Friday, December 14, 2018

The hard truths of trying to 'save' the rural economy

In the Sunday Review of The New York Times, economics reporter Eduardo Porter offers a 2,000-word analysis of rural America's economic problems and what might be done about them. Excerpts:

"Nobody — not experts or policymakers or people in these communities — seems to know quite how to pick rural America up. States, municipalities and the federal government have spent billions to draw jobs and prosperity to stagnant rural areas. But they haven’t yet figured out how to hitch this vast swath of the country to the tech-heavy economy that is flourishing in America’s cities."

"Overall, manufacturing employs about one in eight workers in the country’s 704 entirely rural counties. . . . But factory jobs can no longer keep small-town America afloat. Even after a robust eight-year growth spell, there are fewer than 13 million workers in manufacturing across the entire economy. Robots and workers in China put together most of the manufactured goods that Americans buy, and the high-tech industries powering the economy today don’t have much need for the cheap labor that rural communities contributed to America’s industrial past. They mostly need highly educated workers. They find those most easily in big cities, not in small towns."

"This is the inescapable reality of agglomeration, one of the most powerful forces shaping the American economy over the last three decades. Innovative companies choose to locate where other successful, innovative companies are. That’s where they can find lots of highly skilled workers. The more densely packed these pools of talent are, the more workers can learn from each other and the more productive they become. This dynamic feeds on itself, drawing more high-tech firms and highly skilled workers to where they already are."

"Consider a recent Brookings Institution study by Benjamin Austin, Edward Glaeser and Lawrence Summers. They focus on the alarming rate of joblessness in what they call the Eastern Heartland, the region roughly between the Mississippi River and the states on the Atlantic coast, where rural communities are doing particularly poorly.
Share of county population not employed, 2015 (Brookings Institution map)
"After examining a range of potential policy interventions, they conclude that a targeted employment subsidy, such as the earned-income tax credit, is probably the most powerful tool available to revive employment. But they, too, are not sure it will work. “Our call for a wage subsidy is us saying, ‘We can’t figure this out, and we hope the private sector will,’ ” Mr. Glaeser told me."

"What if nothing really works? Is there really no option but to do nothing and, as some have suggested, return depopulated parts of rural America to the bison? Instead of so-called place-based policies to revitalize small towns, why not help their residents take advantage of opportunities where the opportunities are? Geographic mobility hit a historical low in 2017, when only 11 percent of Americans picked up shop and moved — half the rate of 1951. One of the key reasons is that housing in the prosperous cities that offer the most opportunities has become too expensive."

"There are compelling reasons to try to help rural economies rebound. Even if moving people might prove more efficient on paper than restoring places, many people — especially older people and the family members who care for them — may choose to remain in rural areas. What’s more, the costs of rural poverty are looming over American society. Think of the opioid addiction taking over rural America, of the spike in crime, of the wasted human resources in places where only a third of adults hold a job. And if today’s polarized politics are noxious, what might they look like in a country perpetually divided between diverse, prosperous liberal cities and a largely white rural America in decline?"

Porter quotes Brookings' William Galston: “Think through the political consequences of saying to a substantial portion of Americans, which is even more substantial in political terms, ‘We think you’re toast.’” Porter concludes, "The distress of 50 million Americans should concern everyone. Powerful economic forces are arrayed against rural America and, so far, efforts to turn it around have failed. Not every small town can be a tech hub, nor should it be. But that can’t be the only answer."

UPDATE, Dec. 17: It's not, Roberto Gallardo writes for The Daily Yonder. And Jim Branscome writes for the Yonder that Porter has not written any news, but history.

1 comment:

Observer said...

Are these figures accurate? Our county is the third smallest and supposedly has the worst poverty of counties of its size in our state, and yet our county unemployment rate is about 3.5%. Many workers have two or three part-time jobs.
The problem here is that employers with the highest employee wages still pay those employees about a third less than those in surrounding counties, and until recently, our economic development agency thought this was a good thing.
Move? People can't afford to live, let alone move...