The State of Rural PA

KRC's new report, The State of Rural Pennsylvania, reveals good news and bad news for the 28% of Pennsylvanians who live outside the state's metropolitian areas.

If rural Pennsylvania receives the focus and the resources that it needs, it has rich assets that provide a basis for a new era of vitality: natural beauty, gorgeous small towns, a strong work ethic, and strong communities in which, more than in urban Pennsylvania, everyone remains “in it together.” With smart investment in the future, rural Pennsylvania already possesses the human and social capital needed for future prosperity.

The good news is that, measured by some economic indicators, rural Pennsylvania as a whole has performed as well or better than urban Pennsylvania since 1990. Job and population growth in rural Pennsylvania, for example, have outstripped that in urban Pennsylvania over the past 15 years. While some of this growth may reflect exurban sprawl, it nonetheless suggests that rural Pennsylvania as a whole is no longer declining relative to urban Pennsylvania as a whole.

The bad news is that rural Pennsylvania has never fully recovered from a downward slide of its living standards that took place in the 1980s. Rural Pennsylvania today remains poorer compared to urban Pennsylvania than it did at the end of the prosperous 1970s. This is true for rural Pennsylvania as a whole and within each of rural Pennsylvania’s western, central, and eastern regions considered separately.

The policy message from The State of Rural Pennsylvania is that, even more than urban Pennsylvania, rural Pennsylvania needs an explicit economic plan to promote sustained prosperity and opportunity. Muddling through will no longer suffice.

A quarter century after the deep recession of the early 1980s, Pennsylvania still has no comprehensive economic plan to help rural Pennsylvania respond to a global economy and shrinking manufacturing sector. If rural Pennsylvania is left twisting in the winds for another quarter century, there is no good reason to expect anything but income and wage stagnation coupled, in some areas, with a loss of population and jobs.

If, on the other hand, rural Pennsylvania receives the focus and the resources that it needs, it has rich assets that provide a basis for a new era of vitality: natural beauty, gorgeous small towns, a strong work ethic, and strong communities in which, more than in urban Pennsylvania, everyone remains “in it together.” With smart investment in the future, rural Pennsylvania already possesses the human and social capital needed for future prosperity.

The end of this report outlines public policies that could help rural Pennsylvania prosper in the decades ahead. Our goal is to encourage a more visible and long overdue debate about the future of rural Pennsylvania, leading to the fuller development of the missing plan for prosperity and opportunity and, then, critically, to the implementation of that plan.

While data on some individual counties is provided, the thrust of the report is on rural Pennsylvania as a whole. Just as the Brookings Institute’s Back to Prosperity report released in late 2003 sought to underscore what Pennsylvania metropolitan areas have in common, we want to underscore what rural Pennsylvania regions have in common. It is hoped that this broad focus will make more visible the challenges rural Pennsylvania faces—and contribute to the crafting and implementation of state policies that promote rural economic development and an improved quality of life in the future.

Rural Job and Population Growth Exceed Urban Since the late 1980s

The popular perception is that rural Pennsylvania is largely in decline, while parts of urban Pennsylvania, especially in the southeast and south central parts of the state, have enjoyed robust growth. In fact, 1980–1987 was the only sustained period since 1969 in which rural job and population growth in Pennsylvania trailed urban.

  • Since 1987, job growth in rural Pennsylvania has been twice as fast as in urban Pennsylvania—25% versus 13%.
  • Since 1989, rural population growth has been 6% versus 4% for urban Pennsylvania.

To be sure, job growth and population growth are not complete measures of economic well-being. Some of the jobs pay poorly and some of the job growth reflects women entering the labor market because male wages fell. The fastest population growth in rural Pennsylvania is in seven counties (Adams, Butler, Centre, Franklin, Monroe, Pike, and Wayne) experiencing growth in exurban sprawl, with five of these counties attracting residents who commute to jobs in other states.

But the numbers since the late 1980s do underscore that rural Pennsylvania is not in a free fall. Thirty-one rural Pennsylvania counties gained population since 1989 while only 16 lost population. Only Cambria County lost more than 6% of its population. Rural Pennsylvania is stable enough for a new effort to restore vitality

The Rural-Urban Unemployment Gap Declines to Almost Zero

In the early 1980s, measured by unemployment rates, rural Pennsylvania experienced a substantially more severe economic recession than did urban Pennsylvania. The unemployment rate in rural Pennsylvania peaked at nearly 17% compared to about 12% in urban Pennsylvania.

Since the late 1980s, however, the unemployment rate in rural Pennsylvania has gradually fallen towards the rate in urban Pennsylvania. In the 2000–2007 period, rural unemployment rates fell to only a little above the urban—4.4% in the first quarter of 2007 versus 4% for urban Pennsylvania.

Public Transfer Payments Help Sustain Rural Pennsylvania

One source of income that helped sustain rural Pennsylvania economically over the past three decades was payments from public programs, or “transfer payments.” Despite a widespread perception that urban Pennsylvania relies more than rural Pennsylvania does on such transfer payments, the reverse is actually the case:

  • As a share of personal income, transfer payments make up 22% of personal income in rural areas versus 16% in urban areas.
  • Medicare, Medicaid, and Social Security account for about 80% of all transfer payments.
  • Welfare cash benefits account for less than 0.15% of total transfer payments in both rural and urban Pennsylvania.
  • As a share of personal income, welfare cash benefits are slightly higher in urban Pennsylvania than rural—by one twentieth of a cent for each dollar of personal income.

