Southern America’s Competitiveness Problem


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In the Boston MSA, the median wage is $24.03 and in the Minneapolis MSA it’s $21.62 and in Chicago it’s $20.66 and in Seattle it’s $22.68—figures that represent the high labor productivity in “core” Northern United States economies. In the South, things look very different. It’s $16.82 in Tampa, $17.16 in New Orleans, $13.28 (!) in El Paso, and $16.47 in Tulsa. There are a few reasonably productive southern MSAs like Raleigh ($19.99) and Atlanta ($19.22) but they fall far behind the north’s leaders. And this gap is not new. In fact it’s converged somewhat since World War II but that’s a very long time frame and convergence in labor productivity is still a long ways away.

That’s just to say that whatever it is that makes the American currency union work, it’s most certainly not that we have equalized labor productivity across the region or that Florida has solved its “competitiveness” problems. Rather, it works despite all that because we have:

1) National bank regulation.

2) National fiscal stabilizers.

3) National labor mobility.

4) Persistent place-to-place transfers.


Creating EU-wide bank regulation, fiscal stabilization, labor mobility, and transfer payments sounds unrealistically difficult but creating EU-wide equalization of productivity is so unrealistic that it doesn’t even exist within the United States! And as far as I know, it doesn’t exist in any other large countries. Certainly India and China feature enormous persistent internal variation in incomes and labor productivity.