How Well Have Rural and Small Metropolitan Labor Markets
Absorbed Welfare Recipients?

Chapter 2:
Rural and Small Metropolitan Labor Markets

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Characteristics of Jobs
1. Lower Wages Across Industries
2. Industry and Occupation Mix
Characteristics of workforce
Barriers to employment

As discussed in Chapter 1, most studies that have measured the impact of welfare reform on labor markets have focused on urban areas, and little is known about the effect on rural areas. This is because data are more readily available for large urban areas and a larger share of welfare recipients live in metropolitan areas (81 percent in 1997).⁽²¹⁾ However, substantial differences exist between urban and rural labor markets in terms of the economic opportunities, the characteristics of the workforce, and the barriers to employment, suggesting that findings from urban studies might not readily apply to rural areas.

States’ emphasis on moving welfare recipients into jobs quickly might prove more difficult in rural settings for several reasons. First, there is some evidence that rural areas offer fewer economic opportunities. Second, individuals living in rural areas have lower education levels, on average, increasing the challenges for finding employment. Finally, job search, as well as educational, childcare, and transportation services, may be less available in rural areas to help welfare recipients find employment, obtain skills required for employment, and accept employment. This chapter discusses these obstacles in more detail.

I. Characteristics of Jobs

PRWORA stressed employment for all job-ready welfare recipients, which presumes that economic opportunities are available for those who seek them. Economic opportunities can mean the availability of jobs. Also important to consider are the types and quality (e.g., wages) of employment opportunities. If there are fewer opportunities available to rural welfare recipients, then PRWORA might have more negative consequences in these areas.

A. Lower Wages Across Industries

There is substantial evidence that metropolitan areas offer higher wages and salaries than nonmetropolitan areas.⁽²²⁾ The U.S. Department of Labor, Bureau of Labor Statistics (BLS) National Compensation Survey, collected wage and salary information from establishments with 50 or more workers in goods-producing and service industries, and state and local governments.⁽²³⁾ Analysis from this survey found that in 1997:

Metropolitan area workers overall earned an average of $15.73 per hour compared to $11.84 earned by workers in nonmetropolitan areas.
In private goods-producing industries, metropolitan area workers averaged $16.40 an hour, compared to $12.06 for similar workers in nonmetropolitan areas.
In the service industries, metropolitan workers averaged $14.44 an hour, compared to an hourly rate of $9.77 for workers in nonmetropolitan areas.
In each of the nine census regions, metropolitan areas paid higher wages.

In addition, the gap between metropolitan and nonmetropolitan wages may be growing. Between 1998 and 1999, real median income for households residing in metropolitan areas increased by 2.1 percent (for households in central cities, income rose by 5.0 percent). However, the median income of households outside metropolitan areas remained statistically unchanged.⁽²⁴⁾

B. Industry and Occupation Mix

In rural areas, manufacturing jobs have traditionally paid higher salaries than other industries. While manufacturing jobs are more prevalent in rural areas, jobs in manufacturing have been declining over time. One study reported that between 1969 and 1992, rural manufacturing employment fell from 20 percent to 17 percent of total employment.⁽²⁵⁾ This has been accompanied by an increase in employment in the service industry, which traditionally pays lower wages, especially in nonmetropolitan areas (as discussed above).

One study examined the occupations in metropolitan and nonmetropolitan areas and found that about 54 percent of the nonmetropolitan labor force was employed in: service; agricultural, precision production, craft, and repair; or operators, fabricator, and laborer occupations. These are occupations where employees are likely to be paid hourly wages rather than salaries, and employees typically incur reductions in hours or layoffs when demand is slack. Consequently, nonmetropolitan labor forces tend to respond more quickly to business cycle movements than the metropolitan ones.⁽²⁶⁾

II. Characteristics of workforce

On average, adult residents in rural areas have lower levels of educational attainment than more urban residents. According to the Census Bureau’s Current Population Survey (CPS), 20 percent of rural residents 18 years and older did not have a high school diploma compared with 17 percent in metropolitan counties (see Exhibit 2.1). A significantly smaller percentage of rural residents had higher levels of education. Interestingly, this was not true when we limited the sample to welfare recipients in nonmetropolitan and metropolitan areas. Welfare recipients living in rural areas were slightly more likely to have obtained a high school diploma than welfare recipients living in large metropolitan areas. Thus, there is a smaller gap in education levels between welfare recipients and non-welfare recipients in rural areas than in urban areas, implying there might be more competition for low-skill jobs.

