The sad thing is that this has been done by one generation to the following one, parents impoverishing their own children. Not intentionally perhaps, but they have created the artificial supply side restrictions through planning laws and nimbyism that have resulted in their childrens impoverishment.
One of my friends is paying half his salary in rent with his own house impossibly out of sight, while his parents own multiple properties and rent them out.
Both outcomes are possible; it basically depends om whether the high productivity of the most expensive cities is truly exceptional - in which case it won't benefit most workers - or something that can be readily replicated in the rest of the country. We've mostly seen examples of the former in places like the Bay Area: there's only a limited number of Big Tech unicorns around at any given time, after all. But the latter is a theoretical possibility, perhaps driven by more ubiquitous sorts of sustained technological change and innovation.
If workers can't afford to live in what were the important cities, they live elsewhere.
Eventually employers move to where the workers are. The formerly important cities become tourist meccas like Venice or Granada, or ghost towns.
This is happening to London and Lisbon, and to a lesser extent to Amsterdam, Paris, New York and San Francisco, and other cities.
It's a pity, because the famous cities got big early because they're in good places for trade. Their replacements are second best in this regard.