A signature feature of the 20th-century U.S. economy
was the rise in skills required by employers. Jobs involving physical,
routine tasks consequently declined as a share of national employment,
and their historical predominance in rural areas is waning. In the
1990s, the rural economy slightly outpaced the national decline
in low-skill job share, reflecting rural America’s participation
in an increasingly skill-intensive national economy. The trend toward
a high-skill economy, along with higher wages and less job volatility,
is considered a fundamental indicator of economic development.
The long-term decline in rural low-skill jobs stemmed
first from a steep decline in farm employment and more recently
from declines in rural manufacturing. Today, most low-skill jobs
in rural areas are in the service sector—government, trade,
and consumer and business services—rather than in the goods
production sector represented by agriculture, mining, construction,
and manufacturing. Yet the transition to a service economy has been
accompanied by rising skill and earnings levels in rural areas,
in part because the typical service job is less likely to be low-skill
than the typical goods production job. More importantly, shifts
to more skilled occupations within industries—not industrial
change—drove the drop in the low-skill share of jobs in the
1990s, with distinct implications for rural economic development.
Rural areas with limited resources may thus do better to pursue
development strategies incorporating skill upgrades within the current
mix of industries rather than attempting a significant shift in
local industries.
For individual rural workers, jobs requiring higher
skills pay substantially more and have better benefits, on average,
reducing employees’ need for Federal and State support services.
For rural communities, a high-skill job mix indicates an upward
development track, making such places less vulnerable to international
competition and more attractive to long-term, high-wage employers.
Although low-skill jobs (see “Measuring
Job Skills”) were still more prevalent in rural areas
in 2000 (42 percent) than in the Nation as a whole (35.5 percent),
the rate of decline in low-skill share of employment was faster
for rural than urban areas in the 1990s. The total number of low-skill
jobs in rural areas increased slightly during the 1990s, however,
because of robust rural employment growth.
Measuring
Job Skills
This
article uses occupation as the basic measure of job skill.
Occupations differ according to the knowledge and abilities
necessary to perform the tasks that define them. We draw upon
a set of seven skill dimensions from the Dictionary of Occupational
Titles (DOT), produced by the U.S. Department of Labor, each
measuring a different aspect of the intellectual or physical
complexity of the occupation, or the level of formal knowledge
required. Included are three “general educational development”
levels of the job with respect to math, language skills, and
general reasoning; three “functional level” variables
that characterize occupations by the sophistication of interactions
with people, data, and things; and the extent of “specific
vocational preparation” required for the job.
These seven measurements are then added to produce
a single number, or skill index. Low-skill occupations are
those that fall below the median index value for the slightly
more than 500 occupations considered. However, 22 of the 218
occupations below the median are not classified as “low
skill” because of the high average educational attainment
of workers in those occupations, leaving 196 low-skill occupations.
Occupational data are drawn from the 1990 and
2000 Current Population Survey microdata earnings files (CPS)
produced by the U.S. Census Bureau. Data were adjusted using
labor force estimates from the 1990 Census to correct for
differences between the 1990 and 2000 CPS in the definition
of nonmetro areas.
Has the Shift to a Service-Based Economy Slowed the Decline
in Low-Skill Jobs?
According to some observers, the shift from a goods-based
to a service-based economy has inhibited rural America’s movement
along a high-skill economic path. Rural areas are sometimes hard-pressed
to compete for the high-skill service sector jobs (for example,
financial service jobs) that require high population density, high
disposable income, and sophisticated communications and transportation
infrastructures. And because average pay is generally lower for
jobs in services than in traditional goods, service workers often
end up worse off economically than before, widening the gap between
top earners and bottom earners.
A more favorable view holds that the goods-to-services
shift indicates convergence with higher skilled urban economies.
As educational levels and capital investments grow in some rural
labor markets, so too does the ability to attract and retain a vibrant
high-skill service sector. Furthermore, increasing skill requirements
appear to reflect broad changes across the rural economy, not the
transition to services per se.
