The Last Gasps of rural America

Back to Basics
By Paul A. Herbig

It is not easy to be in Rural America these days. During a recent conference of municipal leaders, an economist asked the leaders of rural counties who are their major employers these days. The surprising yet almost consensus answer was: the local School System, the city/county Hospital, Local (city/county) Government, and local University (if one were present.) Manufacturing? No. This is not to say manufacturers did not exist but they do not dominate as they once did. What about the farmers? With one farmer producing as much as a hundred did a century ago, much of the land may still be under tillage but they are few in number. A survey of a local Chamber of Commerce indicated its membership was primarily small businesses with only a handful of large (over 200) employers (3 of which—you guessed it, the school system, the university, and the hospital). Is this situation uncommon? No. and getting more typical every day. If you see similarities to the rural America of 1900, it is not a coincidence. As a scenario it is reminiscent of America at its birth: many small businesses in small rural towns.

As manufacturing continues to shrink (technology and sharp pencils have increased productivity to where far fewer workers can produce many more products, that is, for what few companies still remain in the states as manufacturing roars to China), the economic base of many small rural counties is shifting. Few large manufacturers will remain. Many smaller manufacturing entities will continue to compete as long as they can.

A recent report indicated that while Indiana suffered significant out-migration of its best youth (almost 15,000 between 1995 and 2000 according to U.S. Census), the Indianapolis area had a net immigration, gaining 5,000 educated youth over the same period and placing 24th on the brain-gain list of 300 U.S. cities. If Indianapolis had a net gain (and most larger metro areas gained or stayed even), guess who lost all those youth to other states and metro areas: the rural towns and counties. The result is an aging population as the youth mature mostly move to where the opportunities lie (which unfortunately for many lie not in the rural areas). Health care will be a growth opportunity to support the aging population (Note: One of the reasons the Wabash County Hospital recently announced it will close its obstetric services department for 90 days and evaluate its long term prospect is an aging county population). Government will still be necessary to provide functions required. Not that it will grow tremendously but as other sectors shrink, it will increase in importance proportionally.

Retail will still be needed in small town rural America. But here the similarities of 1900 to that seen in 2010 stop. 1) The majority of retail jobs are low-paying, at or just above minimum wage that are insufficient in themselves to provide a quality lifestyle; 2) The Walmarts, Targets, and other chains that now exist in nearly every town will provide those retailing jobs but at the cost of dozens of local smaller businesses (and their owners) closed and out of business; 3) Small towns have limited needs—perhaps 1 movie theater at most will suffice instead of 2.; and 4) Shrinkage will occur as demographics change: An aging population has different needs than a more diffused population. More health services, less education, and less youth-oriented retailing will result (Since the majority of movie goers are between 10 and 25, once the youth have left, will even that one theater have sufficient demand to survive? Or will it too leave for the regional center where it can be profitable serving a multitude of similar small towns?)

Whereas a decade ago the trend was away from urban to rural, the big winners in the decades to come will be the suburbs with the rural counties continuing to lose population and base to the larger metro areas. The Plain states (Dakotas, Nebraska, Kansas) have for over a decade suffered from the re-suburbanization of America. In particular, the western parts of those states have been experiencing the slow death of many towns (and counties if not entire regions) due to an aging population dying off while the youth (if any) leave for greener pastures. The shrinking population requires fewer services (government, retail), which eventually relocate to regional centers, furthering the downward spiral, the death spiral of these areas.

What can areas do to compete? The answer is as simple to express as it is difficult to implement: 1) Find clusters that will be long-lived. Most basic and assembly (labor intensive) manufacturing will be gone by 2010. Only high-value added or tech oriented non-competitive manufacturing may survive. Warsaw with its cluster of new tech biotech will survive and thrive. Others with older industries dominating (steel, automotive) will suffer unless they shift focus to growing sectors. 2) Encourage and promote entrepreneurship (grow your own business). Not additional retail small businesses. How many card shops can a town support? But service-technology firms that will satisfy a national need thus bringing monies into the community and not just rearranging already existing monies. 3) Education and Training. A more educated workforce is more attractive to potential employers and entrepreneurs. Providing higher education opportunities through community colleges and vocational training gives the community additional tools for continuous education and re-tooling of the job force that will be necessary in the coming century. Learning new skills and entering a different career multiple times throughout a worker’s life will be norm of the new economy.

Rural America, if you thought life has been tough these last few years, hang on, the ride will only get rougher these next few years.