Rural Human Capital

by John V. Winters

Economic prosperity in rural areas depends crucially on the knowledge, skills, and abilities of rural residents. Skilled workers earn higher incomes, create new firms, enhance the quality of life, and raise productivity for others around them (Winters 2011; Artz et al. 2021; Ahn and Winters 2023). Rural areas are often endowed with natural resources including fertile land, but human resources are required to utilize these resources effectively. Furthermore, rural residents are increasingly employed in the professional services sector instead of traditional rural sectors such as agriculture and mining. Knowledge, skills, and abilities are collectively referred to as human capital, and formal education plays an important role in developing human capital.

This short article presents selected data for non-metropolitan area residents to measure rural human capital. Consistent with previous research literature, I focus on the share of local residents with a bachelor’s degree or higher. I provide comparisons to metropolitan areas and explore human capital differences within non-metropolitan areas.

Figure 1 presents long-run trends in bachelor’s degree attainment for metropolitan statistical areas (MSAs) and non-MSAs in the United States for 1980, 1990, 2000, 2010, and 2020. Both MSAs and non-MSAs have increased college attainment over time, but there are vast differences in human capitals levels between MSAs and non-MSAs in each year. For 2020, 36.2% of MSA residents age 25+ have a bachelor’s degree or higher, but the rate is only 21.4% for non-MSA residents.

The continued growth of rural human capital is encouraging, but the large and widening gap in human capital relative to metro areas is more worrying. As the economy becomes more information intensive, human capital grows in importance and human capital deficits can translate into lagging economic success.

Figure 2 maps human capital levels across non-MSA counties for 2020. Metro counties are excluded and shaded in gray. For non-metro counties, a darker color indicates higher human capital levels. There is notable variation with much of the South and Southwest having low human capital levels, but low human capital levels also occur in parts of the Midwest.¹

Table 1 provides more quantitative precision by reporting non-metro human capital levels for the top- and bottom-10 states in the United States. The top of the list is dominated by three New England states: Massachusetts, Vermont, and New Hampshire. The bottom includes Louisiana, Arkansas, West Virginia, Tennessee, and Kentucky in reverse order, confirming that Southern and Appalachian states have especially low human capital levels.

Human capital levels in non-metropolitan areas also depend on county population and proximity to a metro area. Table 2 Panel A splits non-metro counties into three groups based on county population in 2020. The percentage of the populations with a bachelor’s degree or higher among non-metro counties is highest for those with population above 50,000 and lowest for those with population less than 20,000. Thus, human capital levels increase with county population even for non-metropolitan areas, suggesting that more populous non-metro areas have a combination of employment opportunities and education resources that facilitate residents with a college degree. Panel B, however, indicates that metro adjacency does not increase human capital levels—the rate is slightly higher for non-metro counties that are not adjacent to a metro area than for those that are adjacent to a metro area. This may suggest that metro adjacency draws college graduate residents away from non-metro areas.

Industrial structure could play some role in human capital differences across areas, so I next use individual-level data from the 2023 American Community Survey to compute the percentage of the workforce with a bachelor’s degree or higher by industry and metro status (see table 3 for results).² Workers in Agriculture, Forestry, and Fisheries actually have slightly higher bachelor’s degree attainment rates in non-MSAs (23.6%) than MSAs (22.6%). For all other industries, the human capital level is much higher in MSAs than non-MSAs. Notably, Agriculture, Forestry, and Fisheries is also well ahead of three other broad industries in non-metro human capital levels.

As a final data exploration, table 4 reports the distribution of college graduates by major field of study for non-metro and metro areas. For non-metro residents relative to metro residents, degrees are relatively more prevalent in agriculture, natural resources, education, health and medical, and applied technology fields. The greater non-metro concentration in agriculture and natural resources makes sense given the greater reliance of rural economies on agriculture and natural resources. The greater non-metro field concentration in education partially reflects the overall lower levels of human capital and somewhat uniform need for teachers everywhere.³ Conversely, non-metro college graduates are underrepresented in other fields including computer science, engineering, physical and biological sciences, math, and business. These fields that are underrepresented in non-metro areas are often particularly high-paying fields.

The data above indicates that non-metro areas have many unique patterns in their human capital relative to metropolitan areas. These differences reflect a combination of factors including educational access and take-up, skill utilization, and migration. Young people have to decide how much education to complete and where to live after finishing their education. Young people from rural areas may be less likely to pursue higher education if they live and attend high school in locations far from high-quality colleges and universities offering degree fields that interest them. Online education has some potential to fill this gap, but there are numerous reasons why this has not eliminated rural education gaps, including limited broadband access, limited program offerings, and lack of knowledge about and interest in online programs.

