Rural incomes are lower because jobs in rural areas require fewer skills, researchers confirm

Rural residents have lower incomes than those employed in the cities. The Daily Yonder's Bill Bishop reports that three economists, working through the Federal Reserve Bank of New York, have figured out why, at least in part. As you might expect, they have concluded that the occupations found in rural areas require fewer skills than those found in the cities. (Detail of Diego Rivera mural, Detroit Institute of Art)

“We find that the occupation clusters most prevalent in urban areas — scientists, engineers, and executives — are characterized by high levels of social and resource-management skills, as well as the ability to generate ideas and solve complex problems,” write Jaison Abel, Todd Gabe and Kevin Stolarick. “By contrast, the occupation clusters that are most prevalent in rural areas — machinists, makers, and laborers — are among the lowest in terms of required skills. These differences in the skill content of work shed light on the pattern of earnings observed across the urban-rural hierarchy."

Their findings further explain why young people with college degrees are reluctant to move back to rural communities. Jobs in those communities simply do not pay what can be earned in central cities. Still, compensation favors these city occupations, the economists find. Executives earn the most in the cities, far more than engineers or scientists. Executives living in rural areas don't earn the same premium. In fact, notes Bruce Ross of The Record Searchlight after looking at the data, "for each high skill occupation, wages fell as the community became more rural. Every occupational group had lower wages in rural areas than in cities, but the rural penalty was higher among the most skilled jobs."

The economists finally add that there is something about urban areas that facilitate high-skilled employment and higher wages: “The dimensions of social and complex problem-solving skills are apt to benefit from the flows of ideas and knowledge that are facilitated by dense urban environments.” The economists' report is here.