Originally published Vol. 3,
Issue 2 (April 2005)—updated May 2007
Policy Options for a Changing Rural America
No longer
tied closely to farm policies, rural economies in
the 21st century will be shaped by demographic change,
industrial restructuring, and national economic
trends.
Leslie A. Whitener and Tim
Parker
In 1950, 4 out of every 10 rural
people lived on a farm, and almost a third of the
Nation’s rural workforce was engaged directly
in production agriculture. Because agriculture dominated
the social and economic well-being of most of the
rural population, public policy related to agriculture
was a dominant force shaping rural life both on
the farm and in rural
communities. But today, rural America is vastly
different from the 1950’s, and current commodity-based
farm policies do not fully address the complexities
of rural economies and populations. Farms are larger
and more efficient, farm households depend more
on off-farm income, and rural communities look for
nonfarm sources of economic growth. Today, less
than 10 percent of rural people live on a farm,
and only 14 percent of the rural workforce is employed
in farming.
In addition, some rural communities
have changed dramatically since 1990 due to increased
population from urban areas, shifts in age and ethnic
composition, and economic and industrial restructuring.
Population changes are creating new needs as new
migrants from urban areas and abroad revitalize
some nonmetropolitan (nonmetro) or rural areas,
while long-term population and employment losses
have the opposite effect on other rural communities.
Increasing competition from abroad and sectoral
shifts in employment present new challenges and
opportunities in the worldwide economy and raise
the question—how can rural communities successfully
build on their economic base and other assets to
retain and attract population and employment? And,
when, where, and under what circumstances will rural
development strategies be most successful? The diversity
within rural America dictates that strategies tailored
to particular types of rural economies may be more
effective than a broader “one size fits all”
rural policy. Demographic change, the health of
the Nation’s economy, and industrial restructuring
will be major factors affecting rural policy in
the 21st century.
Changing Demographics Suggest
Different Policy Needs
Overall rural population growth
rebounded in the 1990s, increasing by over 10 percent,
up from 3-percent growth in the previous decade.
Migration continued to fuel rapid population growth
in some nonmetro counties, especially in scenic
areas and along the metro periphery. However, population
growth began to slow at mid-decade, and the number
of nonmetro counties that have lost population has
climbed from around 600 counties during the 1990s
to well over 1,000 since 2000. While population
loss affects all regions, it is particularly widespread
in the Great Plains, a region that depends heavily
on farming (see box, “The
2004 ERS County Typology”). Many of these
counties also lost population in the 1980s. Maintaining
the population base, improving off-farm job opportunities,
and providing public services continue to be long-term
challenges for many traditionally farming areas.
Growing numbers of Hispanics are
settling in rural America, accounting for over 46
percent of nonmetro population growth between 2000
and 2005. With a younger population and higher fertility,
Hispanics are now the fastest growing racial/ethnic
group in rural America. And, almost half of all
rural Hispanics live outside of the traditional
settlement States in the Southwest. In many places,
new Hispanic settlement patterns are contributing
to the revitalization of small towns; in others,
the influx of residents is straining housing supplies
and other community resources. In addition, the
younger age, lower education, and large family size
of Hispanic households suggest increased demands
for social services, including prenatal care, child
care, and education programs.
The older population grew rapidly
in many rural places in the 1990s, due largely to
retirement and recreation opportunities. Nonmetro
retirement-destination counties, where the number
of residents age 60 and older grew by 15 percent
or more between 1990 and 2000 due to inmigration,
were located predominantly in the West and in major
retirement centers throughout the South, including
Texas and Florida. In the rural agricultural areas
of the Great Plains and Corn Belt, as well as in
rural parts of the lower Mississippi Delta, the
growth of the older population slowed and in many
places stopped altogether. This pattern reflects
the small size of the cohort now reaching age 65,
a group that was depleted in many rural areas by
low birth rates in the 1930s, an exodus to cities
in the 1940s, and an exit from farming in the 1950s.
