Should We Subsidize Rural Economies?

Last week I offered a point-by-point review of Democratic gubernatorial candidate Ralph Northam’s plan to revitalize rural Virginia. In rough summary, I concluded that the plan wouldn’t accomplish much, but on the other hand, it wouldn’t cost much either. The Northam proposals had considerably more merit than a lot of ideas — such as a $15-per-hour minimum wage — that he could have put forth.

Writing in the Richmond Times-Dispatch op-ed section, however, Bart Hinkle took issue with core assumptions of the Northam plan.

First, Hinkle noted that investing in job creation in Southwest Virginia is not necessarily the optimal solution for reducing unemployment. Perhaps people could better improve their circumstances by moving to urban areas that offered greater economic opportunity.

Of course, some people in Southwest Virginia might want to improve their economic circumstances and still stay put. But is it the state’s job to ensure that they can? And if the answer is yes, then what does that imply about, say, struggling economic sectors? Should the state help people stay in fading industries as well as fading regions? If not, why not?

Hinkle also questions the value of providing workers skill-specific training. He cites a Journal of Human Resources study that suggests technological and other changes often leave skill-trained workers behind, and that employers, rather than retrain them, often let them go and bring in new talent. The real need, the study suggests, is “for more general cognitive skills that give workers the ability to adapt to new circumstances and new jobs.”

On a more philosophical plane, Hinkle wonders why the job of providing specific workforce training has devolved to the state in the first place.

If companies need workers who are trained to perform specific tasks, then why don’t those companies do the training themselves? Why should the state — i.e. the taxpayers — shoulder the burden of doing it for them?

Labor, he suggests, is a production input just like raw materials. If Acme Semiconductors wanted to build a plant in Virginia, and it asked the state to ensure a steady supply of silicon, the state probably would tell Acme to pound sand. But if Acme says it wants workers trained to work in a clean room, Virginians feel compelled to help out.

Bacon’s bottom line: These are all good questions.

I am reminded of a Daily Signal article published last week about a federal-state-private job-training program set up in Kentucky coal country, practically next door to Virginia’s coal-mining counties, to teach people in 20 weeks of classroom training how to code. Under the banner of turning “coal country” into “code country,” the program paid interns $400 a week to learn how to write software code, and Interapt promised high-paying jobs to those who completed the course. But after a year and $20 million, the program has fallen far short of expectations. Only 17 people have found jobs in the tech sector.

The Kentucky program may or may not be typical of government-backed workforce training programs generally. Some programs deliver modestly positive results; others are scandalously, almost fraudulently bad. But even if they do help people find jobs, how long will skill sets from a 20-week training program stay relevant? How many graduates will have jobs requiring those skills three, four, or five years from now? Hinkle raises an important point: If companies require workers to possess certain skills, why don’t they train their own? Why has this obligation been fobbed off to government?

While acknowledging the value of Hinkle’s questions — I do lean libertarian, after all — I frame the issue differently. Rural Virginians do need help. If they can find local jobs through targeted training programs, great. If not, mastering new skills will make it easier, by making people more employable, for them to move to jobs in growing metropolitan areas, just as Hinkle thinks they should do.

If state government is going to subsidize anything under the banner of economic development, it should be education and training. Given that I favor continued state support for higher education mainly benefiting the upper middle-class, as noted here, how could I not endorse training expenditures to benefit those lower on the socio-economic ladder?

However, I am acutely cognizant of the dangers in turning job training over to untested government programs or public-private partnerships. Any program must be subjected to rigorous review to ensure that the benefits are commensurate with the costs. Resources are too scarce. We cannot afford to waste them.

Update: The obsession with rural economics is decades old. A couple of months ago, Garland Pollard penned a profile of Dr. Wilson Gee, a professor of Rural Economics and Rural Sociology at the University of Virginia beginning in 1923. His view, as Pollard puts it: “The United States is a rich country, even if we have nothing else but our land. Our farms and agriculture, worked properly and carefully, can provide riches for us, beyond measure, in health and well-being, as well as a decent, fair living. Compared to Europe, Africa and Asia, there is an abundance here, but we have have to work hard and make good use of it.”