To address this debate, it is helpful to think of the
decline in low-skill employment share as an outcome of two types
of change: (1) in the kinds of goods and services produced, reflected
in industry composition change; and (2) in the way that goods and
services are produced, reflected in occupational changes within
industries. As an example of the first kind of change, the growth
in physicians’ offices and clinics in rural areas in recent
decades has helped raise overall rural skill levels because physicians
and nurses typically have high-level skills. As an example of the
second type of change, the textile industry too has recently helped
raise overall rural skill levels as it shifts away from (low-skill)
production workers toward (higher skill) managers and other white-collar
occupations (although total employment has declined as well). Technological
changes may also affect the skill content of particular occupations,
by requiring greater computer literacy of clerical workers or fewer
computational skills of sales people.
ERS researchers found that, independent of other effects,
the goods-to-services transition led to a slight decrease in the
low-skill share of rural employment between 1990 and 2000. Employment
in the goods-producing sector (relatively low-skill jobs) fell relative
to employment in the service sector, resulting in a reduction in
the low-skill share. The effect was more pronounced in rural areas
because the relative size of the goods-producing sector is larger
than in urban areas, and because the low-skill share of rural, goods-producing
employment is much higher.
What
Is Rural?
Statistics reported
here are based on the metropolitan (metro) and nonmetropolitan
(nonmetro) definitions announced by the Office of Management
and Budget in 1993. Metro areas contain (1) core counties
with one or more central cities of at least 50,000 residents
or with a Census-defined urbanized area (and a total
metro area population of 100,000 or more), and (2) fringe
counties that are economically tied to the core counties.
Nonmetro counties are outside the boundaries of metro
areas and have no cities with as many as 50,000 residents.
The data reported are for nonmetro and metro areas,
but here we use the terms “rural” and “urban”
for ease of exposition.
However, the industry mix was also changing within the
goods and service sectors themselves during the 1990s. Declines
in rural low-skill industries within the goods-producing sector—as
in the apparel industry and the yarn, thread, and fabric mill industry—reduced
the low-skill employment share. Leading the list of relatively high-skill
and rapidly growing goods-producing industries in rural areas were
construction and livestock agriculture.
Conversely, shifts between industries in the larger
service sector tended to increase the low-skill employment share.
Major low-skill service industries with rapid employment growth
in rural areas during the 1990s included trucking, department stores,
and hotels and motels. High-skill service industries with slow or
negative job growth included elementary and secondary schools, colleges
and universities, banking, and insurance. Ultimately, the impact
of inter-industry shifts within the service sector was smaller than
the combined impact of shifts within goods and from goods to services.
Hence, the overall impact of industrial change was to reduce the
low-skill share of employment in rural areas.
Growth in the rural service sector appears to have contributed
to increases in the number of rural high-skill jobs, but were rural
workers better off? Service jobs are typically perceived as paying
less than jobs in the goods sector, but evidence suggests that the
reality is more complicated. Earnings for rural full-time service-sector
workers were indeed 17 percent lower than for goods-sector workers
in 2000. Among workers in low-skill jobs, wages were 15 percent
lower in services than in goods. But many of the low-skill goods
jobs that disappeared in rural areas were replaced by higher skill
service jobs that paid more. Even among workers with at most a high
school diploma, these higher skill service jobs typically paid 11
percent more than low-skill goods jobs.
Total
and low-skill employment in rural areas, 1990-2000
1990
2000
Thousands
All
industries:
- Total employment
21,453
24,399
- Low-skill employment
9,536
10,298
- Percent low-skill
44.5
42.2
Goods-producing
sector: 1
-
Total employment
7,759
8,240
- Low-skill employment
4,330
4,202
-
Percent low-skill
55.8
51.0
Service-provision
sector: 2
-
Total employment
13,694
16,160
-
Low-skill employment
5,206
6,095
-
Percent low-skill
38.0
37.7
1
Includes agriculture, mining, construction, and manufacturing. 2 Includes transportation, communications,
and utilities; finance, insurance, and real estate;
government; and other services.
Source: Calculated by ERS using data from the U.S. Census
Bureau.