These dual patterns of growth and decline suggest
the need for different strategies. Areas with rapidly
increasing older populations must be prepared to
provide essential services, resources, and programs
for the elderly. Areas with declining elderly populations
must consider economies of scale when ensuring that
necessary services are available and accessible.
The educational attainment of
rural Americans is higher than ever before, continuing
a long upward trend. In 2005, nearly one in six
rural adults had a 4-year college degree, about
twice the share of a generation ago. But the substantial
growth in the college-educated population was not
evenly distributed across rural areas, and low education
levels still challenge much of rural America. Low-education
counties, with 25 percent or more of residents age
25 to 64 who had not completed high school, are
concentrated in the South and Southwest. Low-wage
resource-based and manufacturing economies in many
of these counties limit the kind of high-skill job
growth that attracts a higher educated labor force.
Strategies for raising educational levels and the
quality of that education are essential to improving
the economies of many rural communities.
The Rural and National
Economies Are Linked
Rural areas as a whole shared
in the Nation’s economic prosperity during
the 1990s. The nonmetro unemployment rate fell to
its lowest level (4.9 percent in 2006) since the
2001 recession, and rural poverty rates reached
an all-time low (13.4 percent in 2000). But in late
summer 2000, the manufacturing industry went into
a downturn, and by March 2001, the longest U.S.
economic expansion on record had ended. Unemployment
and poverty rates subsequently rose in both rural
and urban areas, while employment and earnings grew
sluggishly.
The U.S. economic recovery began
in November 2001, and by the beginning of 2004 had
become broad-based, with most domestic sectors exhibiting
moderate to strong growth. Metro employment grew
by 3.3 percent from 2002 to 2005, while nonmetro
employment grew by 2.7 percent. But economic recovery
has been uneven across rural America, with most
gains concentrated in the high population growth
areas of the South and the West. Areas of the Northwest
continue to wrestle with declining employment in
timber and other natural resource industries. The
employment picture for the Great Plains and Midwest
was mixed, with some rural areas buoyed by employment
gains of at least 2 percent and others mired in
long-term declines in population and employment.
Industrial Restructuring
Creates New Opportunities and Challenges
The rural economy has shifted
from a dependence on farm-based jobs to a dependence
on nonfarm-based jobs. Today, four out of five rural
counties are dominated by nonfarm activities, including
manufacturing, services, mining, and government
operations. In many areas, however, agriculture
is still a major source of income. For farming-dependent
counties—located primarily in the Great Plains
and accounting for 10.8 percent of farm operators
and 22.9 percent of total farm cash receipts in
2004—the challenge is not a weak agricultural
economy. Rather, these counties have not been equally
prosperous as others because nonfarm sector development
is limited by remoteness from major urban markets
and low population densities.
Other nonmetro economies depend
more on industries, such as manufacturing, for their
economic base. Almost 30 percent of all nonmetro
counties were dependent on manufacturing, having
derived 25 percent or more of average earnings from
manufacturing during 1998-2000. Manufacturing has
traditionally located in rural areas to take advantage
of lower labor and land costs. Since the late 1980s,
some manufacturers, competing on the basis of low-cost
production, shifted their production overseas. Other
manufacturers took advantage of new technologies
and management practices and began to compete on
the basis of product quality. This shift resulted
in a need for more highly skilled labor, and manufacturing
moved to rural areas with better schools and fewer
high school dropouts. Areas with low high school
completion rates, located predominantly in the South,
now face greater difficulties in attracting and
retaining manufacturing employers. The manufacturing
counties of the rural Great Plains offer a more
educated labor force, and these areas have been
most attractive to employers. But, the loss of 3.2
million manufacturing jobs nationwide since 2000
suggests that manufacturing counties as a whole
may be especially hard pressed to find alternative
sources of economic growth.
