Jobs, innovation leave some small towns behind

We need ideas, investment zones for rural areas

Before our eighth-grade promotion, nearly every boy in Rockdale, Texas (not quite three hours northeast of here) went down to Hodges Man Shop to buy a suit. In the late 1970s, we looked sharp in our three-piece suits and our dads showed us how to fasten a tie.

What was the last small town you drove around in that had a “man’s shop”? (Fredericksburg’s tourist-driven inducements notwithstanding.) Small town business creation around the country, unless there is a huge visitor base like ours, is struggling.

On Sunday, the Washington Post published an article about how Americans in small towns are much less likely to start new businesses. This is a trend that is bad for huge swaths of our country.

Our small town of Rockdale relied too much on one industry for its economic welfare. When Alcoa’s smelter closed in 2008, a lot of good jobs left along with it.

Today, I have a lot of admiration for the courage of my school mates — the same ones who got their suits at Hodges — who opened restaurants or other small businesses after they lost their jobs at Alcoa. But those are relatively few compared to how many Alcoa had employed — 2,000 good-paying, steelworker jobs at its peak.

The Post report states that the slow recovery from the recession has shown a slowdown of new businesses, or start-ups. Most of the innovation is happening in America’s larger cities, and small towns are being, in large part, left behind.

The study cited census bureau data which showed that during the 1990s economic recovery, 125 counties combined to generate half the total new business establishments in the country. In this recovery, just 20 counties have generated half the growth. “Rural areas have seen their business formation fall off a cliff,” the Post article states.

Lots of trends have contributed to this: the rise of big-box retailers such as Walmart, the loss of millions of manufacturing jobs, like Alcoa’s, and construction jobs, as well as a pullback in business lending that has stung small-town borrowers, also perhaps due to banking consolidation and additional regulation.

We see the results of this economic decay in the rise of support for Donald Trump in rural areas. Trump claims he will bring back jobs. That’ll be a lot more difficult than it sounds. We’ll need to restructure our corporate tax system for starters, which will involve Congress (collective groan here).

The long-term trend is that income and employment gaps are growing between metro and rural areas. Along with that is political representation, which is being concentrated around our large cities. State Rep. Dan Kubiak of Rockdale represented our district until his untimely passing, then our district got lumped in with fast-growing Georgetown. Rockdale won’t likely see another representative from our town for decades.

Years ago, I spoke with economist Dr. Ray Perryman. He told me small towns fight a natural attrition with their population, losing 100 or so residents to simple high school graduation each year. With fewer jobs to come home to, fewer will ever return.

This is a national problem. Nearly two out of three rural counties showed a net loss of businesses between 2010 and 2014. Yet the 100 largest metro areas have added nearly six million jobs.

This will require some thought and leadership from our lawmakers.

Perhaps we should consider “investment zones” with certain tax advantages to help build up our small towns again. We also should let smaller business lenders invest more freely instead of burdening them with additional regulations meant to combat bad-behaving large banks (Dodd-Franks’ unintended effect.)

We also, as consumers, should support small businesses more. The Post article states an increase in monopoly power from reduced competition, post-recession, is one of the major factors slowing innovation and weakening the quality of job growth.

And that’s why these days a young man in most small towns has to drive to the big city to find a suit for his class promotion.

ken@fredericksburgstandard.com

Fredericksburg Standard

P.O. Box 1639
Fredericksburg, TX 78624-4228
830-997-2155