Episode 2: Superstars Rise, Others Stall Episode 2: Superstars Rise, Others Stall

Runtime: 19:54 — Rural areas are by no means the only places struggling in America, but there’s no denying their problems. Decades-long trends show despair is up in rural America and economic growth is down. Meanwhile, “superstar cities” are headed in exactly the opposite direction. These high-demand locales with high incomes offer a stark contrast to places in long decline and accent an urban-rural divide that policymakers say must be closed.

Overview Overview

The beauty of rural America has always been an essential part of our national mystique. “America the beautiful” sees the country’s splendor in its “spacious skies” and “fruited plain.” It doesn’t say much about its cities. But even though its beauty remains, something is wrong in rural America in the 21st century.

Decades-long trends show despair is up and economic growth is down. Meanwhile, “superstar cities” are headed in the opposite direction. These high-demand locales with high incomes are a stark contrast to places in long decline and accent an urban-rural divide that policymakers say must be closed.

In this episode of Six Hundred Atlantic, we’ll speak to Laszlo Kulcsar, an expert in rural America from Penn State, and Columbia University’s Christopher Mayer, one of the fathers of the superstar cities concept. We’ll look at an America on the rise, an America in decline, and ask a critical question: How can we bring rural America more hope and opportunity?

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Transcript Transcript

The beauty of rural America has always an integral part of our national mystique.

“America the beautiful” sees the country’s splendor mainly in its “spacious skies,” its “amber waves of grain,” its “fruited plain.” It doesn’t say much about its cities.

Henry David Thoreau, the 19th century writer and naturalist from Massachusetts, spoke of Heaven “under our feet, as well as over our heads.”

“We need the tonic of wildness,” he advised.

That tonic is still available around the country, America is still a land of open space. But even though its beauty remains, something is wrong in rural America in the 21st century.

This season of Six Hundred Atlantic is about geographic disparities—vast differences in economic and social well-being, depending on where you live in the country. It’s the topic economists tackled at the Boston Fed’s 2019 economic conference.

Rural areas are by no means the only places struggling in America. But there’s no denying their problems.

Decades-long trends show despair is up in rural America, fertility is down, and economic growth is down. Communities find themselves caught in a vicious cycle that’s being fed by declining populations and opportunity.

Here’s László Kulcsár, an expert in rural America from Penn State.

So, we know with population decline comes the loss of businesses, the loss of consumers, the loss of tax revenues for those localities. If they don't have the revenues, they can't maintain the services, which then will make other people leave again. So that's the cycle.

While rural areas fight decline, other areas of the country are headed in exactly the opposite direction. These are high-demand locales with high incomes and soaring real estate values that some economists have dubbed “superstar cities.” Think New York, San Francisco, Los Angeles.

Their rise and status offer a stark contrast to places in long decline and accent America’s urban-rural divide.

Christopher Mayer of Columbia University is one of the fathers of the “superstar cities” concept:

We already have increasing income inequality and wealth inequality in the country. And to the extent that you have the wealthiest people living in segregated communities, it certainly creates a greater distance between people with different wealth and income. And I think that also perpetuates political problems and social problems.

I’m your host, Jay Lindsay, from the Boston Fed. On this episode of Six Hundred Atlantic we’ll take a look at an America on the rise, an America in decline, and ask a critical question: How can we bring Rural America more hope and opportunity?

We need to first define what “rural” means when we’re talking about populations. It’s not as simple as a place with a lot of countryside and more livestock than people.

A place like that in the same county as a densely-settled area of 50,000 people—just a halfway-decent sized town—would be considered to be in a metropolitan area.

Or, if even 25 percent of the people who live in that small town commute to a densely settled county, that’s also in a metropolitan area.

So rural populations are both geographically and economically removed from densely populated areas.

In 2019, the nation’s rural population was estimated at about 45 million, out of 328 million Americans. That’s roughly 14 percent of the population.

By comparison, the rural population peaked in 1940 at 75 million, when it was about 57 percent of the population.

The history of U.S. manufacturing can help us understand the fortunes of today’s rural areas because it’s played a major role in shaping rural economies.

It’s easy to forget that decades ago, in 1960s and 1970s, U.S. manufacturing centers were found in cities.

But in the 1980s manufacturers began migrating to suburbs and then rural locations. Land and labor costs were cheaper there, and the interstate highway system made it easy to move goods.

Then, in the 1990s and early 2000s, manufacturing was on the move again. This time, it was migrating to locations outside the U.S.

China was a major destination.

Again, the lure was lower costs. And it had a devastating impact on rural areas. People there tend to have lower education levels, which makes it tougher to bounce back from job loss.

Here’s Boston Fed economist Christopher Foote.

De-industrialization is not a new phenomenon in the United States. Put on any record by Bruce Springsteen cut between 1975 and 1985 and you'll hear a lot of songs about that. But it seems like now, the loss of manufacturing jobs is having a bigger effect on the particular areas where they occur.

