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Can Counties Fix Rural America's Endless Recession?

The inability of most rural places to recover from the economic downturn is fueling political and social problems around the nation.

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A blower arches several stories into the sky, spraying enough wood chips to form a small mountain. It’s part of the Georgia-Pacific paper mill in the small Oregon town of Toledo, a hundred miles southwest of Portland. The plant processes wood chips and recycled materials into 2,500 tons of cardboard every day. About 400 people work there, most of them unionized, pumping $42 million annually into the local economy through wages. 

The only thing unusual about the mill is that it exists at all. It’s the last paper mill on the Oregon coast, a vestige of a timber industry that was a dominant force in the state just a couple of decades ago. Earlier this year, a paper mill was closed for good in Newberg, which is not far outside of Portland. About 200 workers were eligible for retraining under a federal program that helps people whose jobs were lost due to foreign competition (although the decline in Oregon’s timber industry has as much to do with federal land management policies as overseas competition). 

Some residents have grown cynical about efforts to retrofit workers to fit the shifting economy. “The big joke along the coast used to be that the loggers ran into trouble, so they trained them to be fishermen,” says Harry Roby, who owns a radiator shop in Newport, a few miles from the Georgia-Pacific mill. “Then fishing got into trouble and they trained them to be loggers.”

Job training is all well and good, in other words, but it doesn’t serve much purpose if there aren’t any jobs to be had. Last year, Oregon was tied with California as having the fastest-growing economy of any state, but almost all the action was in Portland. Half of the jobs in the state are now in a three-county metropolitan area. In four out of 10 rural counties in the state, employment remains substantially below where it was prior to the recession. 

There’s a similar problem throughout rural America. While some metro areas are thriving, two out of three rural counties have experienced a net loss in their total number of businesses since 2010, after the recession had technically ended. According to a recent report by the Economic Innovation Group, half the new businesses started throughout the nation since 2010 were created in just 20 counties, out of more than 3,000 nationwide.

Urban America recovers from recessions, but rural America no longer seems able to. “You look all across this country and some of these places are dying,” says Seth McKee, an expert on rural politics at Texas Tech University. “They’re either going to be wiped off the map, or they’re getting smaller and smaller and there’s nothing to sustain them.”

That may be overstating the case, but it’s no longer far-fetched to talk about permanent, Appalachian-style poverty spreading across rural America. There just aren’t enough jobs. By now, it’s a familiar story that many manufacturing plants have shut down or moved and taken their jobs with them. The prevailing fear of the moment -- that robots are going to take over all the work -- has already happened in agriculture. A machine knows more about the exact fat and protein content of the milk from every cow it touches than a human hand ever would. Farmers are becoming almost as likely to plant sensors as seeds, helping them map out where their drones should apply fertilizer. Already, farms account for less than 1 percent of employment, but the number of agriculture jobs is projected to decline another 6 percent by 2024.

The old notion that jobs in timber, farming and small-town manufacturing are secure and will last for life is not just outdated but antique. Appalachia itself has been hit hard by the recent steep decline in coal jobs, with production down nationwide by 40 percent since 2008. As working-class jobs have dried up, rural communities have emptied out. Lots of rural towns around the country have come to resemble villages in wartime. Practically the only people left are those too young or too old to feel the magnetic pull of the city. Even an area like Oregon’s Lincoln County, which includes Toledo and Newport and can boast of a mix of surviving old and burgeoning new industries, struggles with an aging population, drug abuse and homelessness.

Already, a majority of the country lives in metropolitan areas of more than 1 million people. If current trends continue, rural America will lose population between now and 2060, even as the country gains another 100 million residents, says Rolf Pendall, who directs economic development and housing studies at the Urban Institute. “The people who grow up in these communities who are most capable of having a strong income trajectory, they leave, they go somewhere else,” Pendall says. “It’s true in struggling neighborhoods in cities and it’s true in rural America as well.”

This is putting a strain on rural governments. Along the Oregon Coast, counties that once shared in rich revenues from timber royalties and federal subsidies have seen those funds dry up. Douglas County, roughly 150 miles south of Lincoln County and traditionally the heart of the state’s timber industry, once shared an average of $134 million each year in timber royalties. Last year, the figure was down to $11 million. The county itself has lost a third of its workforce over the past decade, but it’s still in better shape than a lot of its neighbors. Counties can’t just cease operations, but some in Oregon have just about given up on programs such as running jails and juvenile services or enforcing building codes. “Those kinds of services that are shared services, you just declare you can’t do them and literally hand them back to the state,” says Tim Freeman, a Douglas County commissioner.

The anxiety caused by diminished prospects is starting to play out politically. People wondering what happened to their good-paying jobs have been drawn to Donald Trump’s message that bad trade deals are to blame for their struggles, or to Bernie Sanders’ complaint that the economic system is rigged. Abroad, the resentment of rural residents who feel passed over by the global economy was a primary driver of the recent vote in the United Kingdom to leave the European Union. 