Rural Policy Options for
the Future
The goals of economic/community
development programs and policies in rural areas
vary widely, as do the resources and the opportunities
and challenges communities face. Some areas will
focus on strategies to stimulate economic and community
growth to help address problems associated with
population and employment decline. Other areas will
seek to improve wages and living standards by changing
the nature of employment, or by enhancing infrastructure
and public services. Low-density settlement patterns
often make it more costly for communities and businesses
to provide critical public services. In contrast,
other rural areas, particularly those rich in natural
amenities, face growing pains borne out of economic
transformation and rapid population increases. Community
leaders in these areas are struggling to provide
new roads, schools, and other community services
and may actually want to stem growth in order to
limit rural sprawl.
One point is clear—commodity-based
farm policies as currently structured do not fully
address the complexity of issues facing rural economies
and populations. For example, the high level of
farm payments in the late 1990s did little to eliminate
the long-term outmigration from farming areas. ERS
research shows that counties highly dependent on
farm payments had some of the highest rates of population
loss, even during periods when most other rural
areas were gaining population.
Rural policy for the future will
need to encompass a broader array of issues, and
these different rural issues will require different
mixes of solutions. Strategies to generate new employment
and income opportunities, develop local human resources,
and build and expand critical infrastructure hold
the most promise for enhancing the economic opportunities
and well-being of rural America.
New Economic Engines:
Prosperity for many rural communities will depend
on innovative income-generating strategies that
attract people and jobs. Faced with continuing loss
of farm jobs, some rural communities have sought
to offset shrinking employment by adding value to
farm products. Focusing on the role of farms as
a source of raw materials for food and fiber products,
these communities seek to add value to agricultural
commodities by luring food processing plants to
rural areas, developing new consumer or industrial
uses for agricultural products, or bypassing conventional
wholesale-retail systems to sell food products directly
to consumers. These strategies may prove successful
for some communities, but ERS research finds that
value-added strategies in general are not particularly
promising as engines for rural job growth. Food
retail and marketing are the largest and fastest
growing value-added sectors, but these businesses
usually choose to locate in urban areas for more
efficient access to consumers, nonagricultural suppliers,
and distribution networks. Food manufacturing and
other value-added activities account for a relatively
small share of rural employment, and the amount
of job growth from these value-added strategies
has had little impact on the general rural labor
market.
Many rural communities are looking
at other innovative ways of attracting and retaining
high-paying industries and employment to rural areas.
The traditional way of attracting firms to a region
by offering tax reductions may no longer be sufficient.
New approaches, such as providing training and technical
assistance by local educational institutions to
clusters of similar firms, may be more successful
than tax-based incentives because they help firms
to adapt innovative production techniques. Training
and business assistance programs can help new entrepreneurs
in some rural areas enhance their business acumen
and improve business communication skills. Networks
of small businesses can help build a more effective
business infrastructure by coordinating marketing
services, warehousing, business resources, and computer
technology.
Capitalizing on new uses of the
Nation’s natural resource base may be essential
to ensuring the economic well-being of rural America.
This resource base can provide such uses as water
filtration, carbon sequestration, and nontraditional
energy sources, including methane utilization. Some
rural areas may be well suited for the development
of renewable energy as well as the production of
more traditional fossil-fuel energy. Natural amenities,
though, will be the trump card for some rural areas.
Rural counties with varied topography, relatively
large lakes or coastal areas, warm and sunny winters,
and temperate summers have tended to reap huge benefits
from tourism and recreation, one of the fastest
growing rural industries. Recent ERS research finds
that tourism and recreational development in rural
areas leads to increases in local employment, income,
and wage levels, and improvements in social conditions,
such as poverty, education, and health. These strategies
have drawbacks, however, particularly in the form
of higher housing costs in nonmetro recreation counties.