Rural areas weren’t just being hit by a manufacturing exodus during these decades. Greater mechanization and consolidation reduced jobs in agriculture. And the rise of information technology and globalization eroded cost advantages for all rural industries.

These huge disruptions in rural economies over the last 40 or 50 years have been accompanied by unprecedented demographic fluctuations.

For literally decades, “steady outmigration and high fertility” was the trend in rural areas. In other words, lots of people left, but plenty of babies were being born to take their place, so populations stayed stable.

That began to see-saw in the 1970s, as industries came and went, and faddish preferences for a “return to nature” developed and faded.

Then the Great Recession accelerated the trend of dropping fertility in rural areas. Today, it’s at nearly the same level as in urban places.

Fewer babies and fewer jobs opportunities means fewer people. Businesses fail, tax revenues fall, services decline, and the reasons to leave increase.

It’s a cycle that feeds itself, and Kulcsár says right now it’s in full swing.

It is very, very difficult to break, because either you have to convince people to stay in place despite the crumbling infrastructure and services around them, or you have to find new ways to bring people there, and then revitalize those economies. The problem is that if you have demographic trends that go back decades, I mean, there's really not much new that you can do to bring new people to those areas.

Of course, this loss of services and job prospects has major effects on the population that remains.

One jarring statistic is the difference in life expectancy between people in metropolitan and non-metropolitan areas.

In the early 2000s, it was about 71 years for both. By the end of the decade, non-metro dwellers were up to about 77 years, but metro dwellers were at 79. They were living two years longer.

Some social scientists attribute the gap to a rise of “deaths of despair” in non-metropolitan areas—deaths like suicide and, in particular, those related to the opioid epidemic.

Kulcsár said opioid deaths are indeed a fundamental component of the metro-non-metro mortality gap. But he said they’re also a temporary one.

So, imagine that we can fix the opioid crisis tomorrow. Let's say, take those drugs off the shelf and then provide the needed care to people, and do everything that you need to do to get rid of the opioid crisis. Even with that, you would still have the underlying structural problems, overall healthcare, and those would require far greater investment and resources than what we would need to tackle the opioid crisis.

If despair is too often a marker of life in rural areas, optimism is in abundance in “superstar cities.”

These are high-demand, high prestige locations, where companies are eager to invest and employees are eager to move.

Columbia’s Mayer outlines two key characteristics of a “superstar city.” First, there needs to be a constraint on housing construction and supply.

The constraint could be geographic—there’s only so much space to build in New York and Boston, for instance. Or, it could be man-made, like local zoning rules that put tough limits on new building. The bottom line is those constraints push up the cost of living.

The second characteristic of a superstar city is that it’s an attractive place for people to live.

Mayer notes that what makes it attractive can take many forms. It could be beautiful scenery, good museums, good restaurants. Often, it’s just the population itself.

Some of what's attractive is people like to be around other similar kinds of people to them. And so, places that tend to be attractive for highly educated workers would definitely fit into the category of superstar cities.

An interesting phenomenon in superstar cities is that prices there grow faster than incomes.

At a glance, that seems logically impossible. If prices outpace incomes, the people there eventually can’t pay them. But in a superstar city, it’s not just about the people already there. Those people are competing for a place in that city with people from all over the country. That’s a lot of competition for limited housing.

Prices keeps rising with demand, and new people come in while others are priced out.

Mayer uses San Francisco as an example. Real estate values keep going up there, but since 1980, there’s been almost no population growth.

And that pattern means that in essence San Francisco has increasingly become a city of the wealthiest people in this country. And you've seen some of the same things happen in Boston, in New York, Washington DC to a lesser extent. These are places where it's hard to grow, there are constraints on growing and more people want to live there who are wealthy, and that's what drives up prices. And certainly parts of LA also fit into this category.

There’s nothing wrong with highly educated people grouping in highly productive places. But Mayer says a problem superstar cities can run into is that no city is made up of just wealthy people—and no one else.

The firefighters, the teachers, the maintenance workers in a superstar city will struggle to afford to live where they work.

Mayer notes not much is likely to change to bring down costs in a superstar city without intervention from “some larger political force.”

There’s no incentive for property owners to support more residential housing, for instance—that just suppresses the value of their property.

Nobody is of course representing the people who don't live there but who would like to live there and would live there if prices were lower and rents were lower. And the only way that's going to happen is if you actually build more housing.

Of course, even superstar cities don’t avoid big-city problems like crime and homelessness. But at that city’s highest echelons, the geographic disparities between a superstar city and some rural areas couldn’t be greater.

It’s not that rural areas don’t attract wealthy people. But Mayer notes those people are typically not attracting large numbers of people with similar wealth, who could build housing and drive up home values.

And a superstar city has almost no available land, while abundant land is one of the major draws in rural areas.

These places just don’t have much in common.

By definition, the urban/rural divide becomes exaggerated in a world where you have superstar cities growing. And by the way, there's no evidence that superstar cities are causing this problem. It’s that they’re a result of what’s happening.

The rural/urban divide in the U.S. is a topic for limitless sociological and economic study.

