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Low-Skill Employment and the Changing Economy of Rural America
Robert Gibbs, Lorin Kusmin, and John Cromartie
Economic Research Report No. (ERR-10), October 2005
Low-skill jobs have continuously been declining as a share
of U.S. jobs throughout the 20th century, and rural areas are
no exception. In 1900, two-thirds of all workers were employed
in agriculture and manufacturing, mostly holding manual or routine
jobs in the field or factory. By 2000, less than 40 percent
of the U.S. workforce was employed in low-skill occupations.
Today, most rural low-skill workers are employed in the growing
service sector, in which a typical job demands higher skills
than a typical job in goods-sector industries such as manufacturing,
mining, and agriculture. In addition, new production methods
in many industries are raising occupational skill demands and
contributing to the decline in the low-skill share of rural
employment.
The decline in the low-skill share of employment affects the
well-being of rural workers and the economic development of
small towns across America. Jobs requiring more skill tend to
pay more and offer better benefits, leaving rural workers and
their families better off and possibly reducing demand for Federal
and State support services. High-skill jobs also make rural
communities less vulnerable to international competition and
more attractive to high-wage employers. Understanding the factors
driving changes in job-skill levels could help rural areas choose
more effective development strategies and ensure that all groups
benefit from economic growth.
What Is the Issue?
The impact of the industrial shift from goods to services in
rural America has been subject to some debate. The ongoing industrial
shift may be inhibiting the growth of good jobs in rural America.
Although many service-sector jobs are high-skill and pay well,
some observers believe rural areas may lack the density of population
and infrastructure to attract those jobs. As a result, the rural
service sector would generate more low-skill jobs, and because
low-skill service jobs pay less on average than low-skill jobs
in the goods sector, workers would be worse off economically.
Others observe that, as capital investments have grown, many
rural labor markets have been able to attract and retain high-skill
service jobs. Further, these observers argue that occupational
shifts within industries, brought on by technology and productivity
change, have more impact on skill levels than does the transition
to services
ERS examined the relationship between employment trends and
industrial and occupational shifts by addressing the following
questions: 1) Did low-skill jobs continue to shrink as a proportion
of the rural economy as quickly in the 1990s as in the past?
2) Did large-scale shifts from goods production to service provision
play a decisive role in these changes, or did shifts to more
skilled occupations within these industries become the key factor?
3) Did skill trends benefit rural workers economically, particularly
those historically more prone to low-skill employment?
What Did the Project Find?
The nonmetro low-skill job share fell 2.2 percentage points
from 1990 to 2000—from 44.4 percent to 42.2 percent—
compared with a 5-percentage-point drop between 1980 and 1990.
The movement of jobs from the goods sector to the services sector
in the 1990s contributed to a decline in low-skill employment
shares, but the largest source of decline was the shift from
lower skill to higher skill occupations within both sectors.
As expected, low-skill employment rates are higher for workers
who are younger and have less education, for minorities, and
for men. Rural women and Blacks experienced the largest drop
in low-skill employment rate during the 1990s, while Hispanics
saw an increase.
Rural workers experienced real earnings growth on average during
the 1990s. Despite some concerns about the implications of a
shift from goods to service employment, this shift had almost
no impact on earnings change. In fact, most of the gain occurred
“across the board,” in numerous occupations in both
the goods and service sectors, rather than because of the employment
trends analyzed in this study.
The findings suggest that encouraging new technology that creates
high skill work opportunities, as well as investing in education
and training, may be effective in raising skill levels of jobs
in the rural economy.
How Was the Project Conducted?
Data used in this report come from the earnings files of the
1980, 1990, and 2000 Current Population Survey (CPS), a national
sample of 50,000-60,000 households. Information on hourly and
weekly earnings, age, sex, race/ethnicity, education, labor
force status, industry, and occupation is collected on every
adult member of the survey household.
We identify low-skill occupations using seven skill dimensions
from the Dictionary of Occupational Titles, produced by the
U.S. Department of Labor. Each dimension measures a different
aspect of the intellectual or physical complexity of an occupation.
These seven measurements are then added to produce a single
numerical index. Low-skill occupations are those that fall below
the median index value for the occupations considered. Unlike
commonly-used measures such as educational attainment, this
approach emphasizes the skills embodied in the jobs rather than
the workers, who may be in jobs below or above their potential.
Shift-share analysis is used to test whether changes in rural
industrial composition or occupation mix within industries explain
more of the decline in low-skill employment share in the 1980s
and 1990s. The relationships between demographic attributes
and the probability of low-skill employment were assessed using
a logistic regression analysis.
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