Education's Role in the Metro-Nonmetro Earnings Divide

The pay gap between metro and nonmetro workers is one of the most persistent features of the nonmetro economy. Using data from Census Bureau's Current Population Survey, ERS researchers examined the first set of factors explaining the earnings gap -- differences in the characteristics of metro and nonmetro workers and the ways those characteristics are rewarded in the labor market. Nonmetro jobs tend to pay less than jobs in the same occupation in metro areas, especially in those occupations requiring high skill levels. Differences in worker characteristics such as educational attainment and race/ethnicity account for only about one-sixth of the nonmetro earnings disadvantage. The remainder of the gap occurs because the earnings of workers with similar characteristics also vary between metro and nonmetro areas. Education's dual role in explaining the earnings gap suggests that policies to narrow the gap might seek to raise educational attainment in nonmetro areas, to raise nonmetro returns to education, or both.