It’s source of both light-hearted joking and derision—the uneducated hick versus the arrogant city slicker.

And every election cycle it’s a source of political rancor, because of the well-documented differences in their political preferences.

Is the rural/urban divide a factor when it comes to solving the problems in today’s rural areas?

Kulcsár says “Yes.” But he points to a dynamic that isn’t about resentment or politics. Rather it’s about the experts themselves: They’re all from the city. And while policymakers would argue an outside perspective can often lead to better solutions, it can be an obstacle.

Typically, even the best-meaning experts who went to rural areas to help them came from urban areas. And they had a very specific way of looking at rural places. And over time, rural areas or rural populations have become a bit disappointed and disillusioned by those solutions that somebody would provide who does not live there. And they don't necessarily understand all the nuts and bolts of the problems that they have there.

Kulcsár says a few conditions are needed for a rural area to rebound.

One is jobs that can provide a decent quality of life for a family. Nobody will move there without them.

Another is sufficient services, especially in healthcare and education. Even if jobs are available, people also won’t come if they aren’t convinced those services are high-quality.

But meeting those conditions is costly.

Boston Fed President Eric Rosengren warns that, as policymakers consider how to help rural areas, they need to acknowledge some places will be very tough to turn around—especially if the population is sparse and services have already left.

We know that there are some areas that have successfully turned themselves around. That may not mean that every area turns themselves around. They may not have the resources to be able to do it. They may not have the leadership to be able to do it. They may have already lost so much of their infrastructure that it's very hard to recover. So, I think we have to be a little bit more selective on where we think about where we can actually change that outcome in a significant way.

Kulcsár adds that policymakers—and the public—need to accept that turning around rural areas can’t be left to the private market. It’s going to take consistent and enduring taxpayers support.

That’s just the reality of providing the quality education and healthcare services that rural places need to attract and retain the people that will sustain them.

You can't have the cake and eat it, too. So, you either stand on market grounds and say, “We are very sorry, these places will go out of business and we don't care, and you're better off moving to a city, period, and see you in New York City or someplace.” You could say that, and it would be a valid argument. You could also say that we have a cultural obligation to keep these places going because it’s very important for who we are.

That’s what Kulcsár thinks, for many reasons—including history, the tourism industry, and our food production. But he emphasizes the people.

We still have almost 50 million people living in rural areas, and we do need to take care of them as best as we can. And rural areas do produce all the natural resources that we have. They do provide all the tourism opportunities, or at least most of them. They do provide all the food and other such commodities. So, it's very important for our national well-being.

So, we have an obligation to make sure that those communities are there, and those people are being taken care of, and those resources are well-stewarded.

This episode covered how people aren’t moving to rural areas. But rural places aren’t only regions in the U.S. where geographic migration has slowed. It’s all over.

“Go west, young man” is a famous line in the American narrative. But people just aren’t moving like they used to, and we don’t really know why.

We also aren’t sure if this lack of mobility is worsening our geographic disparities.

Economists used to believe that mobility helped people absorb major economic shocks—they could just move to somewhere with more opportunity.

Now, more people are staying put, even in places that are hurting.

The idea that migration has declined is certainly consistent with the idea that the country's getting farther apart, in a sense that if you're in a declining area, it's just harder for you to get out and move to an area that's doing better.

Does this lack of interstate migration matter?

And what factors are critical to helping different regions absorb the economic shocks that are sure to come?

That’s next time on Six Hundred Atlantic.

Thanks for listening to Six Hundred Atlantic, and please check out the rest of our debut season, which includes five episodes and a bonus episode. Learn more and subscribe to our mailing list at bostonfed.org/six-hundred-atlantic. Listen and subscribe to Six Hundred Atlantic on Apple Podcasts, Spotify, Stitcher, and TuneIn.

Most of the interviews and reporting for this season of Six Hundred Atlantic were done prior to the onset of the COVID-19 pandemic. But the trends discussed are decades in the making and are particularly relevant during a time of economic upheaval. The pandemic’s impact on these trends are the focus of a special bonus episode of Six Hundred Atlantic, which features a discussion with urbanist Richard Florida and Harvard economist Ed Glaeser. We invite you to listen.

The producers would like to thank our expert contributors for lending their time and insights. They are Christopher Foote, Carol Graham, László Kulcsár, Christopher Mayer, David Neumark, Jonathan Skinner, Eric Rosengren, Katheryn Russ, and Abby Wozniak.

Six Hundred Atlantic is a Federal Reserve Bank of Boston podcast hosted by Jay Lindsay. Produced by Jay Lindsay, Allison Chase, and Peter Davis. Executive producers are Lucy Warsh and Heidi Furse. Recording by Steve Osemwenkhae. Engineering by Steve Osemwenkhae and Alex Cronin. Project manager is Allison Chase. The chief consultant is Christopher Foote. The podcast is written by Jay Lindsay and edited by Christopher Foote, Allison Chase, and Nicolas Brancaleone. Graphics and website design by Meghan Smith and Stephen Greenstein. Production consultants are David West and Thomas Stranberg.