Episode 24: Rural-urban economic interdependence

Christy Kallevig: Hello, my name is Christy Kallevig, host of Vital Connections On Air. Over the next few months we will be using our episodes to explore rural/urban issues. In some episodes, we'll discuss areas where we differ, but more will show ways that we are similar, and all of the episodes have been created with the hope of starting a larger conversation. We hope that you enjoy them.

Christy Kallevig: Welcome to Vital Connections On Air, a podcast brought to you by the University of Minnesota Extension Center for Community Vitality that explores the trends and topics important to communities and leaders throughout Minnesota. My name is Christy Kallevig, and I am an Extension Educator with the Center for Community Vitality, and today I am joined by Brigid Tuck, the senior economic analyst for the University of Minnesota Extension Center for Community Vitality. Welcome to the podcast, Brigid.

Brigid Tuck: Well, thank you. It's a pleasure to be here this afternoon.

Christy Kallevig: Yes, I'm excited that we finally get to talk. You've helped me with a lot of podcasts, but now it's finally your turn.

Brigid Tuck: Yes, I think it's going to be fun to share some of the information I know.

Christy Kallevig: Tell me a little bit about your work with the Center for Community Vitality, and what exactly does a senior economic analyst do?

Brigid Tuck: Well, I work in our community economics team. So in community economics, our goal really is to help communities be able to use economic data to make decisions and really be able to sort of figure out what their economic future might look like. We know there are a lot of people out there in Greater Minnesota especially, but in the Twin Cities as well, [who] are thinking about their community and their future, trying to guide their economics that way.

And so our goal is to help provide data and research that might help them with those decision making processes. So what I do specifically is to work on our Economic Impact Analysis Program. So I have access to a lot of data, especially around how our economies are interrelated, how are we interdependent on each other.

And we have a couple of programs that we use that way, one of what we call our economic futures workshop where we just sit with the community and they look at 10 industries and see how do those industries interact together. If we were to grow one of those, what would that look like for our economy as a whole? So really just about working with communities and talking about economic data.

Christy Kallevig: Great. Well I know that communities have really enjoyed those conversations, and you've done some really interesting research. And so I'm excited that you're able to be here with us today. And so I guess let's just kind of jump in. We hear a lot about the drivers of the rural economy. And I know I have in my head that we often still associate agriculture as being that big economic driver, but there's a lot of other stuff going on. So what exactly does the rural economy look like today?

Brigid Tuck: Well, you're exactly right. Agriculture is still a really important part of our rural economy, correct? We looked at the 12 regions across the State of Minnesota, and out of those 12, in six regions, agriculture was one of the top three drivers of output in terms of total production, particularly in the western and the southern part of the state. And that was just looking at pure agricultural production.

If you look at ag-related manufacturing, you think of some of our major food processing-type companies that have grown out of what we're good at growing, right? So we have a lot of dairy manufacturing. We have soybean crushing. We have all sorts of things coming from our agricultural products. So it is still a very important, vibrant part of our regional economies in outstate Minnesota.

Brigid Tuck: But on the same side that is not the whole story, right? So we actually looked at some data that shows if you look at the breakout of the two economies by industry, they actually very much mirror each other. So in Greater Minnesota, Outstate Minnesota, we have some of the same breakouts in terms of where our employees are as the Twin Cities. As a matter of fact, I was just looking it up. And if you look at jobs, the top three industry employers in rural Minnesota are healthcare, manufacturing and retail trade. If you look at the Twin Cities, the seven-county metro region, guess what? The same top three industry employers. While we have sort of different nuances on that, if you just sort of look at the big picture, we are more alike, I think, that people sometimes realize.

Christy Kallevig: Sure. And so [with] healthcare and manufacturing, I think we can all kind of get a picture of what that looks like. But what exactly makes up that retail trade category you mentioned?

Brigid Tuck: So retail trade is just mostly your shopping, right? So you're different. It would include grocery stores; it would include your clothing stores, your sort of general merchandising type, online would be part of that. Those are kind of the big hobby stores, sporting goods stores, [are] all part of that.

