Self-Employment Key to Expanding Rural America’s Revival

In many ways, these are the best of times for rural America. Rising commodity prices for food, fiber and energy have revived the economy in much of the nation’s heartland. But still, many rural communities still are losing population, particularly among the young, and suffering unacceptably high rates of poverty. What accounts for this “best of times, worst of times” scenario?

Part of the problem lies with the highly productive nature of industries like agriculture, which now require less and less human input. In addition, the U.S. economy has undergone, and continues to undergo, structural changes beginning with the 2001 recession and continuing today. Permanent employment growth among America’s largest employers began stagnating before the 9-11 (2001) recession. During the recovery, the share of U.S. employment by America’s largest employers declined from 34% to 26% (or by -24%) of all employment (youreconomy.org). This trend coincided with the movement among large corporations to outsource work. Jobs that in the past would have been filled by permanent, salaried-with-benefits employees are today contracted out, allowing firms to lower legacy worker costs and increase workforce flexibility.

This slower rate of job creation may be structural and permanent, not just part of the recession and recovery cycle. Coping with these changes will most likely require an expansion of small-scale entrepreneurship, enabling rural residents to enjoy the quality of life benefits of “rural living” and also to tap economic opportunities. Some of these opportunities are even created by the outsourcing of work by larger employers. Our work with the RUPRI Center for Rural Entrepreneurship over the past 10 years suggests that the rise in self-employment – small-scale entrepreneurship – and slow job creation are related and could present a development “silver lining” opportunity for many communities in the United States.

The potential behind this phenomenon can best be observed in the rise of necessity entrepreneurship. Necessity entrepreneurs are driven into business by the lack of jobs in their region – many clearly would prefer to take a job if those opportunities were available. But, once in business, these entrepreneurs could help create the foundation of a whole new generation of ventures that will help re-invent and renew the rural American economy.

Fortunately, the trend towards small, “microenterprise” has been evolving for a generation. Over the past decade, the number of Americans who are self-employed has risen by 4.3 million. The percentage of the American workforce that is self-employed has risen from 2.5% of all workers in 1993 to 7% in 2008 based on research from the Edward Lowe Foundation (www.youreconomy.org).

Why is this important for rural places and how might this shape rural development strategies?

Freedom to Choose. For one thing, entrepreneurs have far greater freedom to live where they want, including in rural towns and the countryside, and still make a living in our outsourced economy. Our work, particularly across the heartland, suggests that communities can stimulate development and growth by acting upon this emerging trend. The key to success appears to be rooted in an integrated strategy that emphasizes and preserves rural quality of life and values while at the same time creating a strong and supportive entrepreneurial environment.

Rooted Economic Opportunity. Self-employment – creating your own job – represents an opportunity for rural places to intentionally connect strategies to improve “quality of place” and “economic development”. We are seeing rising interest in designing community development strategies that include targeted “people attraction” in combination with efforts to create jobs and career pathways brough on by transplanted entrepreneurial ventures.

Social & Economic Renewal. The lament in rural communities and in rural policy circles has been the “brain drain” or the perceived loss of the “best and brightest.” Based on our field research throughout North America we would argue that the dominate group leaving rural areas are not necessarily the best and brightest, but those with a greater capacity for taking risk. This distinction is strategically important in that losing risk takers erodes a community’s fundamental capacity for innovating and embracing necessary change. Attracting entrepreneurs introduces “change agents” back into declining rural communities. This introduction enhances social and economic renewal.

There are rural communities across the Heartland that illustrate this transformation including larger communities like Dickinson, North Dakota, Kearney, Nebraska and Salina, Kansas. But the emerging success stories are not restricted to the larger of the rural communities and include very small communities like Rawlins County, Kansas (population 2,425), Chase County, Nebraska (population 3,625), Valley County Nebraska (population 4,108) and Linn County, Missouri (population 12,606). Rawlins County is a particularly important example in that this community has over the last 15 years embraced a development strategy focusing on both entrepreneurship and people attraction with impressive emergent results. Rawlins County has begun to rebuild a more dynamic and competitive economy via area entrepreneurs, dramatically improved its migration balance and stabilized the decline in student enrollment through the attraction and retention of younger families. (Read more about the Rawlins County story.)

More work needs to be done to fully understand these trends. Further clarification on how communities can act on them to build brighter futures are suggested below:

Necessity Entrepreneurs. There is a compelling need to learn more about the size and nature of rising numbers of self-employed and necessity entrepreneurs. This research needs to be national in scope, but with detail at regional and community levels as well. Deeper understanding can form the basis of better development strategies.

Targeted People Attraction. More and more communities are exploring people attraction. There is considerable room to learn more and build more targeted and effective strategies. Current efforts need to be documented and evaluated. Promising practices need to be tested and developed.

Necessity to Opportunity Entrepreneurs. Lack of job opportunities is driving more people to necessity entrepreneurship. But necessity entrepreneurship can become a personal trap and a dead end strategy for communities. We need to learn more on how the increasing pool of necessity entrepreneurs can grow into a new generation of opportunity entrepreneurs who can create greater long term, sustainable economic prosperity.

Don Macke is Co-founder and Director of Strategic Engagement, RUPRI Center for Rural Entrepreneurship.

Photo by Tom Haymes