Rural Labor and Education: Nonmetro Earnings and Low-Wage Workers

Rural Labor and Education Briefing Room Nonmetro Employment and Unemployment Nonmetro Earnings and Low-Wage Workers Farm Labor Nonmetro Education

Earnings from wages and salaries account for over half of total personal income in the United States and are a key indicator of worker well being. Historically, nonmetro workers have typically earned less than metro workers in large part because of differences in the industrial and occupational compositions of metro and nonmetro labor markets.

Managerial and professional occupations, which general require the highest levels of education and formal training and offer the highest pay, are disproportionately located in urban centers, while lower-skill jobs in agriculture, mining, and manufacturing are concentrated in rural areas. Accordingly, the share of workers who earn low wages, defined as less than the four-person family poverty threshold on a fulltime, full-year basis, is also higher in nonmetro areas. Within nonmetro areas, earnings vary widely by sex, race, ethnicity, age, and education.

The following information is available in this chapter:

• Median weekly earnings of wage and salary workers in nonmetro America, including differences across population subgroups and comparisons with metro areas
• Characteristics of low-wage workers, who earn less than the four-person family poverty threshold on a fulltime, full-year basis

Median Weekly Earnings for the Nonmetro Labor Force

Median weekly earnings for nonmetro wage and salary workers in 2003 were $473, based on an analysis of the Current Population Survey (CPS). Earnings were 17 percent below median earnings of metro workers. Due to the gradual phase-in of the 2003 metro classification system into the CPS in 2004 and 2005, the 2003 nonmetro earnings estimates are the latest available.

Despite the 2001 recession, nonmetro earnings rose at an average annual rate of 1.4 percent between 2000 and 2003, after adjusting for inflation. Sluggish economic growth following the previous recession (1990-91) held the average annual growth rate of nonmetro earnings to just under 1 percent during the 1990s, despite robust economic expansion late in the decade. Since 1990, nonmetro earnings have generally grown faster than metro earnings.

Changes in median weekly earnings for full-time wage and salary workers follow a pattern of growth similar to those for all workers, although annual changes for full-time workers tend to be lower.

Earnings by Education Level

The labor market rewards to a college degree have risen steadily over the past 20 years. In 2003, median weekly earnings for nonmetro college graduates were $737, about two and a half times the earnings of nonmetro workers who had not completed high school ($301). A small part of this difference is due to the greater average number of hours worked by college graduates.

College graduates earn substantially more in metro than in nonmetro labor markets, while earnings for workers without a high school diploma are nearly the same in both areas. The higher returns to education in metro areas generally reflect greater demand for high-skill workers as well as higher average living costs. In addition, highly educated workers, particularly those with families, who choose to live in appealing nonmetro areas are often willing to forego higher income for the compensating natural and social amenities that these areas provide.

Earnings by Sex, Race, and Hispanic Origin

Among major racial and ethnic groups, nonmetro median earnings grew faster for Blacks (1.8 percent annually) than for Hispanics (1.0 percent) or non-Hispanic Whites (1.0 percent) between 2000 and 2003. Nonmetro earnings also grew faster for women (1.4 percent) than for men (0.7 percent) during this period. Despite greater nonmetro earnings growth among women and Blacks, men and non-Hispanic Whites still earn far more than other demographic groups. Differences in educational attainment account for a large part of the earnings gap between Whites and other racial/ethnic groups, while differences in hours worked account for some of the gap between men and women. Still substantial gaps remain even after taking these characteristics into account.

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Low-Wage Earnings in Nonmetro Labor Markets

ERS defines a low-wage worker as one who earns less on a full-time, full-year basis than the weighted four-person poverty threshold ($18,810 in 2003). Nearly one in every four nonmetro wage and salary workers age 25 and older is a part of the low-wage workforce, compared with one in six metro workers. The metro-nonmetro gap in low-wage employment share has been a persistent feature of U.S. labor markets, reflecting the lower human capital levels and greater preponderance of less-skilled jobs in rural America.

The share of nonmetro workers earning low wages increased steadily during the 1980s. In the late 1990s, brisk growth in the U.S. economy buoyed real wages and improved living standards for most workers, driving down the low-wage employment share. Despite the 2001 recession, the low-wage employment share continued to fall until 2003.

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Low-Wage Employment Shares by Industry and Occupation

Low-wage employment shares vary widely by industry. Differences in the occupational composition of jobs in a given industry, which in turn affect job skill requirements, account for a large portion of the variation. Other factors accounting for variances in industry wage schedules include industry concentration, labor productivity not captured by occupation type, and regional effects.

Low-wage workers are most likely to be found in agriculture, trade, leisure and hospitality, and other services. Some industries exhibit sharp differences between nonmetro and metro low-wage employment shares. The nonmetro shares in information, financial, and public administration industries are at least twice those in metro areas. Among occupations, farming, service, and sales jobs have the highest shares of low-wage employment. Managerial and professional occupations—which require more education on average—have lower shares of low-wage employment. Yet so do many construction and blue-collar occupations, such as those related to installation, maintenance, and repair, that require specialized skills and are in industries with moderate wage scales.

Low-Wage Employment Share by Sex, Race, Hispanic Origin, and Education

Among groups categorized by race or sex in 2003, nonmetro White men who are not Hispanic are least likely to be low-wage workers (14.1 percent), while half of nonmetro Hispanic and Black women earn low wages. Women generally are twice as likely to be low-wage workers as men, and Blacks and Hispanics are nearly twice as likely as Whites. Several factors account for these differences. Women, for instance, tend to work in jobs requiring similar levels of formal education and training as jobs held by men, but are concentrated in occupations where the monetary returns to education and training are lower. Blacks and Hispanics tend to work in jobs requiring less education and training, as well as receiving lower returns.

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