Additionally, non-metro areas often have more limited employment opportunities, especially for some highly educated and very specialized workers. This can lead to skill under-utilization, and concerns about future skill utilization can lead some young non-metro residents to forgo investments in specialized education that may not pay off if they plan to remain in their hometown. As illustrated in Winters (2020), the income premium for college graduates relative to high school graduates is positive in virtually all areas of the United States, but it is much greater in large and densely populated metropolitan areas than in low-density non-metropolitan areas. Furthermore, young people from non-metro areas who do invest in higher education may be able to utilize their human capital more effectively in larger labor markets and decide to live and work where their skills are most rewarded (Artz and Yu 2011). Thus, out-migration from non-metro areas is likely a major factor contributing to the lower human capital levels of adult residents. This “brain drain” from non-metro areas is both a consequence of economic challenges in those areas, and a causal factor that can hinder their future economic prosperity.

Importantly, some non-metro areas are able to encourage and retain high human capital workers. These areas often have some combination of attractive amenities, high-quality public services, a strong sense of community, and residents who strongly identify with the place they live. Better understanding and replicating these success stories can help other non-metro areas be more resilient and successful. Additionally, increased prevalence of remote work opportunities may play an especially important role in the future economic vitality of non-metro areas and allow them to attract and retain high human capital workers (Winters 2024).

Footnotes

1. Higher human capital levels are often more prevalent in high-amenity areas, some of which is attributed to retirees. Excluding retirees in high amenity areas would likely make the rural human capital deficit even more stark.

2. Data for tables 3 and 4 are obtained from IPUMS (Ruggles et al. 2023).

3. If every area needed the same amount of college-educated teachers per capita, teachers would be a higher share of college graduates in areas with low education levels in other sectors. As other sectors become more educated, the denominator increases causing the share of college graduates who are teachers to decrease.

References

Ahn, K., and J.V. Winters. 2023. "Does Education Enhance Entrepreneurship?" Small Business Economics 61(2):717-743. https://doi.org/10.1007/s11187-022-00701-x.
Artz, G., and L. Yu. 2011. "How ya Gonna Keep ’em Down on the Farm: Which Land Grant Graduates Live in Rural Areas?" Economic Development Quarterly 25(4):341-352. https://doi.org/10.1177/089124241140939.
Artz, G.M., Y. Kim, P.F. Orazem, and P.J. Han. 2021. "Which Small Towns Attract Start-ups and Why? Twenty Years of Evidence from Iowa." American Journal of Agricultural Economics 103(2):702-720. https://doi.org/10.1111/ajae.12144.
Austin, J.C., A. Weinstein, M. Hicks, and E. Wornell. 2022. "Improving Quality of Life—not Just Business—is the Best Path to Midwestern Rejuvenation." The Brookings Institution. https://www.brookings.edu/articles/improving-quality-of-life-not-just-business-is-the-best-path-to-midwestern-rejuvenation/.
Ruggles, S., S. Flood, M. Sobek, D. Backman, A. Chen, G. Cooper, S. Richards, R. Rogers, and M. Schouweiler. 2023. IPUMS USA: Version 14.0 [dataset]. Minneapolis, MN: IPUMS, 2023. https://www.ipums.org/projects/ipums-usa/d010.V14.0.
Winters, J.V. 2011. "Human Capital, Higher Education Institutions, and Quality of Life." Regional Science and Urban Economics 41(5):446-454. https://doi.org/10.1016/j.regsciurbeco.2011.03.001.
Winters, J.V. 2020. "What You Make Depends on Where You Live: College Earnings across States and Metropolitan Areas." Thomas B. Fordham Institute. https://fordhaminstitute.org/sites/default/files/publication/pdfs/20200519-what-you-make-depends-where-you-live-college-earnings-across-states-and-metropolitan-areas_0.pdf.
Winters, J.V. 2024. "Non-Metropolitan Areas Lag Behind in Work-from-Home Rates." Agricultural Policy Review, Spring 2024. https://agpolicyreview.card.iastate.edu/spring-2024/non-metropolitan-areas-lag-behind-work-home-rates.

Suggested citation

Winters, J.V. 2025. “Rural Human Capital.” Agricultural Policy Review, Spring 2025. https://agpolicyreview.card.iastate.edu/spring-2025/rural-human-capital.