View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Home / Publications / Research / Economic Brief / 2022

Economic Brief
May 2022, No. 22-18

Can Immigration Help Boost Rural Economies in the Fifth
District and Beyond?
By Nicolas Morales

We examine the role of immigration in rural areas. While immigrants tend to
concentrate in urban areas, rural areas also significantly benefit from
immigration. Agricultural firms, for example, need to hire many immigrants to
help with harvesting crops. Past restrictions to immigration in rural areas haven't
proven to be very effective in boosting native worker employment in these areas.
First, firms respond to such restrictions by investing in new technologies at the
expense of labor. Also, native workers seem unwilling to take many jobs in rural
areas, which makes immigrants particularly valuable to meet labor demand.
Immigration has been a central topic in academic and policy debates for decades. However,
most of the discourse on immigration policy has been focused on understanding the labor
market impact of immigration in urban areas, as most immigrants settle in cities.
Rural areas, however, can also benefit significantly from immigration:
Immigrants can bring skills not available in the local labor market.
They can help fulfill seasonal labor shortages in industries like agriculture and tourism.
They spend money and pay taxes in their local communities, which can help develop
other businesses.
Conversely, one argument against immigration into rural areas might be that immigrants
compete with U.S. workers for an already scarce number of jobs.
In this article, we'll examine the benefits and risks of immigration in rural economies, with a
special focus on the Fifth Federal Reserve District.1

Immigrant Shares of Total Workforce

We start by looking at the differences between urban and rural areas when it comes to the
shares of their workforces that are immigrants.2 The share is smaller in rural areas, as
shown in Figure 1.

Enlarge
While 14.9 percent of workers in urban areas in 2019 were immigrants, only 3.5 percent of
workers in rural areas were born abroad. Urban areas in the Fifth District have smaller
shares of immigrants than the U.S. average, with 12.1 percent of workers being immigrants
in 2019. Rural areas in the Fifth District, however, closely follow the national average. Over
time, the share of total workers who are immigrants has remained fairly constant, with
urban areas showing a slight increase.
If we zoom into the distribution of rural immigrants across the Fifth District, we can see
significant differences across states, as shown in Figure 2.

Enlarge
North Carolina accounts for 39 percent of the rural workers of the Fifth District but employs
51 percent of rural immigrants. On the other extreme is West Virginia, which accounts for
15 percent of the share of rural workers, but only 5 percent of rural immigrants.
When it comes to educational qualifications, rural areas attract more immigrants without
college degrees. Only 4.1 percent of new immigrants with college degrees located in rural
areas in 2019, compared with 6.8 percent of new immigrants without college degrees.
However, immigrants can provide useful skills that are not easily available in rural areas.
For example, 14 percent of physicians and surgeons in rural areas were immigrants in 2019,
a significant fraction considering only 3.5 percent of the rural workforce are immigrants.

The Role of Immigrants in Agriculture
Despite rural areas being less intensive on immigrants, foreign workers do represent a
significant share of the workforce in specific industries and occupations. Immigrants are
commonly employed in construction and repair, or services such as personal appearance
workers and cleaning staff, and they comprise especially large shares in the Food
Manufacturing, Animal Production and Crop Production sectors, where they make up at

least 12 percent of the workforces. Within Food Manufacturing, immigrants concentrate in
firms that specialize in meat, poultry and fish processing such as beef packing firms. Within
Animal Production and Crop Production, immigrants tend to concentrate in crop handling.
Regarding crop handling specifically, the 2020 report "H-2A Visas for Agriculture: The
Complex Process for Farmers to Hire Agricultural Guest Workers" notes that almost 80
percent of crop handlers in the U.S. in 2016 were born outside of the country, and almost
50 percent did not have legal permission to work in the U.S. Immigrants are particularly
valuable in agriculture due to the seasonal nature of the business, where harvest happens
only a few times a year and high numbers of workers are required during very specific
times.

H-2A Visas for Immigrants in Agriculture
While undocumented immigrants fill a large portion of such seasonal vacancies, there are
legal pathways to hire temporary agricultural labor. More specifically, the H-2A visa is a
temporary visa for agricultural workers to come to the U.S. and work for a specific employer
for less than one year. These workers can then move to other employers in need of
seasonal labor until they reach a cap of three years, at which point they need to exit the
U.S. for a period.
To hire an H-2A worker, employers first need to advertise the job to native workers at
competitive market wages. If native workers apply, they should be given preference until
reaching at least 50 percent of the vacancies.
As pointed out by the aforementioned 2020 report, evidence suggests that when border
enforcement is higher, applications for H-2A visas go up, meaning it could be a policy tool to
reduce illegal immigration. However, applying for such visas is administratively complicated,
and the restriction to seasonal work prevents dairy farms or other year-round agricultural
jobs from benefitting.
H-2A visas account for almost 10 percent of agricultural employment in the U.S. As shown
in Table 1, Arizona is where most of these workers are located, accounting for 40 percent of
the visas in 2019. When looking at the Fifth District, North Carolina accounts for almost 4
percent of the nation's H-2A visas, while the rest of the Fifth District combined accounts for
only 2 percent.

