Dean Barber

For Rural America to Win

In Corporate Site Selection and Economic Development on December 11, 2016 at 10:43 am

As a “place profiler” for corporate and economic development interests, my work will sometimes take me into rural America.

Most rural counties offer employment in a variety of industries, but experience has taught me that they can differ quite a bit in their industry mix.

No logging industry on the open plains of the Texas Panhandle. No expansive cattle ranches in up and down West Virginia.

I’ve also come to realize, and my logic is admittedly somewhat inverted, that most jobs follow people. That in essence means that metropolitan areas will have a certain advantage by virtue that more people live within their confines. It’s where most of the companies are. It’s where most of the jobs are.

Conversely, rural America – those counties that are not in metropolitan areas – will have a tough row to hoe largely because of numbers and geography.

Consider that the population in rural America (non-metropolitan counties) stands at about 46 million —14 percent of U.S. residents spread across 72 percent of the nation’s land area. Now a picture might be forming.

Certain Competitive Advantages

Despite limiting factors, I actually believe there are certain competitive advantages that rural communities can offer to potential companies that would consider investing in them.

The key, for those rural communities that want to grow (and the desire has to be there), is to identify and aggressively promote, leverage, and market those competitive advantages.

I am not the first nor will I be the last to suggest that economic development is a contact sport. The most successful economic developers that I have ever been around are part evangelists and part football coaches for their respective communities.

If you watch a 60 Minutes profile of Joe Max Higgins, I think you might get my drift. For Joe Max and any number of economic developers that I have worked with, this isn’t just their job, it’s their calling.

For practitioners in rural America, the calling can be especially daunting. More so than their urban counterparts, economic developers in rural areas have to work harder to come up with meaningful answers, supported by data, as to why their place would make for a better place for corporate investment.

One possible reason could be labor costs. Per capita income of people living in non-metro counties has been about 80 percent of metro dwellers since the early 1990s. Compared with their urban counterparts, rural workers have lower median earnings in nearly every age group.

This can pose an opportunity for some companies in some places. A manufacturer operating in a rural setting may be able to pay line workers $18 an hour, whereas they would have to pay $23 an hour in a more competitive urban environment.

I have helped certain manufacturers locate in small towns in rural settings as they wanted to be the big fish in the small pond. Armed with data that I had provided to them and visiting these communities, they soon realized they could draw a sufficient number of qualified job applicants without having to pay a premium in wages, but still higher than most wage earners in that particular town.

In urban settings, that strategy would not work nearly so well, largely because of the many existing employers competing for talent. They would be one of many fish.

Bite the Bullet

But for rural communities, appealing on the basis of lower labor costs alone is not enough. They have to show that they have the talent quotient to fill the bill for prospective companies. And therein lies their biggest challenge.

It is not good, it is not helpful that students in rural communities are far less likely than their peers in cities and suburbs to gain exposure to rigorous computer science training. These skills have emerged as a fast track to high-paying jobs.

A 2016 study from Gallup and Google found that computer science is less of a priority in rural schools than in urban and suburban areas.

If rural communities truly want to be in the hunt for better paying jobs, particularly in manufacturing, they are going to have to bite the bullet and emphasize computer science beginning in the earliest grades.

I’m afraid there is no getting around it for rural America. It has to be done, K-12. Not doing so puts rural communities (and the youth living there) at a further competitive disadvantage.

The Old and the Young

We also know, because the U.S. Census Bureau tells us so, that the rural America is older than urban America. (The median age of people living in rural areas is 43 years, compared with 36 years for urban areas.)

Generally, an older working-age population points to lower overall labor force participation, as workers begin to drop out of the labor force past age 50. And the latest Census Bureau data confirms that men and women living in rural areas have lower labor force participation than their urban counterparts. (59.2 percent compared with 64.2 percent.)

What doubly hurts is that many millennials will leave rural America for metro areas in search of better job opportunities. This pattern of migration is nothing new and probably has been going on for a very long time.

The Bold Ones

While it may be difficult if not unrealistic to stem the overall tide of outmigration by millennials, I have witnessed how some economic developers in rural America will take extraordinary steps to improve life in their communities.

In addition to pushing for computer science in local schools, they will advocate for the teaching of principles of entrepreneurship and more vocational training. They will push for the creation of makerspaces, and they will talk to existing industry about forming internships and apprenticeship programs. They will explore alternative financing to small business ventures with their local community banks.

They will be consumed with quality of life, about local healthcare, education, recreation and life away from the workplace, and they will look to form partnerships and find allies along the way, all on a shoestring budget.

Winning economic developers in rural America will be ardent students of state and federal loan and grant programs that can make a difference.

New Market Tax Credits come to mind here, an often ignored federal program that makes it possible for businesses operating in distressed areas to get more flexible loans with better rates and terms than what the market could offer.

Not to take anything away from economic developers in metropolitan areas, but their rural brethren will have to work harder to know more, because the stakes are so much higher. Wins and losses take on a different meaning when your resources are limited.

All economic developers everywhere know that if they are to be effective and spark change, they will likely offend somebody along the way. It just happens.

Coming Home

In my travels, I have seen in rural communities a phenomenon that I liken to repatriation. It is when the sons and daughters who had left to make their bones in their respective fields, typically in urban markets, want to come back home.

I know of bankers, lawyers, doctors, teachers, and corporate executives, who have returned to their hometown to start a business and/or raise a family. It can be done, especially after professional experience has been gained.

Rural economic developers welcome these returning professionals, as they know those coming home will offer much to their communities in terms of talent and will be natural allies to economic development.

Trump’s Big Promise

The history has yet to be written on the 2016 presidential election. But President-elect Trump’s promise to bring back millions of manufacturing jobs certainly resonated with working-class people, particularly in rural America.

Manufacturing is all the more important in rural America, accounting for nearly 15 percent of earnings compared to just over 9 percent in urban areas.

These mostly white and rural people have felt abandoned, even disrespected by the federal government. Sensing this, Trump said he would renegotiate or scrap NAFTA, reject the Trans-Pacific Partnership, and slap China with tariffs.

Based on what I saw in Mexico this past Spring, I can no longer think of myself as a free-trader. But here’s the problem: Total inflation-adjusted output of the U.S. manufacturing sector is now at its highest, with employment near it lowest.

Even with some manufacturers reshoring operations, it is highly unlikely that millions of factory jobs will be created because of the more prevalent use of robots, which will only grow as costs continue to fall.

In short, the automated, hyper-efficient shop floors of advance manufacturing will make Trump’s pledge a hard one to fulfill in both rural and urban America. I hope I am wrong.

The wild card in all of this is corporate taxes rates. If they are more than halved as the Trump & Co. may push for (See last week’s blog “The Big Business Story to Come”), all bets are off.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

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  1. Very good Dean. A good article.

    Charles L. Smith, CEcD
    Executive Director
    Main Line: 903-572-6602
    http://www.mpedc.org

  2. It is truly a nice and helpful piece of information. I’m happy that you simply shared this useful info with us.
    Please keep us informed like this. Thank you for sharing.

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