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Speaking of the Economy
Immigration in rural communities
Speaking of the Economy

June 15, 2022

Immigration in Rural Communities

Topic: Rural Communities
Audiences: Business Leaders, Economists, General Public, Policymakers

Nicolas Morales reviews his research on the economic role of non-native workers in rural areas. Morales is an economist at the Richmond Fed.

Speaker


Transcript


Tim Sablik: Hello, and welcome to Speaking of the Economy. I'm your host, Tim Sablik, a senior economics writer at the Richmond Fed. My guest today is Nicolas Morales. Nicolas is an economist in the Research Department here at the Richmond Fed. His research focuses on immigration, which will be the topic of our conversation today.

Nicolas, thanks for joining me.

Nicolas Morales: Thanks for having me. I'm happy to be here.

Sablik: You came on the show about a year ago to talk about some of your research on the interaction between domestic and immigrant workers. We'll put a link up to that episode for anyone who's interested. One of the key points you made in that episode is that while many people voiced concerns that immigrant workers take jobs away from natives, you and other researchers have found that that's typically not the case, right?

Morales: Yeah, that's true. There's been a lot of research on this topic by labor economists. Kind of surprisingly, most studies tend to find small and positive effects of immigration on the employment outcome of U.S. workers.

Part of the reason for this is that immigrants generally tend to specialize in different occupations than natives. This facilitation is actually good for productivity. For example, if immigrants bring skills that are not widely available in the local labor markets or if they do jobs that maybe U.S. workers don't want to do, then this opens up job opportunities in other related occupations which U.S. workers do have the skills for or might want to do. This also pushes up the employment and wages for natives as well. In addition to this, there's surely been lots of studies that find that immigrants have a positive impact on productivity through multiple channels like, for example, innovation, entrepreneurship, international trade connections, and many other paths through which actually impact positively the labor market opportunities of natives.

Sablik: Yeah, and I would definitely recommend our listeners to go check that episode out. A lot of great interesting information there.

You have a new Economic Brief on this topic that looks specifically at immigration in rural economies. I'm curious, first, what led you to focus on this question.

Morales: I think there's an increasing interest on understanding which policies might help reactivate rural areas and small towns in the United States. Immigration, I think, could be a really useful policy tool that actually has been quite underexplored in the setting of rural areas.

For example, one limitation of rural areas is that there are fewer people living there. It might be hard to find some specific skills in the local labor markets. Immigration can be a solution for that since we can hire workers from abroad to work, for example, as doctors, as nurses or other occupations where native workers could be rare to find in rural areas.

Another feature is that many jobs are not yearlong. Instead of yearlong there are what we call seasonal [jobs], so they take place in a very specific time of the year. We see a lot, for example, in agriculture where workers are needed at very specific times of harvest, or in tourism industries where workers are just needed, for example, during the summer if we're talking about a beach town. So, these jobs might be quite hard to fill with native workers as they don't get employment for the full year. They're not very appealing if native workers have to be moving back and forth within the country to work for these jobs. Immigrants, on the other hand, they live abroad but [with] the high wages in the US they might still be willing to come and work in large numbers for the seasonal jobs. It might help meet this excess labor demand.

Finally, an additional contribution of immigration is that just by increasing the number of people that live in a community, you're increasing the number of people that pay taxes and that consume local services. If more people are around, they will spend money in local businesses, which could also help to reactivate the economy.

However, a critique of increasing immigration, particularly in rural areas, could be that if jobs are really limited and we increase the number of people, we might just be increasing competition for a very limited number of spots. So, it's important to really understand the pros and cons and the specific context to really think about what's the optimal policy and how to use immigration to reactivate rural communities.

Sablik: That's a good point. There have definitely been no shortage of stories over the past year about how employers are having a hard time finding workers. Historically, I believe, rural communities have struggled even more than cities with labor force participation. Does comparing the immigrant workforce in rural settings versus cities help answer any of those questions?

Morales: Yes, definitely.

Immigrants tend to disproportionately concentrate in cities. Part of the reason for this is that job growth is just larger in cities, so immigrants tend to go where new jobs are showing up the most, but also because immigrants tend to go to places where they might assimilate easier. Urban areas have historically received more immigrants, so it's more likely that there will be people speaking different languages and there's going to be higher diversity in terms of cultures.