Enlarge
What Can We Learn From Past Episodes on Immigration
and Workforces?
While most economics literature has focused on the impact of immigration in urban areas,
a few papers have studied the impact on employment, wages and technology adoption
from restricting immigration into rural areas.
A forthcoming paper, "The Effect of Immigration Restrictions on Local Labor Markets:
Lessons From the 1920s Border Closure," examined the period after 1920, in which the U.S.
established country quotas limiting the number of European immigrants in cities. Mexican
immigrants moved to big cities from rural areas, decreasing the labor availability for
agriculture.
As a response, farmers did not seem to increase the employment of natives, instead
investing more in capital-intensive technologies such as the gasoline-powered tractor.
Production shifted toward wheat, which could be harvested with these new technological
innovations.
A similar result occurred in the 1960s, according to the 2018 paper "Immigration
Restrictions as Active Labor Market Policy: Evidence From the Mexican Bracero Exclusion,"
which studied the ending of the "Bracero" program in 1964. The Bracero program was the
predecessor of the H-2A program, through which U.S. farmers could hire Mexican workers
for seasonal jobs in agriculture. Once the program was terminated in 1964, areas in the U.S.

that used to hire lots of these workers experienced a negative shock to their employment
availability relative to areas that were not intensive in this particular program (and were,
thus, unaffected by the termination of the program).
While there were notably fewer immigrant workers, the employment and wages of native
workers did not increase. Farmers also did not replace the legal immigrant workers with
illegal immigrant workers. They instead responded by changing the crops being produced.
Affected areas experienced a shift toward crops for which higher mechanization was
available, such as tomatoes, cotton and sugar beets.
All in all, decreases in immigrant labor for agriculture did not seem to boost labor market
outcomes for natives. Instead, these decreases pushed farmers away from labor and
toward more capital-intensive technologies.
Employment and wages for natives might have remained unchanged because natives did
not want to engage in crop harvesting. The 2013 case study "International Harvest: A Case
Study of How Foreign Workers Help American Farms Grow Crops — and the Economy"
gives support to this argument. It focuses on the demand for H-2A visas of the North
Carolina Growers Association (NCGA) during the Great Recession. North Carolina is one of
the main states that employs H-2A workers (as noted in Table 1), and the NCGA is among
the largest such employers, as North Carolina farms apply for visas as a group.
During the Great Recession, unemployment in the U.S. was very high, and North Carolina
experienced a peak unemployment rate of 11.4 percent in 2009. Given that companies
must first recruit U.S. workers for positions before going the H-2A route — and that the jobs
must pay competitive wages — one would have expected U.S. workers to be available to
take seasonal jobs in agriculture.
However, few U.S. workers applied for such positions. With 6,500 job openings, only 268
natives applied for the jobs, 163 showed up the first day of work, and only seven workers
completed the harvest season. While this is one specific case study, it gives support to the
idea that, without immigrants, some of these jobs would go unfilled. This case study
estimates that 7,000 H-2A workers created between $218 million and $371 million for the
North Carolina economy in 2012.
To sum up, despite being a small share of the workforce, immigrants play an important role
in rural areas, particularly in the agricultural sector. Restrictions to immigration would likely
have a small impact on the job opportunities for U.S. natives and would push farmers to
either reduce production or switch to production technologies that require fewer workers.
Simplifying and expanding the H-2A program could be a useful policy tool to expand
agricultural production and help boost economic activity in rural areas.
Nicolas Morales is an economist in the Research Department at the Federal Reserve Bank
of Richmond.

1 The Fifth District is comprised of Maryland, North Carolina, South Carolina, most of West

Virginia, and Washington, D.C.

2 We define an urban area as a mass of one or more counties that contains at least one

urbanized area of more than 50,000 people and highly integrated neighboring counties, as
defined by the Office of Management and Budget. Rural areas are all non-urban areas, and
they account for 20 percent of U.S. population. Immigrants are defined as individuals born
outside the U.S. who migrated after the age of 18.
To cite this Economic Brief, please use the following format: Morales, Nicolas. (May 2022) "Can
Immigration Help Boost Rural Economies in the Fifth District and Beyond?" Federal Reserve
Bank of Richmond Economic Brief, No. 22-18.

This article may be photocopied or reprinted in its entirety. Please credit the author, source,
and the Federal Reserve Bank of Richmond and include the italicized statement below.
Views expressed in this article are those of the author and not necessarily those of the Federal
Reserve Bank of Richmond or the Federal Reserve System.

Subscribe to Economic Brief
Receive an email notification when Economic Brief is posted online:
Email address

Subscribe

Contact Us
RC Balaban
(804) 697-8144

© 1997-2022 Federal Reserve Bank of Richmond