The Rural Education Gap Restrains Economic Growth and Opportunity

Better-than-expected news on the jobs and population front should not obscure the challenges that rural Pennsylvania faces positioning itself for future growth.

At the top of the list of challenges is the rural education gap—rural Pennsylvania substantially trails urban Pennsylvania when measured by educational attainment. This gap was large in the 1970s, when education mattered somewhat less to economic opportunity and economic growth. This gap is even larger today.

  • Only 45% of rural adults (ages 25–64) today have more than a high school degree versus 56% in urban areas.
  • Only one in five rural Pennsylvanians 25–64 has a college degree, compared with almost one three in urban Pennsylvanians.
  • These gaps in educational attainment persist even among rural people age 25–40. They do not simply reflect an older population in rural Pennsylvania but also stem from persistent differences in postsecondary accessibility and, possibly, in cultural attitudes. These persistent gaps could also reflect the difficulty rural Pennsylvania has holding onto more educated young people or bringing them home again after they go elsewhere to college.

Rural Pennsylvania Still Depends Heavily on Manufacturing, but Also Needs Middle-Class Jobs in Other Industries

Over the past 35 years, manufacturing has declined sharply as a share of total employment throughout Pennsylvania but somewhat less so in rural Pennsylvania.

  • In rural Pennsylvania, manufacturing employment as a share of total employment fell from 25% in 1979 to 13% in 2005.
  • In urban Pennsylvania, manufacturing employment as a share of total employment fell from 25% in 1979 to 9% in 2005.

Manufacturing still accounts for 22% of total wage income in nonmetropolitan Pennsylvania compared with 17% in metropolitan Pennsylvania.

These statistics underscore the importance of manufacturing to rural Pennsylvania and further underscore that rural Pennsylvania has a pressing need for innovative state policies that can sustain and grow manufacturing. At the same time, figures on the share of employment and wage income accounted for by manufacturing make clear that manufacturing alone cannot by itself sustain a rural middle class. More service industries must generate family sustaining jobs in the future if rural Pennsylvania is to have economic opportunity for all.

Average Rural Wages and Incomes Decline in the 1980s but Rise Modestly Since

Rural Pennsylvania living standards, measured by wages and income, declined in the 1980s in absolute terms and relative to urban Pennsylvania. Since the early 1990s, by these measures, rural Pennsylvania has recovered somewhat in absolute terms and stopped declining relative to urban Pennsylvania:

  • In inflation-adjusted terms, average wages per job in rural Pennsylvania dropped 9% from 1978–82, recovered only 3% by 1993, and then climbed another 9% by 2005.
  • Average wages per job declined in rural Pennsylvania relative to urban from 87% in the 1977–81 period to 78% by the end of the 1980s, and 73% throughout 2000-05.
  • Per capita income in rural Pennsylvania was 18% below the urban average at the end of the 1970s but then fell to 25% below by 1990, holding steady at about 27% below since the end of the 1990s

Middle- and Low-Income Rural Taxpayers Lose in the 1980s, Recover Some Ground Since

Average wages and per capita income both measure overall or average living standards in urban and rural Pennsylvania. A new data set constructed by KRC makes it possible to look at any point on the taxable income curve, and thus to distinguish the economic progress of upper- and middle-income taxpayers from low-income ones. Doing this reveals that:

  • the lowest 70% of the rural taxable income distribution experienced a decline in income, adjusted for inflation, between 1979 and 2005.
  • since 1989, rural taxable incomes in the bottom 70% of the distribution have recovered some ground relative to urban Pennsylvania and also seen increases in their inflation-adjusted income.
  • while their taxable incomes have risen, the most affluent rural taxpayers have lost ground relative to their urban counterparts in all periods since 1979.

Rural Workers Lack Pension and Health Benefits Even More than Urban

Turning from wages and incomes to benefits, rural Pennsylvanians also trail urban ones:

  • The share of nonmetropolitan Pennsylvanians younger than age 65 who lack health insurance substantially exceeds the same share in the rest of the state. (Recall that non-metropolitan Pennsylvania makes up a bit more than half of rural Pennsylvania.) Whereas 16% of nonmetropolitan Pennsylvanians have no health insurance, the same figure in the rest of the state is 12%.
  • The share of nonmetropolitan Pennsylvanian workers without pension benefits is two percentage points below the same share in the rest of the state (54% versus 52%).

Rural Pennsylvanians Are Still In It Together

Because incomes and earnings have increased less at the top end in rural than urban Pennsylvania, levels of economic inequality are lower in rural Pennsylvania. In two senses, then, rural Pennsylvanians are “in it together” more than urban ones:

  • First, even those at the high end of the distribution in rural Pennsylvania have enjoyed only modest gains economically in the past quarter century and have an interest in new approaches that might yield more rapid improvements in living standards;
  • Second, since the highest earners have pulled apart less dramatically from the middle in rural Pennsylvania, there may be less of a sense of detachment from the broader community among the most affluent.

To the extent that economic polarization translates into greater community solidarity in rural Pennsylvania, this sense of cohesion provides an important cultural resource in the development and delivery of new economic strategies.

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