In 2019, immigrants in cities accounted for about 15 percent of the workforce. If we look at rural areas, they only account for about 3.5 percent of their workforce. This is true in the U.S. as a whole, but also for our own Fifth District — which, for the listeners, it comprises Virginia, North Carolina, South Carolina, Maryland, D.C. and most of West Virginia. In our own District, our urban areas are actually less immigrant intensive than the country as a whole because we don't have big, immigrant powerhouse cities like, for example, New York or L.A. or Miami. But the rural areas actually follow closely the national average of 3.5 percent of the workers being immigrants.

Even within the rural areas of the Fifth District, there [are] large differences in how much immigrants are employed. For example, North Carolina accounts for less than 40 percent of the Fifth District's rural population, but it employs over 50 percent of the Fifth District's rural immigrants. On the other hand, West Virginia accounts for 15 percent of the rural workforce in the Fifth District, but it employs only 5 percent of the Fifth District's rural workforce. So, there's a lot of differences within the District as well.

If we look at immigrants [in rural areas and] what are they doing, generally they tend to focus on different industries and occupations than those in urban areas. First, they're more likely to not have college degrees. Second, they focus more on industries like agriculture or meat, poultry and fish processing, which are industries that are predominantly represented in rural areas. Then there are some other jobs that immigrants take both in rural and urban areas, such as construction, personnel services and cleaning services.

As I said, in rural areas, immigrants mostly do not have a college degree. But there are also some high skilled occupations where immigrants work at. For example, 14 percent of the physicians and surgeons in rural areas are immigrants, which is way higher than the average share of immigrants in rural areas that is just 3.5 percent. Similarly, for our skilled occupations as physical scientists or computer engineers, immigrants are also highly represented within that occupation, mostly in rural areas but also in urban areas.

Sablik: Yeah, thanks for that overview.

It seems like if you wanted to get a sense of what the impact of immigrants are on rural workforces, it makes sense to focus on agriculture since you said that's where a lot of them end up working in. What are the sort of agricultural jobs typically done by immigrants?

Morales: In agriculture, it's mostly work handling crops. There might be other jobs, too, within the industry — for example, handling farm animals, driving tractors, handling agricultural equipment, working plant nurseries and greenhouses. But it's mostly handling crops.

A key feature of these jobs, as I said before, is that they are highly seasonal. Many workers are needed but just during short periods of time, particularly during harvest periods. If we zoom into the specific job of handling crops, some estimates indicate that only 25 percent of the workers are U.S.-born, the remaining 75 percent are immigrants.

Sablik: Wow, so definitely immigrants are very important to that workforce and those jobs.

From the employer side, what's the process like for hiring immigrants for those types of seasonal jobs? What role do undocumented immigrants play in that field?

Morales: That's a great question. The role of undocumented immigrants is pretty big specifically for crop handling. Some estimates indicate that almost 50 percent of their workforce comes from undocumented immigrants. Part of the reason is that since the U.S immigration system is pretty biased towards high-skilled workers, there are very limited options for businesses if they want to hire immigrants that do not have college degrees.

So, for non-college graduates, if they want to come and work [in] the U.S., they can do it through two main paths. Basically, the first one is family reunification. If you have a family member or a spouse that can sponsor you for a green card, you can come and work legally in the U.S. through that family-sponsored green card. A second way is coming to the U.S. with an undocumented status, and that's either crossing the border illegally or overstaying a legal visa even after it expires.

Thinking specifically of agriculture, there's an additional program that the government has. There is a smaller visa program called the H-2A visa that is particularly aimed at agricultural workers who come work at jobs that take less than one year. They come and work for seasonal jobs. Workers on these visas account for about 10 percent of total agricultural jobs, so it's like not a majority but it's also not a negligible amount.

In general, the way it works is an employer sponsors you for this visa. You need to work for less than one year and then you get to move across employers with your same visa for up to three years. Once you meet three years, then you have to go back to your home country for a period of time before being able to return to the U.S. It helps satisfy temporary demand for workers who are really committing to permanent immigration that is sometimes politically complicate.

The issue is that the process is not very easy to apply for. Basically, you need to start the application process about five months before you have the need for the workers to start. Then, you need to … pay some fees and deal with multiple government agencies in order to recruit for these visas. At the same time, there are multiple rules that are in place to prevent the H-2A immigrant workers [from] unfairly competing through wages. The way it works is employers who intend to hire immigrants under this visa need to prioritize native workers in the recruitment process. Then they need to pay both immigrants and natives the same wage and a competitive wage in the markets.

