This commentary was originally published by the Federal Reserve Bank of Richmond.

This week is the Richmond Fed’s Rural America Week. It’s the third year in a row we’re bringing together funders and community organizations, exploring solutions to gaps in educational attainment, and sharing some of the many success stories we’ve heard in rural communities throughout the Richmond Fed’s district.

The Richmond Fed has an ongoing commitment to understanding the unique challenges and opportunities faced by rural areas. Every month, I visit three to five small towns in our district (socially distanced) to meet with business and community leaders. While I’ve seen small towns thriving, it’s safe to say that in general, smaller towns have fallen behind more urban areas in recent decades.

One measure of this is the employment/population ratio. In the Richmond Fed’s district, the employment/population ratio for people between 16 and 64 years old is almost 11 percentage points higher in urban areas than in smaller towns. The Fed’s mandate includes maximum employment, so this gap means that understanding and helping small towns succeed is a priority for us.

While every community is different, we’ve identified some common themes in the challenges they face, as shared when I spoke at our first annual Investing in Rural America Conference in Harrisonburg, Virginia. The first is education, or providing students with the information and preparation they need to succeed. The second is connection—facilitating workers’ access to good jobs. Isolation is another challenge, as geographic remoteness can lead to informational and institutional gaps. Finally, many people in smaller towns face obstacles to labor force participation, such as health problems. And of course, Covid-19 has exacerbated many of these challenges over the past year and a half. Remote education has widened preexisting gaps. Community college enrollment has declined. Broadband has become even more critical. Both mental and physical health have been issues.

How do we address these challenges? Sometimes the best place to start is looking at who is getting it right. So let me put forward some of the innovative strategies I’ve encountered throughout our district.

Education

I’ll start with education, which builds the foundation for economic growth in a community. Educated workers attract new businesses, and good schools attract new residents. I should note that while there is an overall education gap, there are many smaller towns with high-performing educational systems. The public school system in Wise, Virginia, for example, has been in the top tier of Virginia schools for years.

But I have kept my eyes open for interesting stories of transformation and improvement. And while improving educational outcomes is a challenging task, some communities have made a real difference. Danville, Virginia, for example, has made big investments in early childhood education that have led to large increases in kindergarten readiness. In Lexington Park, Maryland, which is home to the Naval Air Station Patuxent River, leaders at the base have collaborated with business and community leaders to make major improvements in K-12 education.

Connection

Education is just the first step. When I was in Fayetteville, North Carolina, someone remarked that their “biggest export is educated kids.” How do you ensure that there are opportunities worth staying in town for? 

A lot of communities focus on recruiting major company operations. Of course, if one can attract the right stable employer that can be of help. But recruitment is a hard game to win. So, many communities have put their efforts into better connecting their workforce to jobs that already exist. That’s particularly helpful in today’s tight labor market. Here there’s an important role for community colleges, and we have some great examples in our district of schools and businesses partnering to train and connect residents to job opportunities.

In Hickory, North Carolina, the Catawba Valley Furniture Academy at Catawba Valley Community College is a training program designed by local furniture manufacturers to train students for skilled positions. Pitt Community College in Greenville, North Carolina, works closely with pharmaceutical manufacturers in the region to train workers for their growing industry. Procter & Gamble partnered with Blue Ridge Community and Technical College in Martinsburg, West Virginia, to train workers for its Tabler Station plant. And in Lake City, South Carolina, the Florence-Darlington Technical College has partnered with the Darla Moore Foundation and Francis Marion University to create a regional center (the Continuum) to train people for high-quality jobs. Manassas, Virginia, is using CARES Act money to fund a training program that offers eligible city residents up to $5,000 for program costs and wraparound services to help them secure retraining. And Virginia is using CARES Act funding to provide scholarships for workers displaced by the pandemic.

Not all training has to be provided by schools. The Carolina Textile District, for example, part of the Industrial Commons based in Morganton, North Carolina, offers workshops to train people for the resurgent field of industrial sewing. It also offers classes to help people start and scale their own textile firms, which brings me to my next point: It’s not just about attracting existing employers. It’s also about giving people the tools to become employers themselves. We’ve visited multiple communities in West Virginia that are doing great jobs fostering entrepreneurship.