Exhibit 2.1
Education Level of Adults and Adult Welfare Recipients by Size of Geographic Area
Education Level	Nonmetropolitan/ Not Identified (%)	MSA: 100,000 – 250,000 (%)	MSA: 250,000+ (%)
Total Population
No high school degree diploma	20.4	16.7	16.6
High school degree	38.9	32.7	31.3
Above high school	40.6	50.6	52.2
Total	100.0	100.0	100.0
Welfare Recipients
No high school degree diploma	33.9	32.6	40.0
High school degree	41.9	44.3	38.0
Above high school	24.3	23.1	22.0
Total	100.0	100.0	100.0
Source: Lewin calculations using the 1999 CPS March Supplement.

In addition, a research synthesis on the rural welfare population found the following:⁽²⁷⁾

Rural welfare recipients were slightly more likely to be married and more likely to work than central city counterparts.
Spells on public assistance were shorter in rural areas than in urban areas.
In rural areas, the dollar amount of grants received by welfare families was significantly less than the dollar amount received by urban families. States with large rural populations tended to offer lower benefit grants.

III. Barriers to employment

Rural workers may face greater barriers to employment than urban workers. These include the following:

Child Care. Rural areas have fewer child care slots than urban areas and workers must travel greater distances from home to obtain child care. As a result, rural families depend more on child care by relatives and friends.⁽²⁸⁾
Transportation. Public transportation is less available in rural areas and distances traveled between home and work are also longer in rural areas. Nationally, 40 percent of all rural residents live in areas with no form of public transportation.⁽²⁹⁾ Thus, access to personal transportation is critical.
Education and Training Services. To achieve self-sufficiency, welfare recipients may need access to additional education and training services that are more readily available in urban areas. In addition, they may not have the same level of access to job training centers.

Endnotes

(21)Current Population Survey 1998, US Census Bureau. These estimates are calculated from the number of respondents age 15 to 65 who indicated they received welfare in 1997. [Back To Text]

(22)Unless otherwise noted, we used the term rural to mean nonmetropolitan, for simplicity, although these are not synonymous. The Office of Management and Budget defines nonmetropolitan counties as being outside the boundaries of metro areas and having no cities with as many as 50,000 residents. Metropolitan areas contain (1) core counties with one or more central cities of at least 50,000 residents or with a Census Bureau-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. According to official federal definitions, rural areas comprise places (incorporated or unincorporated) with fewer than 2,500 residents and open territory. Urban areas comprise larger places and densely settled areas around them. [Back To Text]

(23) This survey integrated the Occupational Compensation Survey Program (OCSP) with the Employment Cost Index and the Employee Benefit Survey. Results are reported in: U.S. Department of Labor (1999a). When it Comes to Pay, Does Location Matter?, Compensation and Working Conditions Online. Summer 2000, Vol 5, No. 2. [Back To Text]

(24) U.S. Department of Commerce (2000). Money Income in the United States: 1999. Bureau of the Census, Current Population Reports, September. [Back To Text]

(25) Parker, Timothy (1995). Understanding Rural America. Agriculture Information BulletinNo. 710. Washington, DC: USDA. [Back To Text]

(26) Hamrick, Karen S. (1997). Rural Labor Markets Often Lead Urban Markets in Recessions and Expansions. Rural Development Perspectives, vol. 12, no. 3. Washington, DC: USDA. [Back To Text]

(27) Marks, E., S. Dewees, T. Ouellette, R. Koralek (1999). Rural Welfare to Work Strategies: Research Synthesis. Macro International, Inc. Washington, DC. [Back To Text]

(28) Rural Policy Research Institute (1999). Rural America and Welfare Reform: An Overview Assessment. University of Missouri, Columbia, MO. [Back To Text]

(29) Dewees, S. (1998). The Drive to Work: Transportation Issues and Welfare Reform in Rural Areas. Southern Rural Development Center. Mississippi State, MS. [Back To Text]

How Well Have Rural and Small Metropolitan Labor Markets Absorbed Welfare Recipients?

Chapter 2: Rural and Small Metropolitan Labor Markets