DOCUMENT RESUME ED 358 977 RC 019 073 AUTHOR Debertin, David L., Ed. TITLE Education, Off-Farm Employment and Rural Economic Development: Perspectives from States in the Southeast. Proceedings of a Rural Development Symposium at the Annual Meeting of the Southern Agricultural Economics Association (Lexington, Kentucky, February 1992). INSTITUTION Southern Rural Development Center, Mississippi State, Miss. REPORT NO SRDC-165 PUB DATE Jan 93 NOTE 49p.; For a selected individual paper, see RC 019 076. PUB TYPE Collected Works Conference Proceedings (021) EDRS PRICE MF01/PCO2 Plus Postage. DESCRIPTORS *Economic Development; Educational Attainment; Elementary Secondary Education; Farmers; *Government Role; Part Time Farmers; Postsecondary Education; *Role of Education; Rural Areas; *Rural Development; *Rural Economics; ' Rural Education IDENTIFIERS Education Economy Relationship ABSTRACT This publication presents a series of five papers based on presentations given at a rural development symposium dealiag with the role of education in off-farm employment and rural economic development. The first paper, "Education and Rural Economic Development" (Thomas G. Johnson), discusses linkages between the regional educational attainment levels and the potential for rural economic growth. Paper 2, "Investing in Government Public Services: Is it Necessary for Rural Development?" (Rodney L. Clouser), proposes specific investments by state, local, and federal governments for rural development. Paper 3, "The First Job Decision and the Probability of Off-Farm Work" (Judith I. Stallmann and James H. Nelson), reports the results of a survey related to first job decisions by farm operators and their probable consequences. The fourth paper, "Education and Economic Development in Rural Appalachia" (Thomas G. Johnson and David E. Broomhall), identifies factors that influence decisions made by high school students to obtain additional education, with a focus on the behavior of high school students in rural Appalachia. The final paper, "Human Capital. Transactions Costs and Farm Labor Supply and Demand: Some Implications for Rural Economic Development" (Stephan J. Goetz), presents an economic model of farmers' joint decision to obtain off-farm employment and to hire farm workers. This document contains numerous charts and graphs. (LP) ************************************************************** * Reproductions supplied by EDRS are the best that can be made from the original document. ****************************************************************, ment men .... . . . . . Proceediugs of a Rural Development Symposium at the 1992 meetings of the Southern Agricultural Economics Association Published by the Southern Rural Development Center PERMISSION TO REPRODUCE THIS MATERIAL HAS BEEN GRANTED BY D. /Sr° 4 net / H. y- U S. DEPARTMENT OF EDUCATION Office of Educational Research and Improvement EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) has been rePrOduCed as document Trws ,ece,,,e0 trom the persOn or orpanizabon or,g.nahng It TO THE EDUCATIONAL RESOURCES COPY AVAILABLE C Ming.' changes have been made to Improve BE reproduction oushty INFORMATION CENTER (ERIC) Po.nts of new or OpmionsstatednthmCIOCu. 2 went do not necessarily represent official OERI govhon or Dol.Cy Education, Off -Farm Employment and Rural Economic Development: Perspectives from States in the Southeast edited by David L. Debertin University of Kentucky Department of Agricultural Economics Proceedings of a Rural Development Symposium at the 1992 meetings of the Southern Agricultural Economics Association Published by the Southern Rural Development Center Table of Contents David L. Debertin Introduction Thomas G. Johnson Education and Rural Economic Development 1 Rodney L. Clouser Investing in Government Public Services Is It Necessary for Rural Development 4 Judith I. Stallmann The First Job Decision and the and James H. Nelson Probability of Off-Farm Work 12 Thomas G. Johnson Education and Economic Development and David E. Broomhall In Rural Appalachia 20 ti Stephan J. Goetz Human Capital, Transactions Costs and Farm Labor Supply and Demand: Some Implications for Rural Economic Development 30 it Introduction David L. Debertin* This publication presents a series of a firm to locate in a particular area? A lack of papers dealing with the role of education in off- education among farm residents is an important farm employment and rural economic problem in many rural areas of the South. In development. The papers are largely based on Kentucky, for example, those employed in presentations by the authors at an organized farming tend to be less educated, on average, symposium held at the meeting of the Southern than the state's population as a whole. Firms that Agricultural Economics Association held in are interested in recruiting a well-educated Lexington, Kentucky in February of 1992. workforce are therefore reluctant to locate in many rural areas, not only in Kentucky, but in In many states in the South, part-time other rural areas in the South where average off-farm jobs are providing an increasing share educational levels tend to be low. Often only the 3f total income for farm residents. Increasingly, more highly educated farmers and their spouses farm residents are taking on full-time jobs and are able to find part-time or full-tithe off-farm farming on the side. Many people prefer farm employment while continuing to live on a farm life, but lack sufficient capital to rely on farming and obtain additional income from farming as the sole source of income. These individuals activities. need not make a large investment in order to live on a farm, since farm income is only part of total In the first paper, Johnson discusses some income. Moreover, ti.e off-farm job provides of the important linkages