Democrats used to be the party of working people, but it’s now the party of educated professionals who are part of technology or finance or other expanding industries, along with racial and ethnic minorities (who do make up a substantial share of the working class). Republicans have long been the party of business, but Trump’s anti-trade stance has him drawing swords with the U.S. Chamber of Commerce and other business groups. “The Republicans are more and more the party of the unsuccessful,” says Eric Schnurer, president of Public Works, which consults with state and local governments. “You’re either in this international, networked economy, or you’re not. The nonurban centers are largely being left out of the global economy. It’s not surprising that they feel an extreme antipathy toward it.”

The decline in rural prospects is not only feeding political resentment, but causing serious social problems. Nationwide, the number of deaths among working-class whites at most age levels has been increasing, the sad result of a combination of preventable causes such as suicide and abuse of illegal or prescription drugs. Oregon has the second-highest rate of opioid abuse of any state, an epidemic so bad that the Oregon Medical Association devoted its entire annual meeting to the topic this spring. Oregonians also die from alcoholic liver disease at twice the national average. The economic strain can play out in other ways, too: The rate of child abuse in Lincoln County is double the rest of the state.

Lincoln County actually has a lot of things going for it. Local officials have been able to leverage the presence of the coast not only to promote tourism and maintain a sizable fishing fleet, but also to develop marine science as an economic driver. What was at one time home to a single oceanographer’s lab has become the nexus for a range of enterprises that constitute a growing share of the local economy. Oregon State University (OSU) runs the Hatfield Marine Science Center, which houses an alphabet soup of state and federal agencies. There’s an aquarium next door that pairs well with the town’s beaches as a tourist magnet. A few years ago, Newport’s harbor became the headquarters for the National Oceanic and Atmospheric Administration’s Pacific fleet, nabbing the ships from Puget Sound. 

All of these projects, along with many others, came about because the Newport area has managed to build a collaborative culture, with city, county, port and state officials pulling together with private-sector actors to make things happen. “This cluster didn’t happen by accident,” says Gil Sylvia, an economist at the Hatfield center. “You start with something small and you build out the components.”

All the players in town seem to belong to one another’s boards -- which is not unusual -- but everyone, from Georgia-Pacific executives to county commissioners, also meets routinely through the Yaquina Foundation and the Lincoln County Economic Development Alliance. In many struggling communities, various jurisdictions will jealously fight over every scrap. In Lincoln County, a couple of calls is enough to start people working on ways of lining up financing to get a project going. The different local entities have learned that scratching each other’s backs and putting up money for projects of shared interest can end up benefiting everyone. 

The latest example of their collaborative effort paying off is an expansion of the boatyard at the port of Toledo, across Sturgeon Bend from the Georgia-Pacific mill. Thanks to help from a variety of county and state funds, the port just brought in the first of a series of lifts that will allow boatmen to repaint and repair large, ocean-going ships. It’s 63 feet wide and six stories tall and came in pieces from Italy, arriving in seventeen 40-foot containers. It’s a huge step up from the type of lifts that have been in place at the boatyard, and it’s projected to increase the number of jobs involved repairing and painting boats from 20 to 160. 

Experts in the rural economy say what separates the winners from the many losers is inspired leadership on the ground, whether that’s a plant owner who figures out a way to modernize and stay profitable, or economic development officials able to find a niche by building on successful enterprises or attractions that are already in place. 

Other towns on the Oregon Coast have ports, but they don’t have anything like the burgeoning marine science sector that Newport has managed to create. Areas with other natural assets that might easily attract rich retirees or remote workers need to figure out how to sell themselves. Plenty of places have snowy mountains, but they aren’t all successful ski resorts. “There are rural areas that are doing quite well, particularly those with natural amenities,” says Brian Depew, director of the Center for Rural Affairs in Nebraska. “They have aggressive leaders that have figured out how to make their places winners, despite having to swim upstream.”

There’s no magic formula, nothing you can bottle, when it comes to turning around a rural area. Rural economies once ran on commodities -- timber, corn, cattle, coal -- that by their nature were essentially the same regardless of where they came from. In today’s economy, though, places have to find a way to offer something that other similar places can’t.

In Newport, local officials hope marine science will continue to grow into something that puts more than a few researchers to work. The Hatfield center links local fishermen who know the waters with telecommunications companies looking for the best spots to lay Trans-Pacific cables. It’s also partnering with the community college and local businesses to put more people to work making specialized nets that avoid catching protected species -- a product that grew out of research at the center.

The initiative that’s drawn the most attention, however, has to do with seaweed. Researchers at the center developed a new strain of red seaweed called dulse. It tastes a bit like bacon, enough so that it’s become popular enough to be worth patenting. A for-profit company is being spun off to grow dulse in Newport and process it into things like flavor powders and salad dressing -- a total of 15 value-added products in all. “This city always had a more solid mix of industries than other coastal communities that relied on a single industry,” namely timber, says Sylvia, the Hatfield economist.