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35 responses to “Should We Subsidize Rural Economies?

  1. You can get people who have more skills than that. Just given a course, like a one week training course, doesn’t teach you everything. You have a basic level of stuff, but its a far cry from people being able to turn requirements to code.

    They’d do better to teach nursing skills and care of geriatric people.

  2. In general, I would say no. Markets determine the economic value of specific regions and it is usually futile to go against it. West Texas would be nothing other than cattle grazing land if it weren’t for oil (although perhaps there is a big wind and solar future). The gold and silver mine towns in the west were abandoned.

    That said, I think these areas should have options to reinvent themselves. I think Don pointed out legalized gambling could possibly work in some areas in the west and the Eastern Shore seems to have more tourism potential than has been exploited.

    • And we could sell whisky to Indians and solar panels too, like UVa is doing, sending its hind parts down to King William County while yet again preening its virtue.

  3. We do already subsidize with reduced taxes in rural areas.

    But in general, I do feel we need to try take proactive steps to build up the economy and create jobs including those rural areas where we can try to make something happen. The question becomes, what are the correct techniques? The correct techniques will pay off more than the investment.

  4. the thing people have to recognize is that people without jobs ARE subsidized by people with jobs – no matter where in the state those people without jobs live.

    And no.. not even the younger ones will improve their circumstances if they move to higher cost urban area without the education and skills needed to find employment .. you’re just moving that entitlement taker from rural to urban.. where his entitlements will cost even more.

    it’s sorta like the health care argument. Do you want to pay for late state disease uncovered at the point where it is 5 times more expensive to treat or do you want to subsidize primary care that detects and manages disease for 1/5 of what it costs if you wait to find it?

    People are not dealing with these realities.. the “choices” are between what level of subsidy not none and some….

    I also wonder what this means: ” … more general cognitive skills that give workers the ability to adapt to new circumstances and new jobs.”

    how do you get that … urban or rural?

    or is that just some generic hand-waving that happens when you run out of ideas?

  5. Of course not, it’s a huge waste of money. Let these areas die. They’re going to die regardless of what you do.

  6. I took the question to mean should there be a specific subsidy for economic development in an area with declining population and job prospects due to economic trends and conditions. I think these subsidies often fail. It is sailing against the tide and wind. I distinguish between this and other things like education and assistance in finding a job.

    • The problem is this: it’s nearly impossible to find any area of organic economic growth in the United States since the 2008 recession that isn’t spurred on by a major research university, a thriving agricultural/agribusiness sector, natural resource extraction, or that is heavily urbanized.

      LarrytheG, many years ago on this blog made a post that is as accurate today as it was then: So many of these small cities throughout the country were simply formed as cheap labor manufacturing hubs. Mills located there for cheap labor and access to railroads/waterways. That was the sole reason for their existence in the first place. Now that the reason for their existence is gone, I ask: Why are we going to keep subsidizing them? It makes no sense from an economic, social, or humanitarian perspective. We’re not helping anyone by providing false hope.

      • re: ” Why are we going to keep subsidizing them?”

        who is “them”… the geographic region or the people living in that region?

        unemployed people get entitlements… that people in urban areas pay for.

        what do you propose to do with the entitlement burden? just continue to pay but do nothing to help their economies.. on the premise that there is absolutely nothing that can be done?

        do you differentiate between money for economic development, entitlements .. and education?

        “walking away” is not really a real option… you could zero the amount spent on economic development but that’s a drop in the bucket compared to the money for entitlements and education,… right?

        where we do agree.. is money spent to attract 20th century factories and such… that IS chasing a myth… but what is your solution to convert people currently on entitlements to productive taxpaying workers and reduce the entitlement burden?

      • LocalGovGuy-

        To me, your two comments above reflect current elite group think. Some truth is buried somewhere therein, but, when it is expressed, it is lost in its own narrow focus, parochial experience, and arrogant assumptions. The resultant lack of perspective thwarts balanced judgement.