In Beckley, West Virginia, the West Virginia Hive provides aspiring or current business owners with technical assistance, networking, and business advising. In Taylor County, West Virginia, nearly one-third of the job growth since the Great Recession is accounted for by self-employment. Over the past five years, Taylor County has seen 27 percent growth in new businesses, the second-fastest growth in the state. That is 221 new businesses in a county of just under 17,000 people. They’ve achieved this by creating a local network of committed residents who met weekly to share ideas, make plans and reinvigorate their community. That created an environment where people were striving for more and were more able and willing to take risks—and helped one of the county’s towns be selected for the Energizing Entrepreneurial Communities Program (E-Communities).

It doesn’t stop with the jobs. Workers need places to live and they need transportation—so communities working to boost employment also need to look around the corner and anticipate the needs of the people they’re hoping to attract and retain.

We’re hearing a lot about housing challenges in the current environment of low supply and escalating costs. Here, there is a vital role for community foundations and rural community development financial institutions (CDFIs). For example, Woodlands, headquartered in Elkins, West Virginia, has played a crucial role in revitalizing downtowns and building attractive, affordable housing, such as the Golden Rule in Belington. This former store and warehouse, built in 1902, now features affordable apartments, an artist market and an outdoor community space.

Often in more rural areas, people have to travel long distances between home and work. So in South Carolina, the Palmetto Breeze transit system helps people get from their inland homes to jobs on the coast. In Lynchburg, Virginia, the HumanKind nonprofit organization has been a partner in the national Ways to Work program for more than 20 years, serving over 18,343 families in the Lynchburg region with over $6.3 million in auto loans. This unique program provides non-predatory, affordable auto financing, financial coaching and vehicle maintenance education to enable working families to get access to the transportation they need. 

Isolation

Underpinning the challenges related to education and employment is isolation. The most obvious example is lack of broadband access. Broadband removes the obstacle of distance, opening up a wealth of educational resources and health care options, and giving entrepreneurs access to new markets. Small towns face challenges in funding and in finding providers.

One promising avenue is leveraging rural electrical cooperatives, which serve many of the same areas that lack broadband access. Choptank Electrical Cooperative on Maryland’s Eastern Shore, for example, formed a broadband subsidiary last year and connected its first customer in April of this year. Communities also need help accessing available funding. In West Virginia, communities are working with the Claude Worthington Benedum Foundation and Generation West Virginia to help them navigate various broadband funding sources, such as the U.S. Department of Agriculture, the Federal Communications Commission, the U.S. Economic Development Administration, and the Appalachian Regional Commission.

Breaking down isolation is also about human connection: role models and mentors who can show small town residents a path to a better future. In Maryland, the Garrett County Community Action Committee’s “2Gen approach” promotes family economic security by providing coaching, financial education, and job search support for parents, and high-quality early childhood services. The Roanoke Valley’s Total Action for Progress (TAP) community action agency in Virginia also serves the entire family to make a sustainable impact on poverty. The College Advising Corps, based in Chapel Hill, North Carolina, places advisers in high schools to provide personalized college guidance to students from disadvantaged backgrounds. In addition to helping students navigate the application and enrollment process, advisers also help students and their families see college as an option in the first place.

Participation

Many people in small towns also face obstacles to labor force participation such as health concerns or the potential loss of needed safety-net programs. There are promising programs to help people recovering from substance abuse return to work, such as West Virginia University’s “West Virginia Inspiring Hope” program. This initiative creates an entire recovery-to-work ecosystem of job training and placement, treatment, housing, and transportation. The Williamson Health and Wellness Center, in Mingo County, West Virginia, takes a holistic approach to helping residents with chronic health problems such as diabetes, obesity and addiction—and has become a driving force behind the community’s revitalization. 

