where labor costs and real estate costs are cheaper. Nor are many small to medium-size firms moving into city centers, with technology companies being the notable exception, because the CBD (central business district) and suburban office markets serve different users. This CBD–suburban dynamic became disrupted during the jobs exodus of the ’60s, ’70s, and ’80s, but that period now looks more like an anomaly, with many larger companies returning their jobs to cities.
This reversal has most famously pulled in younger workers, but even some older workers have followed suit. The common denominator is that they’re all working long hours. Employees working in legal services, business and professional services, financial services, information services, and so on are making far more money than the average worker in the country, but they’re working far longer hours than the average worker. According to the most recent employment figures, the average number of weekly hours worked is 34.4. Such a low figure is laughable to even entry-level employees working in city centers in the industries noted above.
At Their Leisure
Because these workers put in longer hours, their leisure time is eroded. In order to maintain some leisure time, these employees have decided to reduce their commutes. This is because, relative to the past, professionals today place a high value on activities outside of work, such as family time and exercise, and they want to be sure to allot time for those activities. Consequently, the increased competition for leasing apartments and buying condos, co-ops, and other units that boast relatively short commute times has caused rents and prices in preferred neighborhoods to increase dramatically.
Eventually, those priced out of the preferred parts of cities have moved to adjacent neighborhoods that still offer relatively short commutes and, in so doing, have begun the process of gentrification. This should be all too familiar to anyone who’s spent time in any number of cities across the country. Places as varied as Brooklyn; Southeast and Southwest Washington, D.C.; and downtown Los Angeles are largely unrecognizable today versus their 1980s selves. This gentrification is causing rent growth in these areas to accelerate, often with faster rent growth than in more-established neighborhoods and submarkets.
Some of the best-paid workers across the age and experience spectrum have never moved out of the city centers, but they’re continually joined by new arrivals as more jobs arrive. Ultimately, this is becoming an arms race where only the best-paid workers can afford to live in their preferred locations. Consequently, everyone else who’s not among the best paid gets priced out to either gentrifying areas (largely younger singles) or suburbs (largely families) that have excellent access to public transportation infrastructure that can get them in and out of the city center relatively quickly.
If many high-end jobs hadn’t relocated from the suburbs starting in the ’90s, we wouldn’t have observed the widespread migration and gentrification (and concomitant increase in rents and home prices) that’s occurred over the past 20 or so years.
Given that this trend is unlikely to reverse anytime soon, expect gentrification to continue for the foreseeable future.