This finding helps to explain why earnings rose in the
1990s for less educated rural workers as the rural economy shifted
toward service provision. So the net effect of employment shifts
from goods to services was both to lower the share of rural jobs
in low-skill occupations and to raise rural earnings.
Occupational Change—How Much of an Impact?
While industry changes are partly behind the declining
low-skill share of employment, a shift in employment toward high-
and medium-skill occupations within industries accounted for a larger
portion of the decline. Advances in production technology that complement
skilled labor or substitute for less skilled labor (such as computer-assisted
technology) appear to be the driving force behind the overall drop.
The shift from lower to higher skill occupations within
industries was most pronounced in the goods-producing sector. The
share of low-skill jobs fell for manufacturing, construction, and
agriculture, and the declines were especially large in crop agriculture,
lumber mills, and apparel. These industries face intense competition
from imports that often vie with low-skill production work.
In services, low-skill job shares fell in professional/business
services; communications and utilities; and finance, insurance,
and real estate. Hospitals and grocery stores showed especially
large shifts toward higher skill occupations in the 1990s. Many
of these industries have little or no exposure to import competition,
but face significant pressure to reduce costs due to industry restructuring.
In many cases, employers in these industries have reconfigured the
way that services are provided, often with computer-assisted technologies.
Still, many industries—such as wholesale trade,
mining, retail trade, and health services—saw the share of
low-skill jobs grow during the 1990s. In rural areas, the low-skill
share grew in about a third of all industries (accounting for 32
percent of rural employment). These industries saw substantial increases
in their low-skill employment share. Nonetheless, these increases
were dwarfed by the increase in occupational skills in the rest
of the rural economy, leading to an overall decline in rural low-skill
employment share.
Who Was Most Affected by Low-Skill Shifts?
The decline in the low-skill share of jobs from 1990
to 2000 was largest among rural women (-4.3 percentage points) and
rural Blacks (-5.2 percentage points). When race and sex are considered
simultaneously, the largest declines occurred among Black women
(-7.3 percentage points) and White women (-4.9 percentage points).
Declines for most other groups were near the rural average of 2.3
percentage points. Hispanics, however, increased their low-skill
job share, with an increase of 3.3 percentage points for Hispanic
men.
A few key employment shifts accounted for much of the
change among groups of workers. First, the share of rural women
in managerial and professional occupations grew by nearly half during
the 1990s, from 21 to 30 percent of all women employed. And this
share grew for women of all racial/ethnic groups. On the other hand,
occupations where the share of employment fell differed by race.
For White and Hispanic women, the shift was most noticeable out
of the sales, clerical, and administrative support group. Blue-collar
jobs, nearly all low-skill, led the decline among rural Black women,
falling from 30 to 18 percent of Black women’s employment,
but held steady among Hispanic women at 17 percent of their overall
employment. These jobs tend to be primarily in manufacturing. Black
women alone saw large gains in the service occupations. Because
the service jobs held by rural Black women are less likely to be
low-skill than blue-collar jobs, their movement from blue-collar
to service jobs reduced their low-skill employment share.
The increase in low-skill employment among rural Hispanic
men results largely from a shift between two occupational groups
with high shares of low-skill employment. During the 1990s, low-skill
workers became less likely to be employed in farming jobs and more
likely to be found in blue-collar manufacturing jobs.
Earnings rose in rural areas for all demographic groups
in the 1990s, but the greatest increases occurred among those groups
with the largest declines in low-skill share. The association between
earnings and higher skills cannot be attributed solely to rising
educational levels. For example, even among workers who did not
attend college, a lower share employed in low-skill jobs translated
into higher earnings overall.
Why Has the Decline Slowed in the Low-Skill Share of Jobs?
Nonmetro
low-skill employment shares by selected characteristics,
1990-2000
2000
low-skill
share
1990-2000
change
Percent
White
39.0
3.0
- Male
41.2
1.4
- Female
36.4
4.9
Black
64.0
5.2
-
Male
69.3
2.3
- Female
59.2
7.3
Hispanic
67.1
2.5
-
Male
70.8
3.3
-
Female
61.6
2.1
All
Male
44.6
-0.8
All
Female
39.4
-4.3
Total
42.2
-2.3
Source: Calculated by ERS
using data from the U.S. Census Bureau.