Sablik: That gets back to the question that we talked about at the beginning, which is this debate about whether hiring immigrants takes away jobs from native workers. Is there any sort of evidence in the agricultural field specifically about whether that's the case or whether immigrants are mostly hired to fill vacancies that would otherwise go unfilled?

Morales: Yeah, that's one of the great questions on immigration. Particularly for agricultural jobs, I think there's pretty convincing evidence that if immigrants are not available, the vacancies would go unfilled.

There's this interesting case study done by Michael Clements, who looks at how North Carolina firms applied for H-2A visas during the Great Recession in 2009. This is an interesting time to study this question because the H-2A, as I said before, makes employers actively recruit and hire American workers at competitive wages for the jobs that they want to hire immigrants for.

During the Great Recession, North Carolina had unemployment rates over 10 percent. One would expect that there will be available U.S. workers that would be able to take those jobs. However, the findings are really surprising. The North Carolina firms had about 6,500 vacancies to fill back in 2009. But only 268 natives applied for these jobs and only 163 showed up the first day. Even more surprisingly, only seven workers completed the harvest season that year. This suggests that American workers do not seem to want to take some of these jobs, even if they are paid recently competitive wages at times where many Americans were unemployed and available.

Sablik: That definitely fits with what you were saying before and also with the idea that these are seasonal jobs and it can be difficult to find native workers willing to take that on.

I know that, as with many types of data, these data are probably released on a lag. But do you and your fellow researchers have any sense yet of how the COVID-19 pandemic has affected the availability of immigrant workers, particularly in rural settings?

Morales: There definitely was a large decrease in the employment of immigrants during the first months of the pandemic. Part of the reason for this is that in the early months of 2020, many embassies and consulates around the world were closed until much later in the year and that definitely slowed down the entry of new immigrants into the country. I think some estimates indicate that the U.S. as a whole has about 2.4 million fewer immigrants than if the trends in immigration had continued at the pre-2017 rates.

However, if we look at particularly agriculture and rural areas, it's not so clear. While temporary visas declined across the board during 2020, the number of admissions of H-2As … actually increased during that period. This is, in part, because the government wanted to make sure that food supply chains would run as smooth as possible during the time. So, they made it easier for H-2A workers to extend their visas and cross the border given all of the disruptions that were going on with the embassies and other institutions.

The number of H-2A visas has been steadily increasing since 2015. It went from 150,000 in 2015 to almost 350,000 annual visas in 2021. I think it was also increasing in 2020.

Sablik: That's interesting, and something that you wouldn't expect given those other disruptions that you mentioned. It holds out some promise for rural areas that are looking to grow their workforce through immigration.

Are there specific policies that those towns can take that might help? Or is this an issue that's mostly driven by policy at the national level?

Morales: I think there's some room for policies at the local levels.

When I think of "What are the main barriers for immigrants in rural areas?" I would say the main thing is the lack of information. On the immigrant side, many immigrants just consider options to move to places where they know something about, either from family members that are already live there or acquaintances that might help them search for jobs there. On the employer side, many employers in rural areas find it hard to know where to start recruiting immigrants and navigate the visa process.

There are policies that could aim to reduce these information frictions and could be useful to rural locations that want to increase their immigrant population. For instance, one could think the local governments would hire bilingual speakers to help employers and immigrants find each other in the labor markets. They also have to navigate the visa application process together. Once the immigrants come into a community, it's also important to make sure they can assimilate locally so employers and immigrants can build a relationship and create an ongoing employment dynamic that can be preserved throughout the years.

Sablik: Right. Well, thanks very much, Nicholas, for coming on to talk about your research. I'm curious what you're planning to work on next.

Morales: Right now, my main line of research is related to the impact of immigration of college graduates in the U.S. and its impact on U.S. businesses. We're trying to understand how firms change their hiring practices when they're unable to hire immigrants. So, stay tuned on that front because there's a paper coming soon.

The second thing [is] we are organizing a mini-conference on immigration that will take place at the Richmond Fed on June 24. We will receive some of the top scholars, some of the ones I cited and used their studies here. They're going to be talking about the impact of immigration on productivity on firms and human capital and discuss their research. I'm also very excited about that.

Sablik: Great. To all our listeners who are interested in following up on that, I would encourage you to head over to our website at Richmondfed.org. Also, if you enjoyed today's conversation, please consider rating us and leaving a review on your favorite podcast app as well.

Nicolas, thanks very much for being here to talk to me today.

Morales: All right. Thanks for having me.

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