There’s been a lot of talk recently about benefits programs potentially creating a disincentive to work. The Richmond Fed is working with employers, policymakers, and nonprofits throughout our region to help them identify and plan around “benefits cliffs” (using the CLIFF tool developed by Atlanta Fed) —situations where an increase in income for low-income individuals and families actually makes them worse off, because their earnings rise by enough to render them ineligible for the public benefits that they were previously receiving, but not by enough to afford them what the benefits would have otherwise provided.

Making It Work

It’s not enough to have a single program or initiative. The places that are making it work also have several key elements in common: a sense of place, regional cooperation, dedicated funding, and, harder to define—what I like to call scrappiness.

Towns need a story: a reason to visit and a reason to stay; a sense of place to rally around. The story is for employers, and the story is for talent. But, importantly, the story is less about marketing the plan to outsiders and more about marketing it to those who live there—why one should come and why one should stay.

This is a relatively easy task for beach towns and college towns—but many places also have natural resources to take advantage of. In Fayetteville, West Virginia, a thriving outdoorsports industry has helped rejuvenate the area. A robust all-terrain vehicle trail system draws visitors to Gilbert, West Virginia. Danville, Virginia, has capitalized on its riverfront and New Bern, North Carolina, on its thriving waterfront district.

Other towns could build on history, as Cambridge, Maryland, is doing by honoring Harriet Tubman and by capitalizing on its rich maritime history. Abingdon, Virginia, has a revitalized downtown that dates back to the Revolutionary War (along with a thriving theater program). I could keep listing examples— the arts scene in Lake City, South Carolina; the “walking mall” in Winchester, Virginia.; the vibrant downtown in Aiken, South Carolina ; the lively retail district in Leonardtown, Maryland —but the common thread is that these communities all believe in what they have to offer and are committed to making others believe too. 

Regional collaboration also is key. Almost by definition, small towns are surrounded by other small towns, and the strategy for that region needs to be integrated across jurisdictions. Together, small towns are more attractive to funders. They need to speak with one voice and operate together, whether it’s on education, business recruitment or housing development. Similarly, a nearby bigger city isn’t a problem but a benefit, as proximity to amenities and transportation can enhance the story. The path to success isn’t going it alone; instead, it’s working together. The GO Virginia initiative is pushing that sort of regional cooperation, leveraging state funding.

Of course, everything I’ve talked about requires money. Funding can come from a lot of places. Some communities are fortunate to have a local philanthropist or corporate benefactor. But not every town has that option.

Some places have gotten creative — Danville and Martinsville, Virginia, and Asheville, North Carolina, used the sales of local hospitals to endow regional foundations that invest in health, education and workforce programs. In Hagerstown, Maryland, a local business association worked with a state senator to secure legislation to issue bonds to fund a new baseball stadium, which is in turn supporting downtown revitalization.

And the Covid-19 stimulus money is a huge opportunity. It has made billions available to fund infrastructure and broadband investments. Even more is potentially available to support child care, early education and community colleges.

The challenge for small towns now is local capacity. Government institutions are slow to release money, and they tend to distribute it to places with a proven track record, access to matching funds and a well-written plan for using the money. Some communities have built that grantwriting and funding capacity, but most have not. We have seen this issue starkly with broadband funding in our broadband summit this summer that highlighted the importance of capacity building and public-private partnerships.

Bringing all these pieces together—building a sense of place, collaborating with neighbors and being opportunistic about funding—requires what I heard one community leader describe as “scrappiness.” It’s a hard thing to define, but we know it when we see it: a mix of determination, optimism and creativity that sets some places apart. Every town I’ve mentioned has scrappy local leaders who just won’t give up.

As we’ll see during Rural America Week, and continue to share in our Rural Spotlight series, there are small towns throughout our district that have found creative ways to evolve and thrive. And next March, we’ll be hosting our fourth conference devoted to the challenges and opportunities of the small towns in our district and beyond. We’ll be talking in more depth about the issues highlighted in this essay—capacity building, barriers to workforce participation and digital inclusion, to name a few.

Keep an eye on our website for more information, and we hope to see you there.

Tom Barkin is the president and CEO of the Federal Reserve Bank of Richmond, where he is responsible for monetary policy, bank supervision, payment services and the Fed’s National IT organization. He has held this position since 2018.