Loss in Arkansas’ rural manufacturing prompts economic development rethink

Aug. 27, 2013
Contact Information:

Mary Hightower,  Extension Communications Specialist
501- 671-2126 / mhightower@uaex.edu

By Rich Shumate

For the Cooperative Extension Service

U of A System Division of Agriculture

LITTLE ROCK, Ark. -- The figures are bleak: Between 2000 and 2010, rural areas of Arkansas lost more than 53,000 manufacturing jobs, a slow, painful bleed that dragged down median household incomes and fueled migration away from the Natural State’s small towns.

In a state that’s one of the most rural in the country, this loss of manufacturing jobs has forced a fundamental rethink of how rural areas try to reverse this slide, which has a wide range of implications for funding schools, health care and local government services.

“We’ve been telling local communities for a while that it’s not about chasing smokestacks,” says Tom Riley, director of the University of Arkansas System Division of Agriculture’s Public Policy Center. “The opportunity for Arkansas is great. We just have to be more strategic.”

In the Rural Profile of Arkansas 2013, the Division of Agriculture made this stark assessment of the new challenge facing rural Arkansas: “Rural areas can no longer depend on recruiting manufacturing firms to provide jobs for their residents.”

Finding a new path

Instead of chasing new firms – which was often done by dangling expensive tax incentives in front of them – the new mantra in economic development calls for communities to look at the resources they already have, with an eye toward developing them in new ways.

“It’s an entirely different way to approach economic development,” says Dr. Wayne Miller, an extension economist with the Division of Agriculture and one of the authors of the report. “What we’re trying to promote is more indigenous growth, more entrepreneurial opportunities.”

Arkansas has long been an exporter of raw materials, particularly agricultural and forest projects, much of which are processed elsewhere. Then starting in the 1950s, manufacturing firms from other parts of the United States started setting up plants in rural areas to take advantage of cheaper labor.

Those manufacturing plants, which provided jobs, became an important mainstay of rural economies, often providing supplemental employment for farmers. But starting in the mid-1990s, those jobs started to shift to Latin America and Asia where labor was cheaper – and there is little prospect of them coming back to rural Arkansas, according to Miller.

In addition, new technologies increased efficiency at those manufacturing plants that remained. As Riley puts it, “The jobs became more technology based, and there are fewer of them.”

Need for education

A need for stronger technology skills presents a particular problem for Arkansas, which ranks 49th out of the 50 states in the number of adults with college degrees. In rural Arkansas, only 13 percent of residents have college degrees, compared to 24 percent in urban areas of the state and 30 percent nationwide.

Gov. Mike Beebe stressed that connection between higher education and economic development in a recent speech sponsored by Arkansas Manufacturing Solutions, a group which provides competitive assistance to manufacturing firms in the state.

“There is a correlation and a tie between education and economic development, and specifically between our roles in higher education,” Beebe said. “Inevitably, they all require a higher and higher skill level and a higher and higher degree of education in order to be productive.”

In addition to improving education to build a stronger workforce to fill those higher-tech jobs, economic development officials are also looking at more creative ways to create jobs around resources communities already have.

Many of these efforts center on agriculture. The idea is that instead of simply shipping crops or animals grown or raised in Arkansas to other states for processing that the processing is done here at home.

Riley cited the state’s fresh fruit growers as an example. Instead of depending solely on the fresh fruit market, many are now producing jams, jellies and juices for sale to consumers and even selling byproducts, such as seeds and husks, to the health food market.

“They found value added in a number of aspects of what they do,” he said.

Other communities are building on their natural beauty and local attractions to generate tourism and attract retirees, such as the town of Harrison in the Ozarks, which undertook a major revitalization project in its historic downtown.

In the coastal plains region across the southern part of the state, where timber has historically been shipped out with minimal processing, there may be opportunities to add value to some of the commodities before they’re shipped. There are some specialty wood product manufacturers in Arkansas aiming for the niche consumer market, Miller said. Rice producers in the Mississippi Delta have also started growing specialty rice that they are marketing directly to consumers, he said.

Business with the government

The Division of Agriculture also operates another program aimed at building local economies across the state, the Arkansas Procurement Assistance Center, which helps local firms try to get government contracts.

Funded by a federal grant, the program on average from 2005 through 2010, has generated more than $142 for local communities for each dollar invested, said Ray Blevins, the center’s director.

“We show them how to get into the system,” Blevins said. In addition to trying to match local firms to contracts, the center also helps firms band together to bid on larger contracts that they would not be able to fulfill alone, he says.

Of course, these low-key entrepreneurial efforts haven’t completely stopped state and local officials from recruiting large manufacturing investments. Earlier this year, the Arkansas Legislature ponied up $125 million worth of incentives to spur construction of a steel mill in Mississippi County, near Osceola.

For more information about community and economic development visit http://www.arcommunities.org/  or contact your county extension office.