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 50 years ago, 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 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 The 2004 ERS County Typology).
Many of these counties also lost population in the 1980s (see Population
Loss Counties Lack Natural Amenities and Metro Proximity).
Maintaining the population base, improving off-farm job opportunities,
and providing public services continue to be long-term challenges
for many traditionally farming areas.
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:
Growing numbers of Hispanics
are settling in rural America, accounting for over 25 percent
of nonmetro population growth during the 1990s. 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.
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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 2000, 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 (4.4 percent in 2000) in 20 years, 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 0.5 percent from 2002 to 2003, while nonmetro employment grew
by 0.6 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 of these counties,
however, agriculture is still a major source of income. For farming-dependent
rural counties—located primarily in the Great Plains and accounting
for 10 percent of farm operators and 21 percent of total farm cash
receipts in 2000—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.
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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 2.6 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.
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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 these 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 2003, average
weekly earnings for nonmetro workers ($555) were about 79 percent
of the metro average ($699). In 2000, only 16 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.
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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.