What happened to the widely touted rise in job skills
of the 1990s? After all, the low-skill share of employment declined
by over five percentage points in rural areas, and nearly six points
nationally, during the 1980s. Why was the decline in the 1990s so
much smaller than in the previous decade? One possibility is that
increased immigration may have made less skilled labor cheaper,
thereby delaying the shift to higher skill production methods. Where
immigration was higher, as in many large metro areas, the decline
in low-skill share was generally smaller.
In some cases, technological change may actually have
dampened employers’ replacement of less-skilled labor. The
mix of technology changes may have shifted from more skill-intensive
in the 1980s—such as the introduction of spreadsheet programs
for personal computers—to less skill-intensive in the 1990s—such
as cash register icons for frequently ordered items in foodservice
outlets. This possibility coincides with the wage gap between the
most and least educated workers growing more slowly in the 1990s,
despite continuing advances in computer technology.
A final possibility is that changing skill requirements
within occupations accelerated during the 1990s, which would not
have been fully captured by occupation and industry mix changes.
A growing body of evidence suggests that the widespread diffusion
of computer-related production technologies has changed the content
of occupations, from the field to the factory floor to the office
cubicle. Further research may allow better explanations for the
apparent slowdown in raising skill levels during the 1990s.
Transition to Service Jobs Elevated Rural Job Skills and
Earnings
Economic forces have changed the nature of work in rural
America, affecting the well-being of workers, their families, and
their communities. In the 1990s, these forces led to a gradual upgrading
of rural skills, as more and more jobs required higher levels of
education and training. Technological change, global shifts in the
geography of production, and large investments in human capital
prompted rapid growth in jobs requiring high levels of formal education
and technical knowledge. Census data confirm that the average educational
attainment of rural adults rose along with job skill requirements.
Thus, rural areas appear to be participating in the movement toward
a high-skill national economy.
These findings should allay some concerns about losing
jobs in the goods- producing sector to low-paying, low-skill service
sector jobs. On balance, the transition to a service economy has
helped to raise the skill and earnings levels of jobs in rural areas.
More importantly, the goods-versus-services debate misses the point
that shifts to more skilled occupations within industries—not
industrial change—drove the drop in the low-skill share of
jobs in the 1990s, with distinct implications for rural economic
development.
Rural areas with limited resources would do better
to pursue development strategies incorporating skill upgrades within
the current mix of industries rather than attempting a significant
shift in local industries. Two critical rural strategies are: (1)
to invest in education and training, and (2) to encourage new technology
adoption by local industry that creates higher skill work.
However, educational and technological strategies will
not be viable in all rural places. Where jobs lost in farming, mining,
or manufacturing have not been replaced, the remaining service-dominated
jobs often indicate an economy with few prospects for growth. Additionally,
not all workers are equally well positioned to participate in higher
skill labor markets. Women and Blacks generally benefited from the
decline in low-skill share, but Hispanics experienced a rising share
of low-skill work and lower earnings growth. Strategies tied to
place of residence will not always work. However, the most effective
Federal and State labor policies will be those that ensure that
labor market differences are transitory, and that in the long run,
better educational and career pros-pects are available regardless
of residence.
Educational opportunities and assurances of gainful
work are especially important for the least skilled, least educated
in the workforce. Some of these workers did not ride the upward
shift in occupational mix, and the goods-to-services transition
was less favorable for them. Low-skill earnings for noncollege-educated,
full-time service workers were $428 per week, on average, in 2000,
or 13 percent less than the $491 per week earned by comparable workers
in the goods sector. Given the sharp drop in manufacturing employment
since 2000, less educated workers may find themselves with few options
other than low-pay, low-skill service jobs. Others, however, will
undoubtedly acquire the additional training needed to move up the
occupational ladder. As they follow the rural economy’s path
from low-skill goods jobs to higher skill service jobs such as management,
their wage prospects will rise accordingly.