Education's effect on poverty: the role of migration and labor markets

Improving the quality of education and encouraging students to stay in school is one possible strategy for reducing poverty and raising local well-being in rural areas. A potential obstacle to this strategy, however, is outmigration to metro areas due to the lack of demand for this better-educated rural workforce, and secondarily, the necessity of leaving rural areas to attend college. Even where robust rural job growth exists, the lower wages offered by rural employers dampen the poverty reducing power of education.\ud In this paper, we test for both a "direct" effect of educational attainment on the poverty status of rural adults, which operates through access to higher-quality jobs; and an "indirect" effect, which operates through a higher likelihood of outmigration to urban areas and hence access to higher monetary returns to education. Drawing from a sample of 701 households in the Panel Study of Income Dynamics, we find that, in general, better-educated rural household heads are more likely to move to urban areas during the 1990s and that poverty status is affected by that move. As a first step in assessing the impact of labor market conditions, we examine the effect of the unemployment rate in the county of origin on the migration decision. \ud Education is a key determinant of economic well-being for both individuals and places. Despite overall improvements, however, rural residents still have significantly lower educational attainment than urban residents. Improving the quality of education and encouraging students to stay in school is one possible strategy for reducing poverty and raising local well-being. A better-educated workforce should have higher incomes. Partridge and Rickman showed that both education levels and increases in attainment explained spatial variation in poverty reduction.\ud Outmigration to metro areas is a potential obstacle to this strategy, however. Migration from rural areas occurs because of the lack of demand for a better-educated rural workforce and the necessity of leaving rural areas to attend college (Gibbs). Outmigration may prevent local human capital levels from reaching the threshold required to attract new industry or encourage expansion in the existing economic base. Even where robust rural job growth exists, the lower skill levels and wages offered by rural employers, on average, both dampen the poverty-reducing power of education and hinder long-term development prospects associated with an increasingly high-skill economy.\ud This study documents a direct and an indirect effect of education on household poverty status. Data from the Panel Study of Income Dynamics (PSID) is used to obtain a sample of 701 working-age (25-64 years of age) household heads that lived in a non-metro county in 1993. The metropolitan and poverty status of their households is observed in 1999. For adults who live in a rural area, greater educational attainment has a direct effect on eventual poverty status by increasing the likelihood of obtaining higher income (wherever they live) and an indirect effect on eventual poverty by increasing the likelihood of moving to an urban place with better income-earning opportunities. Controlling for the fact that better-educated rural adults are more likely to move to urban areas, the study finds that migration has an influence on the likelihood of being poor