Economic Trends in Rural America

The Great Recession hit rural areas hard as median incomes fell, poverty rates increased and the metropolitan-nonmetropolitan wage gap continued to grow.  In addition, nonmetro areas continue to lose young adults through out-migration, and rural populations are increasingly relying more heavily on transfer payments due to rising medical costs and an aging population.

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Rural areas made economic gains during the 1990s but were hit hard during the Great Recession: median income fell, poverty rates increased and the metropolitan-nonmetropolitan wage gap continued to grow.

  • Throughout the 1990s, high economic growth rates benefited rural areas. Between 1993 and 2000, real median income for nonmetropolitan households grew by 10.5 percent and poverty rates dropped by 20 percent.
  • Some of the gains made in rural areas have been lost or reversed since the beginning of the Great Recession. Between 2000 and 2008, rural median household income decreased from $41,145 to $40,785 (in 2008 inflation adjusted dollars).
  • Over the past 30 years, average metro earnings have grown faster than nonmetro earnings. An average nonmetro job now earns 69 percent of what an average metro job earns, down from 81 percent in the late 1970s.
  • The nonmetro poverty rate was adversely affected during this time, rising from 13.4 percent to 15.2 percent. In 2009, the poverty rate hit 16.9 percent.
  • The nonmetro and metro poverty rate gap for the South historically has been the largest in the country, a trend that only got more extreme in 2009, increasing from a 4.4 percentage point disparity in 2008 to 5.5 points in 2009. Rural areas continue to rely more heavily on transfer payments, particularly to the elderly and disabled, due to rising medical costs.

Rural areas continue to rely more heavily on transfer payments, particularly to the elderly and disabled, due to rising medical costs.

  • Nonmetro residents receive a larger percentage of their income from transfer payments, which include Medicaid, Medicare, Social Security, disability, unemployment insurance, veteran’s benefits and other low-income benefits. Transfer payments represent 22.7 percent of nonmetro personal income, compared to 13.6 percent in metro areas.
  • The transfer payment disparity is due in large part to rising medical costs—which have far outpaced the overall rate of inflation—with a higher proportion of elderly and disabled in nonmetro areas.
  • From 1978 to 2008, nonmetro transfer payments for medical benefits increased 509 percent, versus 427 percent in metro areas. Medical benefits as a percentage of transfer payments also skyrocketed, growing from 18.9 percent of all nonmetro transfer payments in 1978 to 43.1 percent in 2008.
  • Legislation that expanded access to publicly subsidized health insurance and care, especially to children in working families like CHIP, may account for some of the increase in transfer payments for medical benefits. Nonmetro areas continue to lose young adults through outmigration, but are gaining retirees as baby boomers migrate to rural areas, further increasing transfer payment disparities.

Nonmetro areas continue to lose young adults through outmigration, but are gaining retirees as baby boomers migrate to rural areas, further increasing transfer payment disparities.

  • Net outmigration is generally attributed to low population density, geographic isolation, and a lack of amenities, educational and economic opportunities.
  • Nearly half of nonmetro counties lost population through net outmigration over the past 20 years, with one-third of those counties losing 10 percent or more or their population. The highest concentration of losses came in the young adult group.
  • Population loss tends to increase tax burdens, reduce property values and reduce the demand for and supply of local goods and services.
  • Per capita transfer payments in rural America will likely increase as baby boomers retire and migrate to nonmetro areas. If past trends continue, the nonmetro population age 55-75 will increase by 30 percent by 2020.

Source:
U.S. Department of Agriculture, Economic Research Service. “Rural Income, Poverty, and Welfare.”