Christy Kallevig: Okay. And so as you take a look at the data that you have access to, would you say that the rural economy is growing or is it kind of staying the same?

Brigid Tuck: It's absolutely growing. So if you look at the time period from 2001, which is about as far back as the data sets that we can use go right now, to 2018 there was 9 percent job growth across greater or rural Minnesota and 7 percent since 2010. So if you look at just that period since the Great Recession, we've had 7 percent job growth in those counties that are not considered part of the Metro.

The largest was in the healthcare sector, manufacturing and construction, which all are industries that have been growing nationally as well. It's really interesting if you look at that manufacturing job, Greater Minnesota added 1700 more manufacturing jobs than would have been expected, even given national trends, so [it’s] growing and growing at a rate faster than really they should given the national trends. So we absolutely have a strength around manufacturing out in rural Minnesota.

Christy Kallevig: Any ideas why that growth might've occurred at such a strong rate?

Brigid Tuck: Again, I think we do have just kind of that competitive advantage. And it might be a mix of what kinds of manufacturing we have as well. Just have some of those industries that happen to be growing.

Christy Kallevig: Okay. Interesting. And how did rural Minnesota fare through the Great Recession compared to the Metro area?

Brigid Tuck: I haven't really looked at [those] numbers, so I can't give you a number, but I can tell you that we kind of followed a very similar path, right? Minnesota as a whole has a fairly diverse economy, which works well for us in these situations, because when we have certain issues that are turning down, we also have some that maybe are turning up or aren't hitting that negative is hard.

You might think of an oil-dependent state. You know, if oil is not doing well, they're really gonna feel the effects of that. [In] Minnesota, where we have that diversity, we don't necessarily see those sharp swings quite as much as some of our other neighboring states and other states in the U.S.

Christy Kallevig: Okay. So as we understand that rural economy a bit better, let's think about our urban friends. And certainly there's the seven- county metro area, but we know that there's a lot of other communities throughout the state that are more urban just because of their population. So that also might include your St. Clouds, your Duluths, Mankatos, Moorheads over on the northwest side. What do the urban economies look like at this point in time?

Brigid Tuck: If you just kind of look at the seven-county metro here, they had in that same time period of 2001 to 2018, they had 10 percent growth compared to Greater Minnesota’s 9 percent, and then 13 percent since 2010 compared to 7 percent in Greater Minnesota. So they grew a little faster coming out of the Great Recession than maybe other parts of the state.

We do know that some of the regional centers, like you referred to Mankato, and St. Cloud have at this point, very low unemployment rates. Right. If you look at that sort of map, that is where those lowest unemployment rates are. So they're very definitely feeling the growth and really starting to try to figure out [that] the workforce question now is becoming really important for them.

We've got a lot of our people working. How do we continue to be able to, so to help our businesses grow and expand and keep people. “Can I get more people in the workforce?” is really where they're struggling right now?

Christy Kallevig: And you mentioned that the top three industries in both our urban and rural were the same. Am I remembering that correctly?

Brigid Tuck: Yup. Okay. And if you look at that what's interesting, if you remember I said rural Minnesota or Greater Minnesota had that increase in manufacturing jobs. That was the second largest industry in terms of growth in the urban area. They actually had job losses and it was actually the number one job loss industry in the urban area. So wow. The Twin Cities is maybe struggling, too with the manufacturing. Greater Minnesota is actually growing in that area. So I thought that was really interesting as well.

Christy Kallevig: Are there any job categories or in sector areas that are unique to the Metro that you don't see in any other part of the state?

Brigid Tuck: I don't know that there are any that are unique that we don't see. I mean, again, we have a very diverse economy across the state. Probably what I think when you think about the metro area and the regional centers to an extent too; probably the two things that come to mind are that professional and technical services sector. So that was one, in the Metro, that was the second largest growing industry.

So I'm thinking more about your lawyers, your accountants, kind of that sort of group of folks, architects. So kind of that professional scientific technical services piece grew quite quickly in the Metro and we didn't see quite that growth out in Greater Minnesota. There certainly are those jobs out there. It's just not as strong.

