Feb 26, 2020 - Economy

Rural America's meager business growth

Reproduced from Center for American Progress; Chart: Axios Visuals

The growth of small businesses has been concentrated in big cities and urban suburbs since the Great Recession, while nearly all rural areas have experienced substantial loss of businesses in the past decade.

Why it matters: "Firm growth is a crucial part of economic development, and business creation has been critical in the aftermath of previous recessions. But policies geared toward encouraging startups have not been effective in rural areas, leading to a growing regional divide," per a new report by the Center for American Progress.

  • Southern rural areas have seen the highest levels of business deaths, with African American communities bearing the brunt of economic decline.
  • Small businesses in the South and rural middle America have been battered by growing consolidation in the agriculture industry, leading to communities being dominated by a single company.

Yes, but: Some pockets of rural America are seeing business growth, even though it pales in comparison to larger cities.

  • Graying America communities are generally recreation-dependent. These communities are located in large states such as Florida, Texas and California.
  • Many Hispanic centers are mining-dependent, especially in the oil and gas industry.
  • Latter-day Saint enclaves in Utah have large youth populations and less population loss than other rural communities.

Between the lines: In rural America, the small business decline is tied to population decline. There's little point in setting up shop in a town with few potential customers.

  • Some have opened their doors to immigrants to increase their populations and generate more small business demand in agriculture, manufacturing, health care and tourism.
  • There's sometimes a "trust gap" to overcome in rural towns where locals tend to be skeptical of newcomers, said CAP senior economist Olugbenga Ajilore, author of the report. Social infrastructure could help bridge that gap, particularly for new migrants.

What's needed: Policymakers should consider expanding the capacity of community business development corporations or co-ops to support rural towns, which are also dealing with other problems like opioid use, hospital closures and unemployment, per CAP.

"Instead of federal government parachuting in and saying, 'Here’s what you need to do,' they should come and say, 'What are you doing and how can we help you do it better?"' said Ajilore.

Go deeper: The disappearing startup

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