Having a cutting-edge research center with an annual budget of $55 million is quite a coup for a town of 10,000, but it’s no panacea. Marine research remains a small share of the overall Lincoln County economy, which is still led by tourism and fishing -- industries that provide work that is seasonal or part-time in nature, meaning jobs that don’t pay all that well. The average age of minimum-wage workers in the county is 31. Half the income there comes from Social Security and other transfer payments. The poverty rate remains higher than the state average, which in turn is higher than the national average. “It does look like we’re in an upturn,” says Dee Teem of the Community Services Consortium in Newport, “but we’re still seeing a huge number of people in poverty.” 

 Relying on jobs that require high levels of education presents two problems for rural communities. The first is that most such jobs won’t go to locals. Although there are efforts in and around Lincoln County to get students engaged in marine science from 

at least the eighth grade on up, most of the academic hires will come from outside the county. And attracting educated professionals to rural areas remains a challenge. People with MBAs, Ph.D.s or actual medical degrees often don’t want to relocate to smaller communities, for fear there will be nowhere else for them to go if they ever want to change jobs. There also might not be available work for their spouses. “A job for a spouse is a big, big problem,” says Caroline Bauman, executive director of the Economic Development Alliance of Lincoln County. “It comes up all the time.” 

But there’s also the problem of what might be called rural gentrification. As professionals move in, that raises prices and puts a squeeze on all the people making a living pumping gas or selling hand-dipped candles to tourists across the bay from the Hatfield center. Lincoln County has a particularly acute problem because so much of its property is now tied up as vacation or rental housing. As a result, even decent-paying jobs might not be enough to cover a family’s needs. Many residents work two or three jobs to make ends meet, sometimes driving long distances to get there. “I’ve never had trouble finding work,” says Terry Ayres, a construction worker who is raising three daughters in Newport, “but the living expenses are just outrageous.”

You wouldn’t expect this to be the case in big rural counties that can run the size of the state of Connecticut, but there are housing shortages all over the West and, indeed, much of rural America. For decades leading up to the recession, housing starts averaged nearly 1.6 million units per year. Over the past seven years, that number has been cut in half. Even last year, after things picked up, housing starts were still a half-million short of the historical average. Starter and trade-up home inventory has dropped by more than 40 percent since 2012, according to Trulia, the online real estate listing service. That’s a big barrier of entry against homeownership. The percentage of households that are renting is now at its highest level since the 1960s. One out of six families spends more than half its income on housing.

Housing markets are squeezed tight in thriving metros, but a different convergence of forces is at work in rural areas. Lenders often don’t like to do business outside the metro markets they’re already familiar with. Builders are so busy putting up apartment buildings in places like Portland that they can’t be bothered making long drives out to places like Lincoln County unless a dozen or more units are involved. The federal government owns half the land in Oregon, while a good share of the rest is tied up by land preservation programs and zoning restrictions.

For all these reasons, some Lincoln County residents are nervous about a planned expansion at the Hatfield center. What has been primarily a research facility is becoming a campus, with 500 undergraduates expected to arrive from OSU in the coming years. Most people welcome the development, but wonder where they’re going to put all those students, even though the university is building housing for half of them. There’s already more demand than there is supply. Given the cliffs that line the Pacific Ocean and the mountains that separate Lincoln County from the Willamette Valley to the east, there’s not a lot of land left that’s flat. It’s difficult to insure much of the land that is available, due to growing concerns about tsunamis. As a result, the value of residential retail sales in the county shot up by 22 percent in May over last year’s numbers. 

About 10 percent of the schoolkids in Lincoln County are now homeless. But the issue of rural gentrification doesn’t affect only the poor, it affects the middle class, too: Every year, a few teachers cancel their contracts in Lincoln County over the summer because they can’t find housing. Anecdotally, lack of available housing has also been a recruiting problem for the county’s two hospitals.

The problems that plague Lincoln County -- and most of America’s rural working class -- are daily facts of life for a guy like Mike Walters.

For the past two years, he’s been living in a trailer park outside of Depoe Bay, a few miles north of Newport, but he recently received an eviction notice. At 52, he’s followed a career path that’s become common in rural America, stitching together a living by working a few hours here and there painting houses or providing home assistance to the elderly. Working for “people with money,” he’s able to scrape together his monthly rent, but he usually pays in dribs and drabs throughout the month rather than paying in full on the first of the month. His landlord got tired of that and told Walters he’d have to clear out.

Walters has been barely getting by as it is. He could find more work if he had a car, but he has to rely on his bike and buses to get around. Transportation and access to services and jobs are huge issues in rural America. Walters admits he’s “freaking out,” but his situation doesn’t seem to keep him down for long. Riding his bike on the shoulder of Highway 101, he flashes two fingers to passing cars, wishing them either victory or peace. “All these people on the highway got to be going to work to make money,” he says. “I gotta catch up.” 

Alan Greenblatt is a senior staff writer for Governing. He can be found on Twitter at @AlanGreenblatt.
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