The other thing, if you look at what we call a location quotient. So you look at industry concentration. So you look at the number of jobs in an industry, compared to say the national average. And if you have a higher number of jobs compared to the national average, you have a high location quotient and that just simply says you have more jobs than in this particular industry, then you really should have mining on the Iron Range is a perfect example, right? They have a very high location quotient for mining because there's a concentration. We know that in Minnesota, right?

So if you look at the Twin Cities, it's actually management of companies, which is that sector for kind of your back office type, your headquarters, right? So that is an absolute strength for the Twin Cities Metro area. And that really plays out when we start talking about the linkages. Some of the work I've done just points to exactly how connected those two are.

Brigid Tuck: So we have a lot of the manufacturing itself or the agriculture production itself happening out in rural Minnesota, but then we have the headquarters and sort of the business functions taking place in the Twin Cities. So I did a study looking at bio production, looking at agriculture, kind of looking more like the bio science piece of it. And it was just amazing how clear the connection was between the Twin Cities and rural Minnesota that is happening out here.

But that is really driving what is happening in the Twin Cities in terms of those management of companies and that headquarter activity. And in fact, I looked it up and this morning and we had 19. Minnesota had 19 Fortune 500 companies in 2018 and there [were] six of them that I could identify, so a third of them that have a footprint in Greater Minnesota.

So you think of Land O Lakes, right? They're headquartered in the Twin Cities, but they’re producing their product out in Greater Minnesota, [also] Hormel Foods. You know, they probably have some activity based in the Twin Cities, but they're manufacturing. So quite a bit of that. General Mills is another example where they might have a lot of headquarter activity. They might be doing some of their business financing stuff in the Twin Cities, but they're really drawing on Greater Minnesota as there is their base for their production.

Christy Kallevig: Well, let's transition into that a little bit more and think about how Greater Minnesota or rural Minnesota urban areas in Minnesota are connected. And one word that we hear a lot about in the news lately is that we're interdependent. What would be a good definition for what it means to be interdependent?

Brigid Tuck: Well, I think that's just indicating this idea that we work together, right? So like I was saying, our connections are there. We don't get one without the other, right? Like, we could produce a lot in Greater Minnesota. But if we don't have anybody to market it and package it and get it sold to the final destination producing it, it doesn't really have a lot of value.

You know, we can have people who are great at marketing and advertising and taking care of the legal piece of it in the Twin Cities, but if they don't have the product coming from Greater Minnesota, then they don't have a job to do either. So we really are connected together in that way.

I think the other thing that sometimes folks who are from the rural areas can remember is that the urban area can be a real attraction for Minnesota, right? So if you think about, if you look at the Upper Midwest when you're talking about as a business location decision or sort of where do you want to grow, the Twin Cities Metro Area is a very attractive market, right? It is kind of where a lot of growth happens in the Upper Midwest.

So for our Greater Minnesota companies, having that growth center here is very valuable in an attraction and bringing in talent, and bringing people into the state, and bringing some of that economic activity that we then out in rural Minnesota that we really do benefit from having [this] magnet, if you will, in the Twin Cities.

Christy Kallevig: Right. I think that you've given a few really good examples of how we do depend upon each other. Any more that you have to share around how we truly are connected?

Brigid Tuck: Yeah. Well I think for urban friends, some things that are good to remember about rural Minnesota is just that we are really diverse, right? I think there is a perception that we are very much agriculture or if you're in Northern Minnesota or you're in mining, or you might be in some manufacturing if you're in Northwest. But we really do have a very diverse economy, and we really do have opportunities across the spectrum depending on where you want to be, what your career path might be.

We do have those opportunities in Greater Minnesota as well. And those jobs are very important in terms of production and in terms of supporting our rural communities, which then helps to feed into the Twin Cities. So I do have some data because I love data.

Christy Kallevig: Oh, who doesn't love some data?

Brigid Tuck: And this comes to us from a colleague. His name is Bill Lazarus. He's at the University of Minnesota in applied economics. But he did a study looking at if we were to increase manufacturing in Greater Minnesota by just a million dollars. So let's say we had a million dollar investment and we increased output in Greater Minnesota. Sixteen percent of the job growth that would result from that would actually happen in the Twin cities Metro area, and 38% of the output would accrue in the Metro.

