Policy options for a changing 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 engaged directly 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 1950s, and current commodity-based farm policies do not fully address the complexities of rural economies and populations.

Farms are larger and more efficient, farm households depend 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.

In addition, some rural communities have changed dramatically since 1990 due to increased population from urban areas, shifts in age and ethnic composition, and economic and industrial restructuring. Population changes are creating new needs 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 from abroad and sectoral shifts in employment present new challenges and opportunities in the worldwide economy and raise the question--how can rural communities successfully build on their economic base and other assets to retain and attract population and employment? When, where, and under what circumstances will rural development strategies be most successful? The diversity within rural America dictates that strategies tailored to particular types of rural economies may be more effective than a broader "one size fits all" rural policy. Demographic change, the health of the nation's economy and industrial restructuring will be major factors affecting rural policy in the 21st century.

Changing Demographics Suggest Different Policy Needs

Overall rural population growth rebounded in the 1990s, increasing by more than 10 percent, up from 3-percent growth in the previous decade. Migration continued to fuel rapid population growth in some nonmetro counties, especially in scenic areas and along the metro periphery. However, population growth began to slow at mid-decade, and the number of nonmetro counties that have lost population has climbed from around 600 counties during the 1990s to well over 1,000 since 2000. While population loss affects all regions, it is particularly widespread in the Great Plains, a region that depends heavily on farming. Many of these counties also lost population in the 1980s. Maintaining the population base, improving off-farm job opportunities, and providing public services continue to be long-term challenges for many traditionally farming areas.

Growing numbers of Hispanics are settling in rural America, accounting for more than 46 percent of nonmetro population growth between 2000 and 2005. With a younger population and higher fertility, Hispanics are now the fastest growing racial/ethnic group in rural America. In addition, almost half of all rural Hispanics live outside of the traditional settlement states in the Southwest. In many places, new Hispanic settlement patterns are contributing to the revitalization of small towns; in others, the influx of residents is straining housing supplies and other community resources. The younger age, lower education and large family size of Hispanic households suggest increased demands for social services, including prenatal care, childcare and education programs.

The older population grew rapidly in many rural places in the 1990s, due largely to retirement and recreation opportunities. Nonmetro retirement-destination counties, where the number of residents age 60 and older grew by 15 percent or more between 1990 and 2000 due to immigration, were located predominantly in the west and in major retirement centers throughout the south, including Texas and Florida. In the rural agricultural areas of the Great Plains and Corn Belt, as well as in rural parts of the lower Mississippi Delta, the growth of the older population slowed and in many places stopped altogether. This pattern reflects the small size of the cohort now reaching age 65, a group that was depleted in many rural areas by low birth rates in the 1930s, an exodus to cities in the 1940s and an exit from farming in the 1950s. These dual patterns of growth and decline suggest the need for different strategies. Areas with rapidly increasing older populations must be prepared to provide essential services, resources and programs for the elderly. Areas with declining elderly populations must consider economies of scale when ensuring that necessary services are available and accessible.

The educational attainment of rural Americans is higher than ever before, continuing a long upward trend. In 2005, nearly one in six rural adults had a four-year college degree, about twice the share of a generation ago. But the substantial growth in the college-educated population was not evenly distributed across rural areas and low education levels still challenge much of rural America. Low-education counties, with 25 percent or more of residents age 25 to 64 who had not completed high school, are concentrated in the south and southwest. Low-wage resource-based and manufacturing economies in many of these counties limit the kind of high-skill job growth that attracts a higher educated labor force. Strategies for raising educational levels and the quality of that education are essential to improving the economies of many rural communities.

The Rural and National Economies Are Linked

Rural areas as a whole shared in the Nation's economic prosperity during the 1990s. The nonmetro unemployment rate fell to its lowest level (4.9 percent in 2006) since the 2001 recession, and rural poverty rates reached an all-time low (13.4 percent in 2000). But in late summer 2000, the manufacturing industry went into a downturn, and by March 2001, the longest U.S. economic expansion on record had ended. Unemployment and poverty rates subsequently rose in both rural and urban areas, while employment and earnings grew sluggishly.

The U.S. economic recovery began in November 2001, and by the beginning of 2004 had become broad-based, with most domestic sectors exhibiting moderate to strong growth. Metro employment grew by 3.3 percent from 2002 to 2005, while nonmetro employment grew by 2.7 percent. But economic recovery has been uneven across rural America, with most gains concentrated in the high population growth areas of the South and the West. Areas of the Northwest continue to wrestle with declining employment in timber and other natural resource industries. The employment picture for the Great Plains and Midwest was mixed, with some rural areas buoyed by employment gains of at least two percent and others mired in long-term declines in population and employment.

Rural Policy Options for the Future

The goals of economic/community development programs and policies in rural areas vary widely, as do the resources and the opportunities and challenges communities face. Some areas will focus on strategies to stimulate economic and community growth to help address problems associated with population and employment decline. Other areas will seek to improve wages and living standards by changing the nature of employment, or by enhancing infrastructure and public services. Low-density settlement patterns often make it more costly for communities and businesses to provide critical public services. In contrast, other rural areas, particularly those rich in natural amenities, face growing pains borne out of economic transformation and rapid population increases. Community leaders in these areas are struggling to provide new roads, schools, and other community services and may actually want to stem growth in order to limit rural sprawl.

New Economic Engines

Prosperity for many rural communities will depend on innovative income-generating strategies that attract people and jobs. Faced with continuing loss of farm jobs, some rural communities have sought to offset shrinking employment by adding value to farm products. Focusing on the role of farms as a source of raw materials for food and fiber products, these communities seek to add value to agricultural commodities by luring food processing plants to rural areas, developing new consumer or industrial uses for agricultural products, or bypassing conventional wholesale-retail systems to sell food products directly to consumers. These strategies may prove successful for some communities, but ERS research finds that value-added strategies in general are not particularly promising as engines for rural job growth. Food retail and marketing are the largest and fastest growing value-added sectors, but these businesses usually choose to locate in urban areas for more efficient access to consumers, nonagricultural suppliers, and distribution networks. Food manufacturing and other value-added activities account for a relatively small share of rural employment, and the amount of job growth from these value-added strategies has had little impact on the general rural labor market.