policy options for a changing rural...

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F E A T U R E PERSPECTIVES ON FOOD AND FARM POLICY: RURAL DEVELOPMENT & ENERGY

Policy Options for aChanging Rural America

In 1950, 4 out of every 10 rural people lived on a farm, and almost a third of the Nation’s rural workforce was engageddirectly 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 notfully address the complexities of rural economies and populations. Farms are larger and more efficient, farm householdsdepend 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.

Leslie A. Whitener

Tim Parker, [email protected]

Eyewire

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Originally published Vol. 3, Issue 2 (April 2005)—updated May 2007

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In addition, some rural communities have changed dramatically since 1990 due to increased population from urbanareas, shifts in age and ethnic composition, and economic and industrial restructuring. Population changes are creating newneeds 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 fromabroad and sectoral shifts in employment present new challenges and opportunities in the worldwide economy and raisethe question—how can rural communities successfully build on their economic base and other assets to retain and attractpopulation and employment? And, when, where, and under what circumstances will rural development strategies be mostsuccessful? The diversity within rural America dictates that strategies tailored to particular types of rural economies may bemore effective than a broader “one size fits all” rural policy. Demographic change, the health of the Nation’s economy, andindustrial restructuring will be major factors affecting rural policy in the 21st century.

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Changing DemographicsSuggest Different Policy Needs

Overall rural population growthrebounded in the 1990s, increasing byover 10 percent, up from 3-percentgrowth in the previous decade. Migrationcontinued to fuel rapid populationgrowth in some nonmetro counties,especially in scenic areas and along themetro periphery. However, populationgrowth began to slow at mid-decade, andthe number of nonmetro counties thathave lost population has climbed fromaround 600 counties during the 1990s towell over 1,000 since 2000. While popu-lation loss affects all regions, it is partic-ularly widespread in the Great Plains, aregion that depends heavily on farming(see box, “The 2004 ERS CountyTypology”). Many of these counties alsolost population in the 1980s.Maintaining the population base,improving off-farm job opportunities,and providing public services continueto be long-term challenges for many traditionally farming areas.

The 2004 ERS County TypologyERS has recently developed county typologies to measure broad patterns of economic andsocial diversity for developing public policies and programs. The 2004 County Typology classifiesall U.S. counties according to seven overlapping categories of policy-relevant themes and sixnon-overlapping categories of economic dependence.

Policy types: Housing stress (537 total, 302 nonmetro) counties are those where 30 percent or more ofhouseholds 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 hadmore 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 EducationalDevelopment) diploma in 2000.

Low-employment (460 total, 396 nonmetro) counties are those where less than 65 percent ofresidents 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 residentsdeclined 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 in2003) counties were classified using a combination of factors, including share of employment orshare of earnings in recreation-related industries in 1999, share of seasonal or occasional usehousing 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 moreof 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 ofaverage 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 during1998-2000.

Federal/State Government-dependent (381 total, 222 nonmetro) counties are those with 15 per-cent or more of average annual labor and proprietors’ earnings derived from Federal and StateGovernment 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 retailtrade; finance, insurance, and real estate; and services) during 1998-2000.

Nonspecialized (948 total, 615 nonmetro) counties are those that did not meet the dependencethreshold 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.

ECONOMIC RESEARCH SERVICE/USDA

Hispanics are the fastest growingracial/ethnic group in rural America.

© 2007 Jupiterimages Corporation

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Growing numbers of Hispanics aresettling in rural America, accounting forover 46 percent of nonmetro populationgrowth between 2000 and 2005. With ayounger population and higher fertility,Hispanics are now the fastest growingracial/ethnic group in rural America. And,almost half of all rural Hispanics live out-side of the traditional settlement States inthe Southwest. In many places, newHispanic settlement patterns are con-tributing to the revitalization of smalltowns; in others, the influx of residents isstraining housing supplies and other com-munity resources. In addition, theyounger age, lower education, and largefamily size of Hispanic households sug-gest increased demands for social services,including prenatal care, child care, andeducation programs.

The older population grew rapidly inmany rural places in the 1990s, due large-ly to retirement and recreation opportuni-ties. Nonmetro retirement-destinationcounties, where the number of residentsage 60 and older grew by 15 percent ormore between 1990 and 2000 due to inmi-gration, were located predominantly inthe West and in major retirement centersthroughout the South, including Texasand Florida. In the rural agricultural areasof the Great Plains and Corn Belt, as wellas in rural parts of the lower MississippiDelta, the growth of the older populationslowed and in many places stopped alto-gether. This pattern reflects the small sizeof the cohort now reaching age 65, a groupthat was depleted in many rural areas bylow birth rates in the 1930s, an exodus tocities in the 1940s, and an exit from farm-ing in the 1950s. These dual patterns ofgrowth and decline suggest the need fordifferent strategies. Areas with rapidlyincreasing older populations must be pre-pared to provide essential services,resources, and programs for the elderly.

