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People living in big cities and surrounding areas have always had far more job opportunities than those living in rural America, but the divide between city and country has grown in the wake of the Great Recession.
City dwellers really do have it much better than rural inhabitants, at least when it comes to job opportunities in the 21st century.
After looking at who’s working in urban and rural areas, the Federal Reserve found that the labor market began to recover earlier and improve much faster in cities than in the countryside. While there’s always been a gap, it’s become more severe during the current expansion
The yawning gap between city and country is most glaring in what’s known as the labor force participation rate. That is, the percentage of the working-age population that either has a job or is looking for one.
Let’s start with urbanites. The percentage of prime-aged (25-54-year-old) residents who were working or looking for work climbed to 83% at the end of 2018 and finally topped the pre-recession average.
By contrast, the participation rate for prime-aged rural Americans has recovered more slowly and is still under 80%. The rate had fallen to as low as 78.5% in the wake of the recession.
Why such as divide?
The chief reason appears to be the long and ongoing shift in the economy from one based on manufacturing to one based on services, a process that began decades ago.
In modern times manufacturing has accounted for a bigger slice of rural jobs compared to service industries like finance, health care, technology and the like. Yet until 2017 the recovery in manufacturing employment was slow and halting.
“Despite the strength in the past two years, the share of total employment in manufacturing has remained near its post-recession low,” the Fed concluded.
Federal Reserve Chairman Jerome Powell discussed rural poverty in a recent speech.
“In Appalachia for instance, timber, coal mining, tobacco, and textiles have long been in decline,” he said. “Likewise, the number of jobs in agriculture and low-skilled manufacturing, mainstays of the Delta’s economy, is decreasing as a result of automation and outsourcing.”
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The same cannot be said for service-oriented jobs. They’ve been on a tear, especially in areas such as white-collar employment and health care that tend to require greater education. Education levels tend to be higher in large metros where most service companies concentrate.
It’s long been the case that lower levels of education in small-town America have contributed to the persistent urban-rural divide in the labor force. Yet education disparities do not explain why problem has become worse.
The Fed, for example said the percentage of well-educated people in the labor force used to be higher in rural areas than in urban ones, “but that is no longer so.” The central bank said the shift in fortunes offers more proof that broader trends in the economy are mainly responsible.
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In the past, Americans with declining job prospects in rural areas would usually migrate to the country’s population centers. Yet the Fed said the evidence suggests people have become far less willing to uproot in recent decades.
What has become of them?
The Fed said “many rural workers who’ve experienced a permanent job loss, perhaps due to a factory closing, decided to eventually exit the labor force rather than continue their job search.” That’s also exerted downward pressure on the size of the rural labor force
Others appear to have applied for disability benefits. The Fed said the a bigger share of rural residents sought and received disability payments over the past decade compared to urban inhabitants.