that exist between the important year-to-year income stability which educational level of people within a region and might not occur if reliance was placed entirely on its potential for rural economic development. He income from the farm. argues that rural areas are disadvantaged by sparse population, large distances to major The additional income attained by markets for products, poor educational systems, working part-time or even full-time off-farm is a high incidence of poverty and outmigration. important for farmers. However, if farmers are He argues that much of the future potential for to be able to do this, there are two important rural development is conditional on building a prerequisites. First, the off-farm employment stronger and more viable educational base within opportunities must exist. In other words, rural regions. industrial and other economic growth must have taken place if off-farm employment is to be a Clouser indicates that specific viable option. Second, the farmers and their investments by state, local and federal spouses who seek off-farm employment must governments are needed if rural development is have the requisite education or other specific job to take place. He provides statistical evidence to skills needed by the employer. support the contention that many southern states lag behind the rest of the nation in their Most rural development specialists tend to expenditures on public services. While this is true think primarily about the problems associated for education, it also appears to be true for many with attracting firms that will generate job other public investments that would lead to rural growth in rural areas. What does the local infrastructure development. He believes that, in community need to do in order to encourage a general, many southern states are significantly *Professor of Agricultural Economics, University of Kentucky Education, Off-Farm Employment, and Rural Economic Development ii Goetz presents an economic model of underinvesting in human capital. Because of this, farmers' joint obtain off-farm rural for opportunities decision employment many to residents in the South are more limited. employment and to hire farm workers. He argues costs impose a significant that transactions barrier to many farmers when seeking off-farm Stallmann and Nelson report the results of a survey and statistical analysis they conducted employment and when hiring workers. Similarly, relating to first job decisions by farm operators long-term unemployed potential workers in many and their probable consequences. They find that urban centers face significant transactions costs the age of the worker and the amount of and other disincentives when considering whether or not to be employed in affect training significantly short-term vocational the farm work. In many states in the South, the decision to work off-farm. They argue that in some instances, workers may engage in farm availability of hired workers to perform work at off-farm opportunities for certain times during the production season is labor when employment is weak. This movement back to important increasingly posing limits to farm employment may occur more frequently agricultural production. Reduction in during periods of weak economic growth. transactions costs facing farmers both as on-farm non-farm of employers residents and as employees in off-farm jobs could contribute Johnson and Broomhall identify factors significantly to greater economic activity in that influence decisions by high school students to obtain additional education, with a particular many rural areas of the South. emphasis on the behavior of high school students rural appalachia. They conclude that to in improve educational performance and break the cycle of poverty, it may be necessary to improve the socioeconomic conditions in the home. They argue that a variety of local factors influence academic performance, which, in turn, can have a profound effect on the future productivity of They force. that labor the stress local efforts development should increased pay attention to improving the local quality of life through improved public services, reducing the outflow of productive workers to the cities, and perhaps luring migrants back to rural areas. Education and Rural Economic Development Thomas G. Johnson* Introduction The Future Role of Education in Economic Development Theodore Schultz (1961) and other researchers (Becker for example) have shown strong links between human capital, especially education, and In fact, historical aggregate income growth. Robert Reich in his recent book, The Work of Schultz found the rate of return on investment in Nations: Preparing Ourselves for 21st Century education to be higher than for many other types Capitalism, deals with the impact of the emer- ging world economy on the demand for and of investment. He estimated that between 30 and 50 percent of the historical increases in national supply of labor and the consequences for national income in the U.S. could be attributed to economic growth. He states, More recent studies, using more education. refined measures of educational investment, have That the strength of the American economy is found somewhat lower but still strong rates of synonymous with the profitability and prod- return to education. Deaton and McNamara, uctivity of American corporations is. . an . upon reviewing literature in the area, conclude axiom on the brink of anachronism ( p. 135). that there is little doubt that aggregate income is highly dependent on education. He continues, Today's concern at the national level is with .the important question is not which . . global competitiveness. Policy debate rages over nation's citizens own what, but which whether our perceived loss of competitiveness nation's citizens learn how