So even though that investment is happening in outstate Minnesota [where] manufacturing is increasing, the Twin Cities really gets some of that ripple effect. Those additional jobs created, because when you increase output at that manufacturing facility in outstate Minnesota, that puts demand back on suppliers that are located in the Twin Cities. So Greater Minnesota sees some of the growth, but so does the Twin Cities, just from an investment in manufacturing in outstate Minnesota.

Christy Kallevig: The rural-urban conversation has really come from many different angles, and people really enjoy looking at it in ways that often divide rather than unite. Or just kind of stirring the pot, if you will. But how do you see economics fitting into that conversation? And what can we learn from our economic interdependencies that might help us advance the conversation?

Brigid Tuck: Well, I think the conversation a little bit comes from this idea of for so long agriculture was a main driver and to some extent, manufacturing that was related to agriculture. And so often there wasn't a singular voice from rural Minnesota about where we were from an economic standpoint and who we were. And as we've diversified, which has been great for our economies. That singular voice and speaking for what we need has changed. Right? So I think that's part of the driver of all this conversation is sort of like who ARE we in rural Minnesota, right? And what unites us and what keeps us together as a unit that we can really be able to articulate our needs and our vision to the Twin Cities Metro area. Right? And so that has become something that I think people in Greater Minnesota are thinking about.

Brigid Tuck: So I think where the economics piece comes in is it really helps people think about “what does it mean?” Like when you think about the fact that we really actually look more alike than we do different. I think that helps you think about policy, right? So policy perspectives that help things in the Twin Cities can help Greater Minnesota and things that help Greater Minnesota do actually also reflect and help things that happen in the Twin Cities.

So we share things in common that way. And so I think that that does very much become part of the conversation as well as thinking about the Twin Cities is a strong economy on its own, but at the same time, it really doesn't function without Greater Minnesota. So just kind of remembering that we need those opportunities to link ourselves ... it's not an island by itself.

Brigid Tuck: It really does need Greater Minnesota as part of its driver and its ability to remain vibrant. So thinking about that, I think maybe where some of the differences sometimes can come in as if we, if we look at this as a whole, we are a lot alike.

For example, we have those same top three industries in both areas in terms of jobs, where maybe some of the difference can be come in is where exactly are those jobs? So you know, you talk about healthcare in the Twin Cities, there might be more doctors and nurses, RNs, those kinds of positions, whereas Greater Minnesota they might look more like LPN and certified nursing assistants and personal care aids, and that kind of thing. So there is maybe some discrepancy in terms of what do those jobs really look like and the pay scale that goes with them.

Sometimes where I think I would like to hear more conversation happening is what do those jobs really look like in the two different areas, and how do we support both of those because both jobs are necessary and then kind of thinking about [how] wages funnel into that as well.

Christy Kallevig: In the world of economics, do those conversations happen? Do you hear either other economists talking about that or trying to push that into a policy discussion at all?

Brigid Tuck: I think it happens a little bit. I don't hear it too much from my perspective, but I tend to work more one-on-one with the communities and a little less on the policy side. So I don't follow that conversation as closely as I could or should. But I think that's gotta be part of the conversation. It's just what do those jobs really look like in our different economies and how can we again, continue to support them as well?

Christy Kallevig: And I think that you have given us a lot of ideas today and information to help us be better involved in those policy discussions. I look forward to having you back on the podcast another time too, to learn more about some of the interesting research that you do.

Brigid Tuck: Well, thank you. And yeah, I mean it's tons of fun, so I look forward to coming back again.

Christy Kallevig: Great. Thanks Brigid.

Christy Kallevig: Thank you to Brigid Tuck with the University of Minnesota Extension Center for Community Vitality for joining us for this episode. Visit the University of Minnesota Extension Center for Community Vitality webpage, where you will find more resources on economics in Minnesota and your community. Make sure to follow us on Facebook and Twitter to stay up-to-date on new research and resources for communities and those who lead them. We hope that you will join us for the next episode of Vital Connections On Air.