        There is an excellent new book just out on this subject: The Road to Somewhere. The writer, David Goodhart, has deep and wide experience in these very same issues that he writes about.

        • Parochial experience? Ha ha….well, if working for McKinsey and living in 9 different cities around the globe is parochial, you got me.

          Please don’t comment about someone that you don’t know.

          • What? You actually work for your money? How quaint. You sacrifice by going wherever you have to go in order to succeed? And … you don’t think that the Gimme Dats ought to pick your pockets to live wherever they want regardless of whether there are job prospects in the area or not?

            Don’t you understand? The money you earn is “the people’s money” not your money. And people like LarrytheG will take your money and hand it out to whomever he feels is worthy.

            Now, be a good little boy and get back to work making lots of money that LarrytheG and Bernie Sanders can re-distribute to the more worthy Gimme Dats who can’t be bothered to move 100 miles within Virginia in search of economic opportunity.

  7. I’m not in disagreement about the prospects for economic development.. in the rural areas but on the other hand -totally writing them off is not reasonable either – and part of the challenge is convincing people in those areas that the best thing for them is to get their kids educated to the levels required for them to compete for urban region jobs…not unlike the rural people who left for city manufacturing jobs decades ago..

    But I point out that the “anti” folks are also opposed to additional funding for education in the rural areas… they REALLY DO want to walk away and abandon the PEOPLE…. also…

    that’s NOT reasonable… what do we want to do .continue to pay the succeeding generations of people, unemployment, TANF, MedicAid, etc ???

    Finally – Virginia is not unique in this regard. Fully 1/3 of New York citizens are on MedicAid… can you imagine this? It’s true!

    • Larry,

      You mention “Anti” folks here, but don’t paint me in with them. I am typically just looking to do things in a better, more productive way. If we can get out of our own way on some issues, I’m optimistic for the U.S. We keep up with or ahead of much of the world despite outspending our primary economic competitors significantly (on a percentage of GDP basis) on healthcare, military, and higher education. These amount to about a 12% or so of GDP “handicap”. Imagine what we could do if we could get ourselves straightened out.

  8. Work. There are lots of farm jobs that can be done. Those who can be cleared, work at hospitals as nurses’ aids.

    Child limits. 1 kid on welfare. We’ll pay for birth control. If you have another kid, no money.

    Must earn up to a GED on welfare. Even if it is at home. No progression, no welfare.

    Drug free. Drug testing. Just like all us workers.

    Any felony committed while on welfare, no welfare for the rest of your life.

    I could think of a few more.

  9. meanwhile.. back on earth……

    Sometimes I also get frustrated.. to be truthful.. I have similar thoughts… especially when it comes to folks having kids that they cannot pay for… and they fully expect “the govt” to “provide” …

    of course a lot of other folks – not just those on welfare – expect their health insurance to fully cover the pregnancy, then expect a soup-to-nuts K-12 college-prep education followed by a subsidized soup-to-nuts College not only for one kids but several!

    Then TMT is gonna bring up all those “illegals” scheming to get their hands on some of those free entitlement .. goodies…

    oh by the way- it’s those illegals that ARE willing to take those farm jobs… and the nursing home jobs that the rural natives won’t touch with a 10-foot pole!

    internet is a way to “connect” the rural .. for things like call centers… or software developers or cybersecurity folks… but high speed internet is needed.

    Next – large retirement communities… low taxes, lake-front, high speed internet… jobs for local tradesmen… repair techs, pet boarding and care…etc…

    get away from reliance on single industries and diversify …

    Take a look at Smith Mountain Lake.. or even Lake Monticello near C-ville…when people retire in NoVa – they want out of there!!! and they WILL go to the right kinds of rural retirement communities…

    The idea that we just abandon regions … and their inhabitants is odious … next thing you know the same folks will want counties to dump the rural parts of the counties!

    good grief!

  10. Are you saying you want government subsidies to build more Smith Mountain Lakes? Does the private sector not have incentives?