to do what.. . should be attributed to declining work ethic, our ( p. 137). massive government deficit, over regulation of the economy, crumbling infrastructure, lagging Reich's clarification of this latter point research and development expenditures, or a indicates that it is something of an exaggeration. failure of our educational system. Schultz's He says, for example, that investment is impor- conclusion, if still valid, would suggest that we tant and that the total return to the American must invest more in human capital, especially economy depends not only on the total amount education. that Americans invest (worldwide) but also on the "care and wisdom with which such worldwide However, two questions related this portfolios of investments have been compiled" (p. to conclusion must be raised. First, has (or will) the 139). This care and wisdom, it turns out, is an apparent restructuring of the world economy important, learnable skill. changed the role of education in economic growth? How should we educate ourselves to Because the high-value enterprise is based on effectively compete most in this new insights, the highest returns and the greatest Second, what are the conse- environment? leverage belong to skilled people. rather . . quences of this conclusion and the answer to the than to shareholders or executives occupying first question, for rural communities? formal positions of authority ( p. 148). * Professor, Department of Agricultural Economics, Virginia Polytechnic Institute and State University. Education, Off-Farm Employment, and Rural Economic Development 2 nation possesses the same agglomeration of symbolic analysts already in place and able to learn continuously and informally from one This perceived importance of skills is supported another ( p. 226). by recent research on industrial demand for skills (Teixeira and Swaim). Reich states later that, Unfortunately, most students receive a very different kind of education, leaving them with New information quickly becomes part of no choice but to compete with the routine worldwide webs. What remains behind are the producers of the world, or the local in-person skills and insights necessary to invent ( p. 152) providers (Teixeira and Swaim). Those fortunate .Money, plants, information, and equipment enough to grow up in the homes of symbolic- are footloose, along with corporate logos. analysts or to go to one of the best schools are Brains, however, are far less mobile" ( p. 163). provided with these bases. While brains may be quite immobile from Reich's Implications for Rural America national vantage, it is important to note that they are very mobile from the community's vantage. Reich makes a point that is particularly important to those of us concerned with rural Reich describes three types of jobs of the economic development and the welfare of rural future: (1) the routine producers, (2) in-person service providers, and (3) symbolic-analysts. people. Since the products of routine producers compete in the United States as in no other nation, in a worldwide market, wages for these workers analysts are will be determined by global ccillpetitive forces. concentrated symbolic in In-person services are provided locally on a specialized geographic pockets where they live, work, and learn with other symbolic person-to-person basis. Their earnings will be a common kind of forces of supply and determined by local analysts devoted to demand. Symbolic-analytic service providers are problem - solving, - identifying, and -brokering problem-identifiers, (p. 234). problem-solvers, and strategic-brokers (that is, they bring those with seems that a form of symbolic-analytic solutions together with those who have the It problems; they create teams or webs). agglomeration is emerging. Reich states that, "The only true competitive advantage .[T Pie symbolic-analyst zone functions as lies in skill in solving, identifying, and brokering . . 6 kind of large informal organization all its new problems" (p. 184). own, whose members' skills are combined in certain ways for particular projects and Reich's central contention is that the idea that we are in the same national economic growth subsequently recombined in different ways for We are in different "boat" is no longer valid. others ( p. 237). economic boats depending on whether we are routine producers, in-person service providers, of traditional the agglomeration In case or symbolic-analysts. Education is at the very economies, rural areas are disadvantaged by their core of this parting of fortunes. Reich devotes sparse population, simple economies, and large In the case of symbolic-analytic considerable attention to the education of the distances. He believes that overall, symbolic-analyst. agglomeration, if indeed such a thing exists, rural areas may be further disadvantaged by their Americans excel and will continue to excel at of historically high symbolic-analysis because: poverty, poor levels education, and selective out-migration of better educated and skilled youth. If this hypothesis is ( I ) no nation educates its most fortunate and correct, then large aras of rural America may children--its future talented symbolic slide Xto relative poverty and continue to analysts--as well as does America; ( 2) no Johnson: Education and Rural Economic Development 3 References underdevelopment with a growing disproportion of the nation's routine-producers. In-person Becker, Gary S. Human Capital: service providers will necessarily be distributed 1975. A but even here Theoretical and Empirical Analysis, more evenly, service those with Special Reference to Education. New York: providers in rural areas will be compensated at a Columbia University Press. lower level because of the lower incomes of those that pay for the services. Some rural areas will become