Areas with declining elderly populationsmust consider economies of scale whenensuring that necessary services are avail-able and accessible.

The educational attainment of ruralAmericans is higher than ever before, con-tinuing a long upward trend. In 2005,nearly one in six rural adults had a 4-yearcollege degree, about twice the share of ageneration ago. But the substantial growthin the college-educated population wasnot evenly distributed across rural areas,and low education levels still challengemuch of rural America. Low-educationcounties, with 25 percent or more of resi-dents age 25 to 64 who had not completedhigh school, are concentrated in the Southand Southwest. Low-wage resource-basedand manufacturing economies in many ofthese counties limit the kind of high-skilljob growth that attracts a higher educatedlabor force. Strategies for raising educa-tional levels and the quality of that educa-tion are essential to improving theeconomies of many rural communities.

The Rural and NationalEconomies Are Linked

Rural areas as a whole shared in theNation’s economic prosperity during the1990s. The nonmetro unemployment ratefell to its lowest level (4.9 percent in 2006)since the 2001 recession, and rural pover-ty rates reached an all-time low (13.4 per-cent in 2000). But in late summer 2000,the manufacturing industry went into adownturn, and by March 2001, the longestU.S. economic expansion on record hadended. Unemployment and poverty ratessubsequently rose in both rural and urbanareas, while employment and earningsgrew sluggishly.

The U.S. economic recovery began inNovember 2001, and by the beginning of2004 had become broad-based, with mostdomestic sectors exhibiting moderate tostrong growth. Metro employment grewby 3.3 percent from 2002 to 2005, whilenonmetro employment grew by 2.7 per-cent. But economic recovery has beenuneven across rural America, with mostgains concentrated in the high populationgrowth areas of the South and the West.Areas of the Northwest continue to

Nonmetro retirement destination counties, 2000

Retirement destination counties number of residents 60 and older grew by 15 percent or more between 1990 and 2000 due to inmigration.

Prepared by ERS using data from the U.S. Census Bureau.

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wrestle with declining employment intimber and other natural resource indus-tries. The employment picture for theGreat Plains and Midwest was mixed, withsome rural areas buoyed by employmentgains of at least 2 percent and othersmired in long-term declines in population and employment.

Industrial Restructuring Creates New Opportunities and Challenges

The rural economy has shifted from adependence on farm-based jobs to adependence on nonfarm-based jobs.Today, four out of five rural counties aredominated by nonfarm activities, includ-ing manufacturing, services, mining, andgovernment operations. In many areas,however, agriculture is still a major sourceof income. For farming-dependent coun-ties—located primarily in the Great Plainsand accounting for 10.8 percent of farmoperators and 22.9 percent of total farmcash receipts in 2004—the challenge isnot a weak agricultural economy. Rather,these counties have not been equally pros-perous as others because nonfarm sectordevelopment is limited by remoteness

from major urban markets and low popu-lation densities.

Other nonmetro economies dependmore on industries, such as manufactur-ing, for their economic base. Almost 30percent of all nonmetro counties weredependent on manufacturing, havingderived 25 percent or more of averageearnings from manufacturing during1998-2000. Manufacturing has traditional-ly located in rural areas to take advantageof lower labor and land costs. Since thelate 1980s, some manufacturers, compet-ing on the basis of low-cost production,shifted their production overseas. Othermanufacturers took advantage of newtechnologies and management practicesand began to compete on the basis ofproduct quality. This shift resulted in aneed for more highly skilled labor, andmanufacturing moved to rural areas withbetter schools and fewer high schooldropouts. Areas with low high schoolcompletion rates, located predominantlyin the South, now face greater difficultiesin attracting and retaining manufacturingemployers. The manufacturing countiesof the rural Great Plains offer a more edu-

cated labor force, and these areas havebeen most attractive to employers. But,the loss of 3.2 million manufacturing jobsnationwide since 2000 suggests that man-ufacturing counties as a whole may beespecially hard pressed to find alternativesources of economic growth.

Rural Policy Options for the Future

The goals of economic/communitydevelopment programs and policies inrural areas vary widely, as do the resourcesand the opportunities and challenges com-munities face. Some areas will focus onstrategies to stimulate economic and com-munity growth to help address problemsassociated with population and employ-ment decline. Other areas will seek toimprove wages and living standards bychanging the nature of employment, or byenhancing infrastructure and public serv-ices. Low-density settlement patternsoften make it more costly for communitiesand businesses to provide critical publicservices. In contrast, other rural areas, par-ticularly those rich in natural amenities,face growing pains borne out of economictransformation and rapid populationincreases. Community leaders in theseareas are struggling to provide new roads,schools, and other community servicesand may actually want to stem growth inorder to limit rural sprawl.