  11. I’m saying that economic development as a function of govt is a subsidy whenever it is used – anywhere in the state… and it’s goal is to improve the economic prospects with selected incentives that spur/enable economic development that otherwise would not come organically from the market itself.

    All over Virginia – both the state and local govt – takes actions that incentivize development – such as … providing water and sewer to some area to attract development to those areas; there are so-called “enterprise” zones that provide tax breaks.. tax increment financing, etc. , worker training, new roads… eminent domain for utilities to bring electricity and communication services… etc.. we grant Dominion eminent domain to take people’s land in rural areas so that electricity and gas can be brought to urban areas… that’s a direct subsidy instead of requiring Dominion to acquire that proper willing buyer/willing-seller transactions where the property owners become shareholders of the company …

    …. and the point being that we do not discriminate against regions based on some folks beliefs that those regions cannot be helped… that’s close to hypocrisy given the reliance that urban areas have on rural for things like electricity… food… water… , etc.

    We do it with roads, telephones, electricity, schools, and subsidized medical facilities… but a big one is rezoning of land – selectively – according to where govt determines it wants development and by non-selection – where it does not.

    The purpose of government is to provide for the well being of it’s citizens – safety, security that includes provisioning of the infrastructure and services that enables a healthy economy… a huge part of what Federal, State and local govt does is to enable a healthy economy so the short answer to your question is that we ALREADY DO subsidize economic development – and that such enabling needs to adapt to the needs of particular locations…

    If they need help with farming , we do that. If they need help with medical…we do that.. if they need help with roads or electricity -we do that.

    what are the needs of rural Virginia? What are the needs of urban Virginia?
    How many billions of dollars of taxpayer money are spent on METRO for instance or the ports in Hampton?

    we should NOT being throwing good money after bad trying to shore up dying industries… but that does not mean there are not other things that can be done … and it is in the best interests of all taxpayers to do the things that will encourage economic activity, employ people and reduce entitlement burdens.

    Some, too many of the ideological folks these days work off of comic book templates of the purpose and role of govt… to our harm, in my view… like abandon entire regions of our country… and letting the people in those regions fall back to de-facto serfs… to be “punished” for their loser status in a world economy….

    it’s not. The purpose of govt is “… provide for the common Defence and general Welfare of the United States” – not parts…

  12. LarrytheG sometimes I get frustrated with your inability to form complete sentances and not use 3 periods.
    It is not the job for govt. to get involved unless there is a trampling of rights. In the past we saw the robber baron era because the govt. did nothing. Now we see it again.
    The govt. has screwed up health care, education, just to name a couple.
    The govt. should get involved only to the point of forcing corporations to act in the best interests of the people, USA, etc. not for their bottom lines. You can make a profit without ripping up everyone. The govt shouldn’t have to legislate morality, they certainly are the worst offenders.

  13. re: ” It is not the job for govt. to get involved unless there is a trampling of rights.”

    that’s not true – guy… it’s maybe your view but it’s not what is embodied in our Constitution and laws – and the will of the people …

    re: ” The govt. has screwed up health care, education, just to name a couple.”

    also a hackneyed view… the most literate ..and longest living people on the planet live in countries where the govt – which is the will of the people – is directly involved in education… health care .. and transportation to name 3.

    the ideological beliefs of some – are at odds with the realities…

    you travel every day on infrastructure that is there because of the govt.

    you can go to any ER in the country and have your life saved… again – due to the government

    and you can have your kids educated to high standards…by govt sanctioned schools – if you so wish…

    the countries that embody ” The govt. should get involved only to the point of forcing corporations…” are 3rd world where the literacy rate is abysmal… people are uneducated and unable to produce anything with little more than manual labor that can barely keep them alive..

    this is the “minimal” govt that is espoused … it’s a nice soundbite for those who can’t understand the world – but …. it’s not the reality of the world. The reality is that the best countries on earth have much more than “small government” – not without it’s issues…. but compared to countries where high percentages of kids and adults die of easily treatable disease… better.

