by Terry L. Besser
Assistant professor and extension sociologist
Iowa State University Extension to Communities
Actually, there is no contest to see which locations can attract the most low wage jobs. No one sets out to lure low paying jobs, or at least few will admit it. Some community leaders, however, have the philosophy that any job is better than no job, and that low wage employment is "good enough" for first time job holders or the second family wage earner.
Also, the incentives, zoning laws and other strategies that are set in place to create a "friendly business climate" may not distinguish between high and low wage employers. No matter what local nonmetro officials do, manufacturers often decide to settle or expand in rural areas due to the low prevailing wage scale. Whatever the cause, the net effect is that non-metro areas are capturing an increasing share of manufacturing jobs - at the same time that manufacturing is offering fewer good paying jobs. (A metro area is defined as an incorporated place with 50,000 or more in population. Non-metro is everywhere else. Iowa has eight metro areas.)
G. Andrew Bernat Jr., in a February 1995 article in Rural Development Perspectives (a publication of the U.S. Department of Agriculture), draws our attention to the changing nature of manufacturing employment in the U.S. As background information, in the mix of all jobs in the U.S. economy, the percentage of jobs in manufacturing continues to decline. Bernat points out that within that smaller manufacturing part of the jobs pie, rural areas are capturing a greater share.
Today, about one out of every five manufacturing jobs is located in a non-metro area. The increasing rural proportion of manufacturing activity implies that rural areas have a competitive advantage over urban areas. Part of the explanation, as implied above, is that rural labor costs are lower. A manufacturing worker in a non-metro area makes 75 cents for every dollar paid to an urban manufacturing worker.
Also, manufacturers in rural locations bring with them a lower percentage of the higher paying non-production jobs that constitute a significant proportion of urban manufacturing employment. Examples of non-production manufacturing jobs are managers, computer specialists purchasing agents, accountants, engineers, health and safety specialists, human resource personnel and research staff. Both of these factors, lower wages for production work and fewer non-production jobs, combine to make rural manufacturers less enticing employers than their urban counterparts.
At the same time, that companies have been increasing the proportion of manufacturing jobs available in rural areas, they have decreased their capital expenditures per employee in non-metro Facilities. In 1989, the amount employers invested in their rural plants for machinery, new facilities, and other technological improvements was about the same as the investment per worker that they made in their metro operations. By 1992, companies were investing only 86 percent as much in rural plants as they were in metro facilities.
As a result employees in rural locations are not as productive as their metro counterparts. On the average, output per worker in nonmetro areas is 77 percent as much as the output of metro workers. With such low relative productivity in rural locations, wages have to be kept low to maintain a competitive advantage. However, when a company's competitive advantage is based primarily on low labor costs rather than higher productivity or higher quality products, the benefits are likely to be fleeting. In a global marketplace locations with low wage scales abound. Employers relying on low wage strategies frequently are not able to provide a secure future for employees, nor are they able to raise wages without first investing to increase the productivity of their employees.
Beating out metro areas in any competition brings pride to the heart of rural citizens. Nevertheless, this is one area where winning may be self-destructive and where the loser might actually turn out to be the winner.
Contacts:
Terry L. Besser, ISU
Extension Sociology, (515) 294-6508
Del Marks, ISU Extension
Communication Systems, (515) 294-9807