One point is clear—commodity-basedfarm policies as currently structured donot fully address the complexity of issuesfacing rural economies and populations.For example, the high level of farm pay-ments in the late 1990s did little to elimi-nate the long-term outmigration fromfarming areas. ERS research shows thatcounties highly dependent on farm pay-ments had some of the highest rates ofpopulation loss, even during periodswhen most other rural areas were gainingpopulation.

Low-education counties 25 percent or more of residents 25-64 years old had neither a high school diploma nor a GED in 2000.

Nonmetro low-education counties, 2000


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Rural policy for the future will needto encompass a broader array of issues,and these different rural issues willrequire different mixes of solutions.Strategies to generate new employmentand income opportunities, develop localhuman resources, and build and expandcritical infrastructure hold the most prom-ise for enhancing the economic opportuni-ties and well-being of rural America.

New Economic Engines: Prosperityfor many rural communities will dependon innovative income-generating strate-gies that attract people and jobs. Facedwith continuing loss of farm jobs, somerural communities have sought to offsetshrinking employment by adding value tofarm products. Focusing on the role offarms as a source of raw materials for foodand fiber products, these communitiesseek to add value to agricultural commodi-ties by luring food processing plants torural areas, developing new consumer orindustrial uses for agricultural products,or bypassing conventional wholesale-retailsystems to sell food products directly toconsumers. These strategies may prove

successful for some communities, but ERSresearch finds that value-added strategiesin general are not particularly promisingas engines for rural job growth. Food retailand marketing are the largest and fastestgrowing value-added sectors, but thesebusinesses usually choose to locate inurban areas for more efficient access toconsumers, nonagricultural suppliers, anddistribution networks. Food manufactur-ing and other value-added activitiesaccount for a relatively small share of ruralemployment, and the amount of jobgrowth from these value-added strategieshas had little impact on the general rural labor market.

Many rural communities are lookingat other innovative ways of attracting andretaining high-paying industries andemployment to rural areas. The tradition-al way of attracting firms to a region byoffering tax reductions may no longer besufficient. New approaches, such as providing training and technical assis-tance by local educational institutions toclusters of similar firms, may be more suc-cessful than tax-based incentives because

they help firms to adapt innovative pro-duction techniques. Training and businessassistance programs can help new entre-preneurs in some rural areas enhancetheir business acumen and improve busi-ness communication skills. Networks ofsmall businesses can help build a moreeffective business infrastructure by coordinating marketing services, ware-housing, business resources, and computer technology.

Capitalizing on new uses of theNation’s natural resource base may beessential to ensuring the economic well-being of rural America. This resource basecan provide such uses as water filtration,carbon sequestration, and nontraditionalenergy sources, including methane utiliza-tion. Some rural areas may be well suitedfor the development of renewable energyas well as the production of more tradi-tional fossil-fuel energy. Natural ameni-ties, though, will be the trump card forsome rural areas. Rural counties with var-ied topography, relatively large lakes orcoastal areas, warm and sunny winters,and temperate summers have tended toreap huge benefits from tourism andrecreation, one of the fastest growing ruralindustries. Recent ERS research finds thattourism and recreational development inrural areas leads to increases in localemployment, income, and wage levels,and improvements in social conditions,such as poverty, education, and health.These strategies have drawbacks, howev-er, particularly in the form of higher hous-ing costs in nonmetro recreation counties.

Human Resource Development: Thewage gap between urban and rural work-ers reflects a rural workforce with lesseducation and training than urban work-ers. In 2006, median weekly earnings fornonmetro workers ($509) were about 84percent of the metro average ($607). In2005, only 16.9 percent of rural adults age25 and older had completed college, halfthe percentage of urban adults. Moreover,

Farming-dependent counties either an annual average of 15 percentor more of total county earnings derived from farming during 1998-2000or 15 percent or more of employed residents working in farm occupationsin 2000.

Nonmetro farming-dependent counties, 1998-2000


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the rural-urban gap in college completionhas widened since 1990. Today, employersare increasingly attracted to rural areasoffering concentrations of well-educatedand skilled workers. A labor force with loweducational levels poses challenges formany rural counties seeking economicdevelopment. Rural areas with poorlyfunded public schools, few good universi-ties and community colleges, very loweducational attainment, and high levels ofeconomic distress may find it hard to com-pete in the new economy. Recent ERS-sponsored research documents the directlink between improved labor force qualityand economic development outcomes,finding that increases in the number ofadults with some college education result-ed in higher per capita income andemployment growth rates, although lessso in nonmetro than metro counties.Efforts to reduce high school dropoutrates, increase high school graduationrates, enhance student preparation for col-lege, and increase college attendance areall critical to improving local labor quality.