  14. … all due respect V N… I tend to have a hard-edge in my dialogue at times.. but I much value principled dialogue … and am dismayed when my part comes across as too harsh…

  15. Your part comes across like you weren’t educated to use full sentances and grammatically correct English. Its hard to believe or give credibility when one markets themselves in a way that doesn’t earn it.

    Where in the constitution is health care provided for? Where is in the constitution is education provided for? and doing a search for those words yields 0 results.
    Ditto if you look for jobs.

    Proof? NHS in England is falling apart. Canada has a 4 year wait for some surgeries, life saving ones. Do they stop treatments in those countries or only have certain available treatments for things like cancer? In those countries do they eat healthy, exercise, walk? Do they form relationships and is the country small and has pretty much a homogenous group with shared values and mores? That right there is going to make a huge dent. Obesity diseases are killing people. Not vaccinating is another problem that is growing. You haven’t addressed those issues. What is the tax rate in those countries? You put a 50% or more tax rate to pay for it and it will kill the middle class.

    My ideological beliefs don’t conflict with the reality that I’ve had with those who want to shut me up because their liberalism conflicts with the reality. I was watching 2 videos last night in regards to equality in Britain. Basically it flies in the face of everything that liberals believe and force/bully silence on some because they don’t want the truth to get in the way of what they think.

    The govt. can’t provide good roads. That’s because of too many giveaways to corporations and those not earning it.

    Last time I went to the ER, if I didn’t have a computer and tell them what to do, I would have been going into a coma. My blood pressure had dropped so low and I told them what to do to get it done. That was an ER in Virginia, btw.

    Kids can’t think straight out of high school. They can’t reason out of college. They need remedial help in maths, etc. for college. Grade inflation is ripe everywhere.

    Give me those countries and tell me which ones is there corruption and other issues that block the problems.

    Amazing how the founding fathers had the idea of govt. getting out of people’s lives and allowing them to have life, liberty and the persuit of happiness. The govt. has had loads of scandals. They can’t even keep themselves with any sort of ethics, won’t follow FOIA, and you trust these people? You must never had had military health care. I’ve had chest pains in the ER and they had me in waiting room for ages.

    • I plead guilty to the grammar and sentence construction deficiencies.. no question.

      In terms of “fail”… for health care and education . I can name about a thousand things not in the Constitution that we do… and all advanced economy countries do… it’s a reality… and it’s the way most people want it – no matter what a bunch of guys though a couple hundred years ago..

      The people in Canada and English LOVE their health care.. and why not.. it costs them 1/2 what we pay – and they live longer than us despite those “wait times”.

      The real point here is that there are about 200 counties on this planet and if the free market worked the way you claim it does. it would be the 170 counties that don’t have strong govt that would beat the countries that do have strong govt.

      Instead.. not a single one of them has education, health care, transportation that is better than the big-govt countries..

      I keep asking.. name 3 countries with small govt and free markets that have better economies, education, health care , etc than the 35 OECD countries…

      no where on earth.. and nothing but excuses as to why that is.. all of those other countries apparently have “fatal flaws” that prevent their small govt and free markets form doing what they are claimed to be able to do.

      tsk tsk.

      or is it Tsk. Tsk. ? darn it!

      • This chart is worthless. Its like asking and National Resources Defense Council and/or the Union of Concerned Scientist to study a controversial environmental issue.

  16. Larry,

    You missed your calling. Pravda advertised a job opening in centralized planning at the CCCP in 1978. It had your name written all over it.

    • Izzo – we’re talking about ALL the advanced economy nations on the planet guy – as well as the 170+ 3rd world and developing world countries – in terms of basic things like literacy and health/ life expectancy.

      No matter what one wants to believe in terms of ideology – the facts are that the most literate, most healthy, longest living people on the planet – live in countries where the govt is directly involved health care and education and in the other 170 countries… where the “free market” does very much exist – the levels of literacy and life span are lower… much lower…

      those are facts and realities guy – not ideological beliefs…

  17. LarrytheG you still haven’t yet extrapolated about the costs and whether or not those societies are healthier than others. You also haven’t addressed why socialist/communist countries like the USSR/Russia and China are mind/thought controlled and how that would work here. I seem to remember that Russians are looking at our socialist stuff like we’re crazy.

