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This paper analyzes the factors associated with “earnings inadequacy” in the rural U.S. between 1979 and 1987. Earnings inadequacy is defined as annual earnings that cannot bring a family of four above the poverty level, even with a year-round, full-time job. Here are the key findings:
- Prevalence of Low Earners: The share of low earners in rural areas significantly increased from 31.9% in 1979 to 42.1% in 1987.
- Determinants of Earnings: The study uses multivariate regression analysis to identify factors influencing the earnings-to-poverty ratio. The model explained 12% of the variation in rural workers’ earnings-to-poverty ratios, but only 4% for urban workers.
- Significant Variables for Rural Workers:
- Sex: Being female had a negative impact on earnings in both 1979 and 1987, although the disadvantage decreased slightly by 1987.
- Race: Being Black was associated with significantly lower earnings compared to Whites, with no significant change in this gap between 1979 and 1987.
- Children Under Age Six: Surprisingly, having children under six years old was associated with a positive, not negative, earnings-to-poverty ratio. The authors suggest this might be due to rural women with young children leaving the labor force, thus biasing the sample.
- Education and Work Experience: Both were highly significant and positive factors, with education having a much greater impact on earnings than work experience (an additional year of education was worth over eight times more than an additional year of work experience).
- Industry: Employment in agriculture, retail trade, and personal services was associated with “below average” earnings, while mining, construction, durable manufacturing, nondurable manufacturing, transportation/communication/utilities (TCU), finance/insurance/real estate (FIRE), and wholesale trade were associated with “above average” earnings (relative to health and education services, the benchmark industry). The advantage of construction as an industry significantly eroded by 1987.
- Region: Living in the Middle Atlantic, East North Central, Mountain, and Pacific regions showed a positive earnings advantage compared to the South Atlantic. However, the advantage in the Mountain region almost disappeared by 1987, possibly due to the decline of the mining industry there.
- Policy Implications: The authors suggest several policy interventions:
- Promote high-quality education and encourage higher education.
- Increase on-the-job training and apprenticeship programs for higher-paying jobs.
- Strengthen and enforce affirmative action laws, especially for women and minorities in better-paying growth industries like business and distribution services.
- Improve wages in expanding service industries (e.g., retail trade) through unionization, productivity improvements, and increasing the minimum wage.
- Assist displaced workers in finding and training for better-paying replacement jobs.
- Increase the Earned Income Tax Credit.
