Democrats and Rural America

Update 355:  Democrats and Rural America as Trump Gives Farmers Crumbs, not Cake

Last week, the Trump administration announced a $16 billion aid package for farmers in an effort to bail out those affected by the continuing trade war with China.  But the bailout sop may not be wooing rural Americans. Per Bill Gordon, vice-president of the American Soybean Association, “Here’s a handout to make you happy? That doesn’t make us happy. We want our markets back.”

What can Democrats offer rural Americans in the way of progressive economic policy ideas?  See below.

Meanwhile, mark your calendar for Manchester, NH on Saturday, June 9 and a 2020 Democratic presidential candidate economic policy forum, co-sponsored by 20/20 Vision.  See:

https://www.eventbrite.com/e/the-economy-the-budget-and-you-tickets-62066648015.

Best,

Dana

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Accounting for 97 percent of US landmass but just 20 percent of the population, the rural economy has its own unique set of economic characteristics and trajectory. Since the financial crisis, rural America has faced a steady population exodus as well as sluggish employment and wage growth compared with the national economy.

Is rural America fated to lag economically, with its inevitable distance from the urban economic engines? Or can the rural economy be reimagined and better integrated into the rest of the economy? Is this a viable and advisable mission for the Democratic Party?

Sectors of the Rural American Economy

Rural America has undergone a rapid transformation since the 1950’s, but continues to face unique demographic and technological challenges.

Source: US Census Bureau

  • Agriculture: Since 1950, the US population has more than doubled to nearly 328 million in 2018. The number of farmers, meanwhile, has fallen by two-thirds, and constitutes just 2 percent of the working population. This change reflects growing economies of scale by larger farming operations, as well as the increased utilization of technology. Women are underrepresented in farm jobs and undocumented workers continue to be a big source of farm labor. The median pay for agricultural workers in 2018 was $24,620 per year, or $11.84 per hour.
  • Manufacturing: Making up around 12 percent of the overall economy, manufacturing in rural areas represents a larger share of nonfarm jobs and earnings compared to urban areas. Since the 1980s, domestic manufacturers, seeking to cut costs and compete globally, retreated to areas with lower wages, property taxes, and land prices. Rural regions’ reliance on manufacturing jobs and industry has become a problem, as the manufacturing sector continues to shrink nationally. Falling US capital goods production suggests the sector is losing ground, and the ongoing trade war is putting downward pressure on a softening sector.  
  • Energy: While some more traditional areas of the rural economy have seen decline, there are some that are picking up speed. The recent boom in natural gas fracking, an expansion in wind power, and increased corn-based ethanol production have all contributed to net gains in regional rural employment. Despite all the focus on coal miners during the 2016 presidential election, there are only 52,000 people left employed in the industry, declining for decades.

Rural America is on the front line when it comes to the next wave of automation and artificial intelligence.  Emerging technologies will continue to displace human labor in agriculture, as well as in relatively well-paid trucking jobs that are over-represented in rural areas. Per Brookings, automation risks are most pronounced in states such as Indiana, Kentucky, South Dakota, Arkansas, and Iowa. States with large rural economies will have to prepare for a future with increased automation or face an even worse structural unemployment problem than today.

Economic Mobility, Stalled

In a recent update, we discussed the effects of underbanked communities across the country. The Wall Street Journal reported in 2017 that of America’s 1,980 rural counties, 625 don’t have a locally owned community bank, about 115 are served by just one branch, and at least 35 counties have no bank at all. Limited access to banking services and credit diminishes economic growth and reinforces class immobility. Alternative Financial Services (AFS), such as check-cashing services and payday loans, often result in high transaction and penalty fees.

Many rural Americans also lack access to higher education. Seventeen percent of Americans — 41 million people, the vast majority of them rural residents — live in a higher education desert, which means they are a half hour away from a higher education institution or there is only one community college within that radius.

A lack of access to higher education further compounds economic mobility prospects, as job creation is increasingly focused in wealthier, non-rural areas. Between 2000 and 2015, 6.5 million net jobs were created in the top 20 percent of income zip codes, where 43 percent of residents have a bachelor’s degree or better. Only 11 percent of residents in the bottom 20 percent of income zip codes have a bachelor’s.

Not So Affordable Housing

Rural America was not spared when the US housing market fell off a cliff in 2008. A little more than 10 years after the crisis, about 21 percent of the US population lives in rural areas, per the Housing Assistance Council. Nearly 30 percent of them reside in substandard housing with leaky roofs or inadequate plumbing. Rural families are more likely to be impoverished than the rest of the nation, and about half of them spend 50 percent of their monthly income on rent.

In April, the House Financial Services Committee Subcommittee on Housing, Community Development and Insurance held a hearing entitled, “The Affordable Housing Crisis in Rural America: Assessing the Federal Response.” Witnesses spoke about affordable housing challenges for rural communities related to homelessness, rental housing, and homeownership. The hearing covered underfunding of Section 515 or 514 housing loans, specifically for rural rental properties. Due to underfunding, affordable housing units in rural areas are crumbling and the programs are so backlogged that they cannot build new units. The Rural Housing Preservation Act of 2019 would focus on making these programs viable again and providing better affordable housing units.

Infrastructure Challenges

Lack of infrastructure funding is affecting America as a whole, but it hits rural America especially hard. One of the most pressing issues of the 116th Congress has been the funding of rural broadband, considered by some to be the area of infrastructure where there can be bipartisan agreement. The US ranks low in comparison with other industrialized nations in broadband connectivity. In rural areas, 39 percent of people — more than 24 million Americans — lack high-speed Internet, compared to four percent in urban communities.

Congress has been increasingly supportive of enacting a rural broadband infrastructure plan. A 2016 World Bank report found GDP per capita growth is 2.7 to 3.9 percent higher after the introduction of broadband and every ten percentage point increase in fixed broadband household penetration raises GDP by 0.77 percent. Rural broadband would make it easier for rural Americans to move their goods to market, decreasing the rural-urban divide.

Rural vs. Urban? False Dichotomy

Rural America increasingly feels economically and politically different from the suburban and urban areas of the country. A national poll in November last year showed Trump still holds a 61 percent approval rating in rural areas, compared to 43 percent nationally. So, what does this say about the path forward; should Democrats consider appealing to rural America in 2020?

The answer is of course, yes. But the message should perhaps focus on integrating the rural economy into the national economy: no region should get left behind. Economic development projects such as improving rural broadband access, infrastructure, and access to good jobs and a good education will help connect rural America to the economy at-large. Democrats should consider these as part of a broader economic narrative; the political gain in rural areas may be a while in coming, but maybe it will be worth the wait.

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