  18. VN
    I was a correspondent in Moscow for a total of six years — three under Communism and three more post-Communism.

    Even under Communism, the Soviet Union had something of a capitalist economic sector. They did allow free markets for farm goods raised by private farmers. If you wanted decent products, you could get them on the thriving black market. If you got caught you could end up in prison. But the size of the black market was enormous. This is one reason why capitalism failed under Yeltsin and then Putin. All too many people knew only how to strip stuff and sell it. That’s why no one wants to buy Russian stuff outside of weapons, software and rocket engines. Maybe some aircraft.

    Say what you want about the Soviet Union but people did have access to free health care. It was usually pretty lousy health care but no one ended up going bankrupt because they got cancer. Ditto education. The Soviet education system was pretty good in the primary grades. When Soviet kids emigrated to the U.S., they often were put ahead one or two grades. And, thanks to government spending, just about anybody could fly to the Black Sea resorts on weekends. The airplanes stank and the hotels were awful, but you could do it.

    And, the dear old U.S.A. is part socialism as are most advanced industrial countries. If you think our health care system is a triumph of capitalism, think again. Try to get a real price on anything. The prices are set in private meetings by Big Insurance and Big Pharma. Some say it is the government’s fault for being too intrusive. I say, the government isn’t intrusive enough and you end up with prices set by oligarchs. SOrt of like in Russia today.

    One more thing. WHen I arrived as a newly minted bureau chief in the summer of 1986, my Soviet staff suddenly announced they were going on their annual vacation. I said, great, when will you be back. They said in about five weeks.

  19. “It was usually pretty lousy health care” and “Ditto education” and “The airplanes stank and the hotels were awful”.

    That’s my point. No one wants garbage health care. Everyone wants someone else to pay for it and it be free for them and it be perfect.

  20. Larry,

    I was kidding you because you always have ideas of what to do with government money. Central planning in a mostly command economy would have been the place for you.

    The original blog post was pretty narrowly focused. The question was along the lines of if people want to stay put in a region, is it the state’s responsibility to help them stay and support fading industries? To that I would answer “no” because it is ineffective to go against macroeconomic trends. They will need to move to the opportunity areas (if they exist). This happens all the time.

    I think you are essentially saying we already subsidize them (e.g. Medicaid) like we subsidize a lot of things. You have a valid point, but when you expand the discussion like that, the original question gets lost and is not addressed.

    How healthcare should be structured is a different issue. I actually favor single payer, because it has been more cost effective and has better outcomes in other countries. There is already huge government spending on healthcare in the U.S. (VA, Medicaid, Medicare, etc.) so the government role is not going away. Implementing it here would be difficult though, because if special interests remain strong, we could end up with no real cost savings (think of the prescription drug bill in 2003 or so, which limited price negotiation).

  21. re: ” Central planning in a mostly command economy would have been the place for you.”

    Oh I took the point and showed the reality of central planning … in the best nations on earth for literacy and life expectancy… it works better than the free market in the 170 other countries…

    re: ” I think you are essentially saying we already subsidize them…. but when you expand the discussion like that, the original question gets lost and is not addressed. ”

    I actually thought it was the same point …. myself… because I DID ASK what exactly does it mean to “abandon” ..specifics… what does that mean?

    specify what you would do…. since we already “subsidize” things like METRO and more for urban areas.

    Oh… and the thing about “Smart Growth” for urban areas… this is a bonus question for you … Is that Govt central planning? Is it subsidized? Are things like zoning , water and sewer, trails legitimate functions of government?

  22. Larry,

    I try to take one question at a time because discussions become too convoluted otherwise. I wish you would do the same. And bringing in zoning, water and sewer, etc. (the “bonus questions” for me) is off topic and a bit of a red herring. No one is really disputing that those are legitimate functions of government.

  23. Izzo,

    If you can’t win, get them off subject. LarrytheG’s M.O.

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