State of The Appalachian Economy

The State of the Appalachian EconomyAlison F. Davis, PhDExecutive Director Community and Economic Development Initiative of KentuckyAssociate ProfessorDepartment of Agricultural EconomicsPresented to Appalachian Funders Network

Some promising news…

County Level

Population Change

Relative per capita income

Kentucky• 54 counties of Kentucky’s

120 counties are classified as Appalachia

• The 54 counties that comprise Appalachian Kentucky are among the poorest in Appalachia. Compared with the U.S. population, Appalachian Kentuckians have lower income levels, higher poverty levels, and greater unemployment rates.

P e rc e n ta g e o f M a le s N o t in L ab o r F o rc e

L e s s th a n 1 5 %

1 5 % -- 3 0%

30% -- 4 5 %

45 % -- 6 0%

Mo re th a n 60%

K e n tu c ky M a le s N o t in L a b o r F o rc e

The Urban/Rural Difference:A County Level Investigation

Urban Rural Very Rural

Population 50,498 20,841 14,434

Population 5 years in same house 54.5% 57.9% 63.8%

Population per square mile 221.8 80.6 52.3

People of all ages in poverty, 2004 13.2% 16.8% 22.3%

Median value of home, 2000 $90,403 $70,614 $57,879

Median household income, 2004 $42,148 $31,537 $24,609

Males not in labor force, 2000 27.7% 33.15% 42%

Residents working within county 52.3% 64.4% 60.1%

Federal Gov’t Exp per capita, 2004 $5,873 $6,910 $7,710

Manufacturing Value of Shipments, 2007 $18,760 $17,012 $6,852

Quality of life variables

Urban Rural Very Rural

Average travel time to work (minutes) 25.88 25.25 27.75

Uninsured Rate (health) 12.42% 13.6% 17.0%

Drug Arrests (per 100,000 pop) 940 1143.9 1063.4

Crime per capita 0.036 0.026 0.016

Mortality Rates (per 100,000 pop) 976.8 1026.7 1063.3

Changes from 1990 - 2000Urban Rural

Income growth 55.4% 54.27%Change in population 18.5% 8.1%Change in poverty rate -22.4% -17.5%Change in median home values 74.9% 68.5%Change in % of those working within county -9.6% -8.2%Change in “not in labor force” % 0.6% 10.6%Change in education % 19.8% 29.0%Change in retail sales 51.7% 37.9%Change in manufacturing employment 50.0% 40.3%Change in mining employment -7.4% -7.8%Change in birth to unmarried mother 41.8% 46.3%

Six Strategies to Improve Appalachian Economy

1. Invest instead of spend2. There are other effective tools other than

industrial attraction3. Create access to capital for entrepreneurial and

small business development4. Health care should be a priority5. Go Regional!6. Envision a new long term framework for

sustainable development

Investment instead of spending• The composition of expenditures in rural areas is

significantly different between rural and urban areas• A much higher proportion of federal funds are

spending (Social security, SSI, disability, welfare)• Spending does not increase the long term

competiveness or economic capacity of an area in the same way as do investments in such things as public infrastructure, healthcare, education and workforce development

VS

Invest in livable communities

• Do not do so to attract firms• Do so for two very important reasons▫ Increase the productivity and profitability of

existing businesses and new businesses▫ Engage in people attraction The new generation is footloose and fancy They decide a location first and then employment

Industrial Recruitment – There are other ways…• Economic gardening• Targeted attraction models• New business development • Business retention and expansion

Manufacturing Trends

Net Job Growth ContinuedAll Jobs

Improve access and demand for capital

• The recent financial crisis and resulting recession has had a profound impact on both businesses and households throughout the country

• The impact of declining credit may be particularly severe in the Appalachian region because of the important role small businesses play in the economic growth of the region

• Even more, small businesses appear to suffer more from a loss of credit than large businesses

More research is needed to better understand the role of supply and demand in lending.

• Demand side▫ Entrepreneurial training▫ Financial management skills▫ Improve the economy???

• Supply side▫ Microfinance institutions▫ Revolving Loan Funds▫ Government secure loans▫ Attract venture capitalists

Health care should be a priority• Two-thirds of all Federally designated health care

shortages occur in rural areas• Inadequate health care is a large problem for

those who live in rural America and it’s a huge disincentive for businesses

• Workforce development begins at birth• Critical workforce issues• Health care is a driver for economic growth• Health care is an export industry

Go Regional!• Economic transactions, workforce mobility do

not begin, end, or follow city limits or county boundaries

• Rural counties are not large enough to compete on their own in today’s global economy.

• Smaller jurisdictions do not have the critical mass of local leadership and civic infrastructure needed to play the game.

Regional OpportunitiesStronger Economies Together –A USDA Rural

Development/Cooperative Extension Partnership to work with selected regions to identify and strengthen their competitive advantage

Sustainable Communities Program – HUD, EPA, DOT

Jobs Accelerator/Innovation Program – ETA, EDA, DOL

Of the 22 regions selected in first round 8 are located in Appalachia:1) Kentucky Highlands2) Northwest Region Pennsylvania3) Coal Heritage Region West Virginia4) Doddridge and Richie Region West Virginia5) Hardwoods Region West Virginia6) New River Region West Virginia7) Panhandle Region West Virginia8) Buckeye Hills Region Ohio

Phase 2 Includes regions from: Alabama and Mississippi

Industrial Make Up

Who is your workforce?

New framework can move Appalachia forward• Civic leadership and engagement• Asset based community development• A culture of innovation• Diversity, access, and inclusion• Youth engagement• Wealth creation and retention• Regional initiatives

We must invest in the infrastructure, civic engagement, leadership development, access to quality health care and education, natural and built amenities before the jobs come!!!

It’s not splashy but its sustainable!

Alison F. Davis [email protected](859)-257-7260