the playgrounds and the retirement Broomhall, David, and Thomas G. Johnson. havens of the symbolic-analysts and a few may 1992. "Community and Family Influences on become enclaves of the more affluent class, but Education Performance in Appalachian rural areas in general will find it harder and Communities." SRDC No. 161. Southern harder to compete particularly because of their Rural Development Center, September. education systems. Deaton, Brady J., and Kevin T. McNamara. A Changing "Education in Conclusions 1984. Impact of Population and Environment The discussion above is at the same time Economic Change on the Demand and Cost of optimistic and pessimistic. It is optimistic about Public Education in Rural America." SRDC the benefits of education to national economic Synthesis-Bibliography Series No. 17, growth, but pessimistic about the fortunes of Southern Rural Development Center. But within the potential most rural areas. Reich, Robert. problems facing rural areas is the possibility that The Work of Nations: 1991. reform of our educational system accompanied for Preparing 21st Ourselves Century by the development of ideal conditions for Capitalism. New York: Alfred A. Knopf, symbolic-analytic agglomeration might create a Inc. better future for rural areas. Reich writes that Schultz, Theodore W. "Investment in 1961. ft] he threads of the global web are computers, Human Capital." American Economic Review facsimile machines, satellites, high-resolution 51(1): 1-17. monitors, and modems--all of them linking designers, engineers, contractors, licel.sees, Teixeira, Ruy A. and Paul L. Swaim. 1991. "Skill Demand and Supply in and dealers worldwide...In the high-volume the New Issues for Rural Areas." economy...economies of scale necessitated a Economy: in central location...Intellectual and financial Education and Rural Economic Development: capital can come from anywhere, and be Strategies for the 1990's. ERS Staff Report added instantly ( p. 111). No. AGES 9153 Agriculture and Rural Division, Economy Research Economic Rural areas, if linked to these global webs Service, U.S. Department of Agriculture. and provided with the financial resources to produce high quality education, could become the location of choice of many symbolic-analysts. Furthermore, research suggests that given better prospects of jobs in their community, many youth would stay in school longer and perform better (Broomhall and Johnson). Investing in Government Public Services: Is It Necessary for Rural Development? Rodney L. Clouser* Introduction appropriate funds for human capital development are necessary if Southern states aspire to compete with other regions in the country. Jobs of state legislators and county commissioners are not Raising and easy. allocating money for the provision of public State and Local Government Expenditures services and infrastructure is a difficult task. The public notices the difficulty faced by elected In 1987, state and local government decision makers only when a fiscal crisis occurs. expenditures Southern What the public does not often recognize is that were by states a budget crisis exists in most state legislatures significantly lower than the average for the U.S. and county commissions every year. as a whole. Southern states generally were below The the U.S. average per capita expenditure by at collective "wants" of the individual legislators and commissioners, and of special interest groups, least 10 percent (in 12 of the 13 Southern states, almost always exceeds the tax revenue available. the exception being Louisiana which was below the average by 8.1 percent). Expenditures for It is extremely difficult when addressing governmental services ranged from $1907 per issues such as economic d: Aopment, human capita in Arkansas to $2469 in Louisiana (Figure capital investment and government taxation and 1). expenditures to articulate problems and issues in regional terms. But my task is to address these As a region, the South has 75 percent of issues from a regional perspective in the South. the states that rank in the lowest quartile of all Before proceeding, a caveat needs to be noted. of and the District states Columbia in Revenue and expenditure data presented today governmental expenditures. Virginia ranks 34th represents a snapshot in time (1987). Changes in terms of state and local government per capita have occurred in some state legislatures since expenditures and this represents the highest 1987 (e.g., Kentucky has significantly altered the ranking of Southern states. Arkansas ranked last state school funding allocation), and the lag in (51st) among the 50 states and the District of data availability between the altered tax and A complete listing for Columbia in 1987. expenditure structures fully not may Southern states is presented in Table I. be considered. but a These statistics provide insight, My hypothesis is that Southern states fundamental question still remains. Is something spend less for public governmental services fundamentally different about the provision of because the region taxes at a lower rate. In government services in Southern states compared the region has allocated more to addition, with the remainder of the country that would physical infrastructure (such as roads, bridges, explain why per capita expenditures are lower in fire the South than for the U.S. as a whole? My and stations.) than human capital conclusion is the primary difference in the infrastructure. Allocation of government funds to human capital may not be sufficient to ensure provision of government services between the but economic development, allocation of South and the remainder of the U.S. is in wage * Professor and Extension Coordinator, Food and Resource Economics Department, IFAS, University of Florida, Gainesville, Florida. 13