Human Resource Development:
The wage gap between urban and rural workers reflects
a rural workforce with less education and training
than urban workers. In 2006, median weekly earnings
for nonmetro workers ($509) were about 84 percent
of the metro average ($607). In 2005, only 16.9
percent of rural adults age 25 and older had completed
college, half the percentage of urban adults. Moreover,
the rural-urban gap in college completion has widened
since 1990. Today, employers are increasingly attracted
to rural areas offering concentrations of well-educated
and skilled workers. A labor force with low educational
levels poses challenges for many rural counties
seeking economic development. Rural areas with poorly
funded public schools, few good universities and
community colleges, very low educational attainment,
and high levels of economic distress may find it
hard to compete in the new economy. Recent ERS-sponsored
research documents the direct link between improved
labor force quality and economic development outcomes,
finding that increases in the number of adults with
some college education resulted in higher per capita
income and employment growth rates, although less
so in nonmetro than metro counties. Efforts to reduce
high school dropout rates, increase high school
graduation rates, enhance student preparation for
college, and increase college attendance are all
critical to improving local labor quality.
Rural human capital can also be
improved by strengthening the quality of classroom
instruction. Technical assistance could ensure that
best-practice models of distance learning are available
to remote schools, where the benefits from such
technologies are greatest. Instructional quality
could be improved by promoting teacher recruitment
and retention efforts in remote and poor rural areas.
Efforts to facilitate school-to-work transitions
of youth are particularly important in isolated
and distressed rural communities. The benefits of
these strategies will be greatest in rural communities,
where existing workforce development programs (especially
the Workforce Investment Act) face special challenges
due to high rates of high school dropouts or limited
demand for youth labor.
Infrastructure and Public
Services: Telecommunications, electricity,
water and waste disposal systems, and transportation
infrastructures (such as highways and airports)
are essential for community well-being and economic
development. But many rural communities are financially
restrained because of a limited tax base, high costs
associated with “dis-economies” of size,
and difficulties adjusting to population growth
or decline. Investments in needed infrastructure
have increased in recent years, but high costs and
deregulation pose challenges.
Investment in rural infrastructure
not only enhances the well-being of community residents,
but also facilitates the expansion of existing businesses
and the development of new ones. Recent ERS research
assessed the economic impacts of 87 water and sewer
projects funded by the Economic Development Administration
and found that these projects in general created
or saved jobs, spurred private-sector investment,
attracted government funds, and enlarged the property
tax base. But the average urban water/sewer facility,
which costs only about one-third more than the average
rural facility, generated two to three times the
economic impacts of rural facilities. The rural-urban
difference in economic benefits likely stems from
the generally more abundant infrastructure of urban
areas—easy access to highways, railroads,
and airports, primary and secondary suppliers, input
and output markets, community facilities and amenities,
and skilled labor.
The Federal Government has helped
rural communities finance public infrastructure,
but many communities still lack infrastructure like
advanced telecommunications and air transportation
services. Information and communication technology—abetted
by financial and technical assistance—can
help smaller communities enjoy the same benefits
as cities, such as higher standards of health care
and virtually unlimited educational opportunities.
Federal financial assistance for deploying broadband
access and incentives for State, private, and public
partnerships to develop fiber optic or wireless
capabilities are among the options for rural areas
seeking to invest in a telecommunication infrastructure.
Because many rural problems occur
regionwide, some policies need to address broader
geographic implications. Agriculture, as a major
source of income and employment, is concentrated
in the northern Great Plains and western Corn Belt.
Rural manufacturing is disproportionately located
in the Midwest and Southeast. Mining and other extractive
activities are conducted west of the Mississippi
River and in Appalachia. All of these industries
have experienced very slow job growth or job loss
in recent decades. Regional or multicommunity cooperative
efforts, such as the Delta Regional Authority and
the Northern Great Plains Regional Authority, may
offer rural areas a better chance of success in
responding to industrywide declines or problems
associated with persistent poverty, population loss,
or educational disadvantage. Job generation and
human resource development will require close coordination
to ensure that the skills possessed by workers will
be appropriate for the new, largely service-based
and information-dependent industries, and that the
jobs will be available in the regional economy.
Unfortunately, little empirical
analysis is available on what strategies will be
most effective in which areas under what circumstances.
