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Keys to Improving the Rural Economy Are Many

It’s no secret that rural counties across the United States have seen a slow but meaningful shift in recent decades: population levels have been stagnant or declining as people move to urban and suburban areas for jobs and other opportunities.

Despite population changes – and most of the population migration is one way, but not all – the economy is not shutting down in rural areas. It is changing, however.

new study on the rural economy in Indiana says there’s still economic life. And in other states, experts and studies emphasize that mobility and work flexibility – for employers and employees – are the best results to come from the pandemic.

“Much of what is thought to drive the differences between rural and urban economic performance is mistaken,” according to the Indiana report from the Center for Business and Economic Research at Ball State University in Muncie, Indiana.

“For example, we find that entrepreneurial differences between rural and urban Indiana are trivial and cannot explain growth differentials across these two geographies. We also find broadband adoption is mostly connected to household income, not rurality, and that Indiana’s rural counties have more heavy industry and lower-paying services, with a modest agricultural sector. All of these issues include some factors that cannot be changed (e.g., the relative cost of land) and some factors that can be affected by policy (e.g., educational attainment).”

Changes are happening in other states. While rural areas in Minnesota have lost population due to migration to urban areas, rural development organizations are creating initiatives to appeal to retirees who might want a more rural setting, according to the State of Rural, a 2021 study from Minnesota’s Center for Rural Policy and Development.

Although there are almost as many “keys” to improving rural economies as there are rural communities, many opinions center quality of life as increasingly important.

Some experts, like Brian Whitacre of Oklahoma State University, acknowledge that there are other factors in play.

“A big advantage urban areas have is agglomeration,” Whitacre said in an interview for this article. “The fact that many industries (and occupations) are nearby leads to competition, which results in higher wages. However, I don’t disagree with the main point (of the Ball State study) that education is an important driver (and that rural areas generally continue to fall behind in the education category.)”

“There are states with rural places with a higher number of jobs dependent on the energy economy that can see periods of time when there may grow faster during the ‘boom’ parts of the energy cycle and slower during the ‘bust,’” Matt Fannin of the Louisiana State University Department of Agriculture said in an interview.

In Praise of Compactness and Childcare

While rural and small-town communities have some characteristics in common, others have widely varying circumstances.

Indiana is unlike many states with a high number of rural areas, the Ball State paper by economist Michael Hicks and colleagues noted, in that the Hoosier state’s relative compactness means that even people who live in isolated locales are still close to an urban center of some size. That allows someone who lives in a small town or along an isolated rural road to easily go to a larger city for work or shopping.

What’s possible in compact Indiana isn’t as easy in sprawling states west of the Mississippi, where people who want to access a large community must travel farther. Kansas is more than 400 miles wide, for example, and if you’re in Wichita and want to go to Kansas City, be prepared for a 200-mile trip – one way.

In Kansas, the state’s Office of Rural Prosperity and the Kansas Sampler Foundation are focusing on young people who have chosen to live in rural areas. A survey indicated that young Kansans want not only viable communities but diversity “in culture, ideas, age, ethnicity, gender and thought.” How to achieve that goal? The organizations said the first step is to improve young rural residents’ connections to government and capitalize on grassroots movements.

A big part of improving the lives of young working Kansans is to improve accessibility to childcare. As one person quoted from the survey noted, “I drive 30 miles to take our child to childcare and then drive 30 back to work.”

Distance reinforces the supposition that rural areas – even down to individual communities and even individual households – are often left to row their own boats when it comes to economic health.

During the Obama administration, the Council of Economic Advisors issued a report on strengthening the rural economy. About 17% of the U.S. population lived in rural counties, the report noted, and the rural economy has seen great diversification since 1970. Joining agriculture as a mainstay of the rural economy are manufacturing and government services. And the White House report noted that rural counties continued to lag urban areas in educational attainment.

Minnesota counties, rural and urban, share much of the same makeup of workers, according to the state report. “Education and health services along with trade, transportation, and utilities employ nearly 50% of the labor force in most of our counties no matter how rural,” the report notes.

In Minnesota, diversity in the rural economy means self-employment as well as mainstays of the economy like government and agriculture. Wages can be lower in rural counties – 68% of the state average — but so is the cost of living, the Minnesota report noted.

Quality of Life – and Technology – Rule

The Ball State report emphasized the importance of quality of life to the economic health of rural communities.

“In today’s economy, most occupations can be performed anywhere, so household location decisions are motivated by quality of life,” the report noted. “Higher quality of life is strongly correlated with more school spending, the absence of crime and a few key private sector amenities, such as recreational activities.”

Somewhat similarly, businesses are drawn to places with quality labor available, and that usually means an educated potential workforce.

In Mississippi, a state hit hard by economic and infrastructure blows as well as natural disasters like hurricanes, in far-southern Jackson County, which is part of a medium-sized metropolitan area, the Economic Development Foundation in October released its Strategic Innovation Plan to raise the county’s profile among Gulf Coast communities and attract a talented workforce in part through quality of life initiatives.

These localities aren’t the only ones to connect quality of life to a thriving economy. In a 2022 report on Midwestern rejuvenation, the Brookings Institution cited data that suggests traditional economic development tools are secondary to good schools and recreation, cultural activities and excellent services in attracting talent and investment.

What role does technology play for rural economies?

“Technology is a two-edged sword for rural areas,” Fannin at Louisiana State said. “Labor-saving technologies (particularly in agriculture) have historically led to out-migration in many rural places. Alternatively, the set of technologies that enhance labor productivity and are also affordable and equitable across all age, race/ethnicity and income cohorts have the potential to help increase prosperity across a broader distribution of the rural population. Affordable and widely distributed broadband fits into this category.”

Posted on October 31, 2022 in News.
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