Rural human capital can also beimproved by strengthening the quality ofclassroom instruction. Technical assis-tance could ensure that best-practice mod-els of distance learning are available toremote schools, where the benefits from such technologies are greatest.Instructional quality could be improved bypromoting teacher recruitment and reten-tion efforts in remote and poor rural areas.Efforts to facilitate school-to-work transi-tions of youth are particularly importantin isolated and distressed rural communi-ties. The benefits of these strategies willbe greatest in rural communities, whereexisting workforce development programs(especially the Workforce Investment Act)face special challenges due to high rates ofhigh school dropouts or limited demandfor youth labor.

Infrastructure and Public Services:Telecommunications, electricity, waterand waste disposal systems, and trans-portation infrastructures (such as highways and airports) are essential forcommunity well-being and economicdevelopment. But many rural communi-

ties are financially restrained because of alimited tax base, high costs associatedwith “dis-economies” of size, and difficul-ties adjusting to population growth ordecline. Investments in needed infrastruc-ture have increased in recent years, but high costs and deregulation pose challenges.

Investment in rural infrastructure notonly enhances the well-being of communi-ty residents, but also facilitates the expan-sion of existing businesses and the devel-opment of new ones. Recent ERS researchassessed the economic impacts of 87water and sewer projects funded by theEconomic Development Administrationand found that these projects in generalcreated or saved jobs, spurred private-sec-tor investment, attracted governmentfunds, and enlarged the property tax base.But the average urban water/sewer facility,which costs only about one-third morethan the average rural facility, generatedtwo to three times the economic impactsof rural facilities. The rural-urban differ-ence in economic benefits likely stemsfrom the generally more abundant infra-structure of urban areas—easy access tohighways, railroads, and airports, primaryand secondary suppliers, input and outputmarkets, community facilities and amenities, and skilled labor.

The Federal Government has helpedrural communities finance public infra-structure, but many communities still lackinfrastructure like advanced telecommuni-cations and air transportation services.Information and communication technol-ogy—abetted by financial and technicalassistance—can help smaller communi-ties enjoy the same benefits as cities, suchas higher standards of health care and vir-tually unlimited educational opportuni-ties. Federal financial assistance fordeploying broadband access and incen-tives for State, private, and public partner-Manufacturing dependent counties an annual average of 25 percent

or more of total county earnings derived from manufacturing during 1998-2000.

Nonmetro manufacturing-dependent counties, 1998-2000


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ships to develop fiber optic or wirelesscapabilities are among the options forrural areas seeking to invest in a telecom-munication infrastructure.

Because many rural problems occurregionwide, some policies need to addressbroader geographic implications.Agriculture, as a major source of incomeand employment, is concentrated in thenorthern Great Plains and western CornBelt. Rural manufacturing is dispropor-tionately located in the Midwest andSoutheast. Mining and other extractiveactivities are conducted west of theMississippi River and in Appalachia. All ofthese industries have experienced veryslow job growth or job loss in recentdecades. Regional or multicommunitycooperative efforts, such as the DeltaRegional Authority and the Northern GreatPlains Regional Authority, may offer rural

areas a better chance of success inresponding to industrywide declines orproblems associated with persistentpoverty, population loss, or educationaldisadvantage. Job generation and humanresource development will require closecoordination to ensure that the skills pos-sessed by workers will be appropriate forthe new, largely service-based and infor-mation-dependent industries, and that the jobs will be available in theregional economy.

Unfortunately, little empirical analy-sis is available on what strategies will bemost effective in which areas under whatcircumstances. There is no one formulafor success. Policy analysts will do well tolook to the areas that have achieved pros-perity to help develop successful proto-types for areas that may be unprepared tomeet the challenges of the future.

This article is drawn from . . .

Food and Agricultural Policy: Taking Stockfor the New Century, USDA, September2001, available at: www.usda.gov/news/pubs/farmpolicy01/fpindex.htm

Rural At a Glance series, USDA, EconomicResearch Service, www.ers.usda.gov/emphases/ruralataglance.htm

The Role of Education: Promoting theEconomic and Social Vitality of RuralAmerica, edited by Lionel Beaulieu and Robert Gibbs, Southern RuralDevelopment Center and USDA/ERS,January 2005, available at: www.srdc.msstate.edu/publications/ruraleducation.pdf

The ERS Briefing Room on Farm Policy,Farm Households, and the Rural Economy:www.ers.usda.gov/briefing/adjustments/ The County Typology Codes chapter of theERS Briefing Room on Measuring Rurality:www.ers.usda.gov/briefing/rurality/typology/

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7PERSPECTIVES ON FOOD AND FARM POLICY: RURAL DEVELOPMENT & ENERGY

Corel

Rural counties with lakes, mountains, and good climates attract businesses related to tourism and recreation.

F E A T U R E

policy options for a changing rural...

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