Farm vs. factory, bucolic green fields vs. densely packed streets: from Green Acres to The Simple Life, America's urban-rural divide has been an enduring axis of the nation's culture. Today, with less than one percent of people employed on farms, what is the underlying source of that divide?
A new Federal Reserve Bank of New York Staff Report by my Martin Prosperity Institute colleague Kevin Stolarick, Fed economist Jaison Abel, and Todd Gabe of the University of Maine, sheds new light on the underlying economic differences between urban and rural areas. It provides a detailed examination of the geographic distribution of jobs, skills, and earnings across the United States, from densely populated city centers to isolated and sparsely populated rural areas. The study uses data from the U.S. Department of Labor’s Occupational Information Network (O*NET) to identify 11 key clusters of jobs based on their underlying skill-sets: Laborers, Technicians, Makers, Machinists, Assistants, Servers, Managers, Analysts, Engineers, Scientists, and Executives. O*NET covers a wide range of skills, from technical skills such as "equipment selection" to social skills such as "negotiation" and "service orientation."
Comparing urban and rural areas can be tricky. The definition of what constitutes an "urban" area and "rural" area is difficult to pinpoint exactly unless you're talking about New York City or Monowi, Nebraska (which had a population of one in the latest census). Urban and rural boundaries exist on much broader continuum. To get at this, the researchers measure this urban-rural hierarchy using Public Use Microdata Area (PUMAs) as the geographic unit of analysis, which are U.S. census boundaries with about 100,000 people. In urban boundaries, the PUMAs are small and in rural boundaries they are much larger. They ranked the PUMAs on a 1-10 urban-rural scale with 1 representing city centers, 6 representing suburbs, and 10 representing rural outposts.
Not surprisingly, the study found that the most high-skilled, high-paying occupations tend to cluster in urban areas. Urban centers tend to specialize in knowledge-based work, with high concentrations of scientists, technicians, engineers, and executives. When it comes to pay, the closer to the city center a job cluster is, the higher the pay.
(Click the graph for a larger image)
Rural areas have larger concentrations of Machinists and Makers, which generally require less skill and receive lower salaries. Jobs with the highest skill requirements -- engineers, executives, scientists, and analysts -- were noticeably underrepresented in rural areas and were far below national averages. As the study notes:
[T]he most rural areas—encompassing the Semi-Rural, Rural Fringe, Rural, and Rural Outpost categories—tend to specialize in the skills-based clusters of Machinists and Makers, which include “hands-on” occupations in the construction trades, production and assembly, and maintenance and repair, and to a lesser extent in the skills-10 based cluster of Laborers. These clusters are characterized by relatively low skills requirements (ranked seventh, ninth, and last, respectively, out of the 11 clusters), with particularly low index values in the dimensions of social and content skills. It is particularly interesting to note the absence of social skills—e.g., coordination, persuasion, and negotiation—in the most rural areas, which are places where extensive interaction and face-to-face contact are hindered by the obstacles of isolation and distance. Perhaps not surprisingly, we also see that rural areas tend to be underrepresented in the clusters with the highest skills requirements, such as Engineers, Executives, Scientists, and Analysts. This means that the percentages of the rural workforce in these clusters are well below the corresponding national averages and even further below their urban counterparts.