SKILLS AND RURAL-URBAN WAGE DIFFERENCES IN AUSTRALIA

Evidence from countries around the world suggests that rural-urban wage gaps are not solely explained by skill differences. Using data for Australia, the current study reaches the same conclusion; there is positive relationship between local economy size and local wages. Workers in Australian large urban centres earn around 7.5% more than workers with similar skill levels in rural areas. Urban Australians do not experience higher wage growth than rural Australians. Therefore, high wage growth in the year following rural-urban migration is most likely explained by the migrant taking jobs that below his ability upon arrival.