Strategies to Mitigate Rural Poverty Using Human and Social Capital

August 2014

Daniel Davis: Welcome to the Federal Reserve's Economic Development podcast series. I'm Daniel Davis with the Federal Reserve Bank of St. Louis.

According to the U.S. Department of Agriculture [USDA], the recent economic recession has resulted in the highest rural poverty rates since the mid-1980s. Rural poverty is top of mind for professionals working in those communities. Yet it is also critical for those advancing economic development strategies in urban and suburban areas because poverty reduction can help strengthen the larger economy. As a follow-on to a December 2013 research symposium on rural poverty hosted by the Federal Reserve Bank of Atlanta and the USDA, this podcast explores the qualities shared by persistently poor rural areas and the role that human and social capital have on the income gap and overall economic growth in these regions.

We're speaking today to Mil Duncan, research director at AGree and founding director of the University of New Hampshire's Carsey Institute, an interdisciplinary research center focused on vulnerable families and sustainable development in rural America. Welcome, Mil.

Let's begin by having you provide some context for us. How should we understand rural poverty, and how is it different from urban poverty?

Mil Duncan

Mil Duncan: Daniel, I think it's helpful to think about poverty as a condition where people just don't have the cultural and material resources they need to participate in the economy and in society more generally. The poor, they often are excluded from opportunities for education, for work, opportunities to lead a full life.

So the rural and urban poor are both excluded from opportunities to get a good education and good work. That's partly because they grow up in fragile families that struggle and don't have stability, and it's partly because they often live in places that are plagued with chronic poverty, and institutions—like schools—fail them.

But the rural poor, of course, are more physically isolated in places without public transportation and places where jobs are scarce. And I've found that in chronically poor rural places you often have a few families controlling the economy and the land, and so public jobs become very important and valued.

Davis: How much does education play a role in overcoming individual poverty? I've also heard many rural communities continue to see their most educated residents leave for better opportunities elsewhere. How does this so-called brain drain perpetuate rural poverty?

Duncan: Education is critical. Those who drop out of school or only have a high school diploma or GED are far more likely to live in poverty. These days even mining or timber jobs or work on farms or in factories require education, require literacy, [require] even computer literacy and math skills. And, importantly, education gives people confidence to stand up for themselves and understand their rights and not be vulnerable. So the educated do tend to leave poor places for better opportunities.

And while you have some educated people who can stay because they own a business or can fill one of those few professional positions in a remote poor rural place, and some educated people who just choose to stay and make the community their life rather than pursue a career, many do leave.

So in both urban and rural places you get all the social ills that accompany deep poverty in poor places. You get young people making bad decisions like dropping out of school, having children too young before a couple has the capacity to form a stable family, and getting into drugs or other trouble with the law. And these are decisions that not only hurt the individuals and their capacity to lead good lives, but also undermine a community.

Davis: Demographic shifts will affect our country's workforce and economic development strategies in the next several decades. What are some of the key demographic projections for rural areas over the next decade?

Duncan: Not surprisingly, with the brain drain issues we have already discussed, the loss of the 20-, 30-, and 40-somethings who are so critical to local development is a critical demographic shift. It's one that's been going on for a long time, but maybe has increased as many rural jobs have begun to, through either globalization or technological improvements, we've seen those jobs decline. The other thing is that we do have the aging of rural communities: more and more people getting older, more and more places where demographers are seeing deaths outnumber births. So demographic shifts are critical for development opportunities in the future.

Davis: What are the main challenges and opportunities that rural development organizations and practitioners face in tackling rural poverty?

Duncan: My friends and colleagues who work on rural development say their greatest challenges are the limited human capital in rural communities, a result of the brain drain we've been talking about, a result of the lack of opportunities to begin with. They also find the geographic isolation challenging, and the relative lack of financial capital and supporting institutions is a big problem. They have to take a broader approach to development than their more specialized urban counterparts, and they have to think and act at a regional level.

Economic development practitioners see opportunities in rural regional development in energy like wind farms or biomass or other alternative fuels. They're also looking for more opportunities to provide ecosystem services, such as carbon sequestration or watershed protection, kind of taking a working landscape strategy. Tourism is another opportunity and many try to link ecotourism with cultural heritage. Some talk about how the new interest in local fresh food offers them opportunities to work on regional food systems and link urban and rural areas. And finally, some are looking at e-commerce businesses.

Davis: Can you shed some light on how much social capital or civic culture in a rural community plays a role in its community and economic development?

Duncan: A place with a strong civic culture or rich social capital is a place where people trust one another and work together, where there's broad participation in public life. In other words, where people are included in social and economic activities, not excluded as we were talking about before, and where people have invested in community-wide institutions. So that's three things: trust, broad participation, and community-wide investment.

Appalachia and the Delta, regions with high poverty and high exclusion, lack a middle class and have weak civic culture. In some communities, there's a two-class society of "haves" and "have nots," and the communities, they often are full of distrust. People look after their own families, not the whole community. And professionals and the "haves" generally send their children to different schools and they attend different churches, and as I said before, just a few families might run things.

In northern New England where I studied a mill community, a large blue-collar middle class was the norm, and without the burden of poverty rates over 30 percent and with a tradition of valuing and investing in education and public schools that served everyone, this community had a strong civic culture that enabled it to navigate a transition from a paper and pulp economy to a new, less prosperous, but nonetheless stable economy based on biomass, tourism, and even two prisons.

So a strong civic culture means that people cooperate, disagree without undermining each other, and work together to find solutions. It's not that they're better people, it's just that having an educated middle-class majority enables them to work together. Poor places have high corruption, high illiteracy, and the many social problems we discussed before, and they have to overcome those problems before they can come together and solve problems.

So really, I guess what I've described is civil, civic culture, or social capital almost as an outcome, rather than as a mechanism to doing development.

Davis: What have proven to be the most effective economic development policies and programs that facilitate change in persistently poor rural communities?

Duncan: It's really a tough challenge and there's no silver bullet. I end up thinking that investing in human capital is the best strategy, at least at the federal and state level. Then your rural development practitioners have the skilled, educated people they need to build on those opportunities we discussed before. You can chip away at the social distress we have discussed. And if one strategy for your human capital investment is to address early childhood development—the zero to three—and to provide quality early childhood education to the three- and four-year-olds, maybe you can begin to break the cycle of disadvantage in these fragile and often chaotic poor families. When you help establish stability in their families through support for their parents: counseling, mental health and substance abuse help, and income supplement. These are individual and family interventions, not place-based development interventions, but I think making those investments would give the development practitioners the human capital they need to bring about economic development.

Another element of human capital investment is workforce development. And I think there's some very good new thinking about workforce development where practitioners are arguing that we not only need to take a career-ladder approach and make it possible for people in jobs to move up and have better opportunities within the sector they are working in, but also that we have to improve the quality of so-called bad jobs: make benefits better, sick pay available. But I think that the new emphasis on recognizing that the growth in jobs is going to be in many sectors that are the low-wage jobs that we need to, as workforce development practitioners, pay attention to improving those jobs at the same time as we work to build career ladders for those in jobs that are low pay and low benefits.

Davis: Mil, thank you for speaking with us today. This concludes our podcast with Mil Duncan.

The Federal Reserve Banks of Atlanta and Kansas City and Rutgers University will cohost a conference on the Future of Workforce Development at Rutgers campus in New Jersey in October 2014. More information about this conference is available on their websites, and conference proceedings will be posted online after the event.

For more podcasts on this topic and others, please visit the Atlanta Fed's website at frbatlanta.org. If you have comments or questions, please email podcast@frbatlanta.org. Thanks for listening.