ECONOMIC ANALYSIS: Smaller communities face largest economic obstacles

Keywords Economy / Health Care
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The population statistics tell the story-we are a nation of cities. Nationwide in 2000, almost 80 percent of us lived in what the Census Bureau considered urban areas.

Yet Indiana has more small cities, and more people who live in rural areas, than do many other states. In 2000, nearly 30 percent of us lived outside urban areas, compared with the national average of 21 percent. And of our 92 counties, 38 have fewer than 30,000 people, with 19 of those falling short of the 20,000 population mark.

Most of those smaller counties are suffering from what can only be called economic stagnation. The symptoms are depressingly familiar. Flat or weak population growth, caused by out-migration of younger households. Low pay for many jobs. Reduced access to quality health care, diversified retail and recreation opportunities, and to broadband Internet. And reduced capacity to pay for the upkeep and modernization of public infrastructure of all kinds, including schools, roads and sewers.

It is a cycle of decline that can be selfreinforcing. The better opportunities elsewhere can be like a magnet to the best and brightest of a smaller community’s work force, drawing down the local talent pool. That, in turn, makes the task of attracting and growing the investment and businesses that will generate wealth locally even more difficult.

Yet it is a cycle that can also be broken. For while there are challenges for more sparsely populated areas of the state, there are also opportunities. The quality of life, the low cost of housing, and the reduced complexity of small-town life are increasingly attractive to many businesses and households.

And while large investments of the scale, say, of the Toyota plant in Princeton do not come along often, the fact remains that many of our state’s smaller communities are just as well-positioned geographically as their larger counterparts to compete in the race.

If the magic formula for turning decay into decadence for smaller communities has been written down anywhere, I haven’t been able to find it. But even if there are no guarantees, I do think there are some ways less-populous areas can position themselves to have a better shot at capturing the growth opportunities all around them.

It begins, and perhaps ends, with the labor force. The extent to which a poorly educated, less-skilled, less-motivated work force is a detriment to growth is apparently not well understood by many of us. Why else would we remain so complacent in the face of appallingly low rates of graduation from high schools, high rates of drug and alcohol abuse, and the too-frequent lack of basic social and communication skills among young adults who enter the labor force in our own hometowns?

No matter who is to blame for the situation-and there’s plenty of blame to go around-it’s clear that employers and, ultimately, the economy are paying the price. Their options are limited, and usually expensive. And the reality of the global marketplace is that they simply cannot afford to think of anything beyond their own bottom line.

That leaves it to the communities themselves to do the job they should have been doing all along-preparing their young people to compete in the economy that exists today, not yesterday. That takes a change in attitude, a redirection of resources, and a deep commitment on the part of local leaders at all levels. It can be done, but there are precious few doing it.

Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at

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