Is There a Link between the Changing Skills of Labor Used in U.S. Processed Food Trade and Rural Employment?
Schluter, Gerald, Lee, Chinkook, Journal of Agricultural and Applied Economics
Between the 1970s and the 1990s, processed food exports switched from using more skilled labor per unit of output than imports to the opposite. Processed food trade also expanded during this period. More meat and poultry products in processed food trade could explain this switch in skill intensity. Growing meat trade paralleled an urban-to-rural shift in meat processing. Although this could have been a win-win situation for rural areas, many of the jobs related to expanded meat trade benefited commuter and migrant workers because late-1990s jobs slaughtering livestock and processing meat did not appeal to domestic rural workers.
Key Words: consolidation in the meat industry, factor content of trade, input-output analysis, international meat trade, processed food trade, rural development, rural labor demand, skill intensity
JEL Classifications: C67, D24, F14, F16, J61, L66, O18, Q17, R15
Every major farm bill since the 1985 Farm Bill has included policies to emphasize increasing value-added American agricultural exports.1 In addition, the 1995 and 2002 Farm Bills provided funding for value-added agriculture enterprises to support more processing of farm products in rural areas. At the same time, rural area planners have looked to international markets for new destinations for their resource-based products. The 1990s saw a gain in processed agricultural products trade and a gain in rural manufacturing employment. The gain in rural manufacturing employment was led by food processing (Drabenstott, Henry, and Mitchell; Ghelfi), and in the Great Plains the gain in food processing employment was led by meat processing (McGranahan), raising the possibility that the trade policy had borne fruit and the hopes of the rural planners may be realized.
Is this a realistic possibility? Can a higher demand for low-skilled workers in rural areas be linked to a changing international trade environment? For the recent expansion of meat trade, it can. But are the linkages strong enough and policy sensitive enough to support a rural development policy? Rural development is complex and complicated. An analysis like that in this paper, which attempts to identify the effects of one economic force on rural development, has a difficult task. Nonetheless, this paper faces this difficulty by presenting evidence that expanded trade in processed food products and expanded employment opportunities in some rural areas have occurred at the same time and that there is a demonstrative economic linkage between the two events. Expanded processed food trade, however, was but one of a number of economic forces favorable to expanded employment opportunities in some rural areas. The paper concludes with a discussion of the economic environment that allowed such a strong economic linkage to be expressed.
The discussion explores the changes in the economic environment leading to the late 20th century status of rural processed food employment. Our assessment of the skill intensity of U.S. processed food trade led to finding a switch in skill intensity toward low-skilled labor. This switch could be traced to the expanded meat trade. Finally, we explore if the circumstances surrounding expanded meat trade and a shift of meat processing to rural areas are likely to fulfill the dreams of those rural area planners who have looked to international markets for new destinations for their resource-based products.
A central objective of international economic research has been to account for the factor content of trade. . . . [Economists want to trace the effects of international influences on relative and absolute factor prices within a country. The Heckscher-Ohlin model and its variants, with their emphasis on trade arising from differences in the availability of productive factors, provide a natural setting for such investigations. (Davis and Weinstein, p. 1423)
The Heckscher-Ohlin-Vanek (HOV) theorem states that each country will export the commodity that uses its relatively abundant factor the most intensely. …