Explaining the Ongoing Growth in the Rural West

Although the conventional wisdom is that the Montana economy has been mired in stagnation for a long time, the truth is that over the last decade or so there has been considerable growth in the state: Since 1990 almost 150,000 jobs have been added; the state gained a 110,000 people, mostly due to in-migration; real per capita income rose 16 percent; and unemployment remained low despite two national recessions. That was not a shabby performance.

Because most of that growth took place in western and southwestern Montana while the Great Plains region continued to see slow declines, the growth was even faster than these numbers suggest for most of Montana’s population centers. Growth in the greater Missoula area, for instance, was sufficient to lead it to be officially classified as a metropolitan area by the federal government. It will not be long before the Flathead and Bozeman areas are similarly classified.

The type of ongoing growth found in Western Montana’s small cities and rural areas was also found across the Mountain West and in clusters of relatively rural counties from the Great Lakes to the mountain regions of the south to the New England states. As in Montana, this ongoing growth took place despite relative declines in the traditional natural resource industries, raising the obvious question as to what economic forces have been supporting that growth.

Economists around the nation have been puzzling over that question since at least the early 1950s when the explosion of growth began in the desert southwest, including southern California, Arizona, New Mexico, and Nevada.

The conventional explanation for population shifts had been people’s pursuit of new jobs and higher incomes. But in the Sunbelt it was not clear what the booming industry was that was creating the jobs that, in turn, were drawing the people. In addition, pay levels were lower in the Sunbelt states than in the industrialized Frostbelt of the northeast and Midwest. Yet it was the high income states that were losing population to the low income states.

The only plausible explanation appeared to be that people had preferences for different types of living environments and were acting on those preferences and shifting locations by the tens of millions. Economic activity then followed those population shifts because those people represent both the supply of labor and the market for goods and services. Things businesses could not ignore.

Economists coined the phrase “amenities” to describe locally-specific characteristics of an area that were attractive enough that they could influence people’s location decisions. “Disamenities,” on the other hand were characteristics that people disliked enough that those negative characteristics tended to push people out of certain areas.

That was a suggestive hypothesis, but it left rather vague exactly what the particular local characteristics, the amenities, were that actually motivated or guided this relocation of population and economic activity. Economists have been analyzing this household relocation activity for several decades now and have been slowly piecing together some of the details.

In the broadest terms, there are two major categories of amenities that are important. One set focuses on the social and human-built environment, the other on characteristics of the natural environment.

In terms of the social environment, people are seeking lower density settlements including purely rural locations. At the same time, however, people do not want to loose access to important urban amenities such as ready access to the goods and services that trade centers provide. They want lower levels of congestion, pollution, and crime, but they also want good schools for their kids, access to good medical care and other important services, as well as variety in the commercial opportunities available.

In terms of the natural environment, people seek variety and complexity. A uniform landscape of crops, trees, plains, or desert is inferior to a landscape with varied topography, (mountains, hills, and valleys), a mix of forest and open fields, and bodies of water (rivers, lakes, and coast lines). Climate is also an important part of the local natural environment. People want to be able to enjoy the natural landscape across most seasons of the year, so they seek relatively moderate climates that do not have seasonal extremes that would pin them indoors for a significant part of the year.

Areas across the nation that have such a mix of social and natural amenities have seen significant growth over the last half-century with that population growth stimulating job growth. Those areas missing some key element in this general mix have seen ongoing out-migration and economic decline. Although this pattern is certainly not unique to Montana, it seems to explain well the shifting population pattern we find here.

Given that this pattern has been visible for a good part of half a century, it would be nice if public economic policy adapted to this reality rather than continuing to be mired in an unproductive nostalgia tied to our frontier past. But that may be too practical a wish for these ideological times.