There is no one formula for success. Policy analysts
will do well to look to the areas that have achieved
prosperity to help develop successful prototypes
for areas that may be unprepared to meet the challenges
of the future.
The 2004 ERS
County Typology
ERS has recently developed
county typologies to measure broad patterns
of economic and social diversity for developing
public policies and programs. The 2004 County
Typology classifies all U.S. counties according
to seven overlapping categories of policy-relevant
themes and six non-overlapping categories
of economic dependence.
Policy types:
Housing stress (537 total,
302 nonmetro) counties are those where 30
percent or more of households had one or more
of these housing conditions in 2000: lacked
complete plumbing, lacked complete kitchen,
paid 30 percent or more of income for owner
costs or rent, or had more than 1 person per
room.
Low-education (622
total, 499 nonmetro) counties are those where
25 percent or more of residents age 25 to
64 had neither a high school diploma nor a
GED (General Educational Development) diploma
in 2000.
Low-employment
(460 total, 396 nonmetro) counties are those
where less than 65 percent of residents age
21 to 64 were employed in 2000.
Persistent poverty
(386 total, 340 nonmetro) counties are those
where 20 percent or more of residents were
poor as measured by each of the last four
censuses (1970, 1980, 1990, and 2000).
Population loss
(601 total, 532 nonmetro) counties are those
where the number of residents declined both
between the 1980 and 1990 censuses and between
the 1990 and 2000 censuses.
Nonmetro recreation
(334 designated nonmetro in either 1993 or
2003, 34 designated metro in 2003) counties
were classified using a combination of factors,
including share of employment or share of
earnings in recreation-related industries
in 1999, share of seasonal or occasional use
housing units in 2000, and per capita receipts
from motels and hotels in 1997.
Retirement destination
(440 total, 277 nonmetro) counties are those
where the number of residents age 60 and older
grew by 15 percent or more between 1990 and
2000 due to inmigration.
Economic types:
Farming-dependent
(440 total, 403 nonmetro) counties are those
with either 15 percent or more of average
annual labor and proprietors’ earnings
derived from farming during 1998-2000 or 15
percent or more of residents employed in farm
occupations in 2000.
Mining-dependent
(128 total, 113 nonmetro) counties are those
with 15 percent or more of average annual
labor and proprietors’ earnings derived
from mining during 1998-2000.
Manufacturing-dependent
(905 total, 585 nonmetro) counties are those
with 25 percent or more of average annual
labor and proprietors’ earnings derived
from manufacturing during 1998-2000.
Federal/State Government-dependent
(381 total, 222 nonmetro) counties are those
with 15 percent or more of average annual
labor and proprietors’ earnings derived
from Federal and State Government during 1998-2000.
Services-dependent
(340 total, 114 nonmetro) counties are those
with 45 percent or more of average annual
labor and proprietors’ earnings derived
from services (SIC categories of retail trade;
finance, insurance, and real estate; and services)
during 1998-2000.
Nonspecialized
(948 total, 615 nonmetro) counties are those
that did not meet the dependence threshold
for any one of the above industries.
The ERS County Typology
has been featured in several Amber Waves
articles:
“One in Five Rural
Counties Depends on Farming,” by Linda
Ghelfi and David McGranahan, Amber Waves,
Vol. 2, Issue 3, June 2004.
“Persistent Poverty
Is More Pervasive in Nonmetro Counties,”
by Dean Jolliffe, Amber Waves, Vol.
2, Issue 4, September 2004.
“One in Four Nonmetro
Households Are Housing Stressed,” by
James Mikesell, Amber Waves, Vol.
2, Issue 5, November 2004.
“Job Losses Higher
in Manufacturing Counties,” by Tim Wojan,
Amber Waves, Vol. 3, Issue 1, February
2005.
“Population Loss Counties
Lack Natural Amenities and Metro Proximity,”
by John Cromartie, Amber Waves, Vol.
3, Issue 2, April 2005. |
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