Spatial Labor Markets, New Economic Geography, and Urban-Rural Linkages: Implications for the Rural South

To reach the levels of prosperity in the urban South, rural leaders have a three-fold challenge: to improve human capital, to improve local amenities and to identify the niche of rural communities in the new economic regions of the South, in other words, spatial labor markets will play a key role. The article first reviews key problems facing rural communities in the South that are likely to cause rural earnings-per-worker and employment opportunities to lag behind those in urban centers. Next, examples are given of the types of empirical and conceptual work needed to examine the role that space plays in shaping the performance of rural labor markets in the South. The concluding section provides a summary and a research agenda for understanding spatial dimensions of rural labor markets in the South. To reach the levels of prosperity' in the urban South, rural leaders have a three-fold challenge: to improve human capital, to improve local amenities and to identify the niche of rural communities in the new economic regions of the South, in other words, spatial labor markets will play a key role. The article first reviews key problems facing rural communities in the South that are likely to cause rural earnings-per-worker and employment opportunities to lag behind those in urban centers. Next, examples are given of the types of empirical and conceptual work needed to examine the role that space plays in shaping the performance of rural labor markets in the South. The concluding section provides a summary and a research agenda for understanding spatial dimensions of rural labor markets in the South. 1 Henry: Spatial Labor Markets, New Economic Geography, and Urban-Rural Linkages in the Rural South Published by eGrove, 1999 Implications for the Rural South Henry 3 9 Human Capital -The Principal Problem Facing Rural Labor Markets of the South The mainstream view of the most important southern labor market problem is the familiar mantra of education or human capital deficiencies. Sociologists, regional scientists, historians and economists have documented the economic consequences of inadequate investments by southerners in education and training (e.g., Lyson and Falk 1992; Malecki 1995; Cobb 1993; and Wright 1986). Yet the urban South continues to do very well in the regional competition for new manufacturing plants and is fully participating in the evolving service economy. In many urban areas of the South -places like Austin, Raleigh-Durham, Charlotte, Atlanta, and Northern Virginia -the South is a worldclass competitor for the most advanced service and manufacturing jobs. (See for example, MDC Research Committee 2000, a description of new economy cities in the South). Extending the human capital thesis, Mathur 1998 argues that investments both in human capital and in local amenities are key to sustained regional economic development. Human capital affects growth because it "generates innovation and technical change which in turn defies diminishing returns to labor and (physical) capital, hence driving the regions' growth and development in the long run" (Mathur 1998:48). Amenities enhance the accumulation of human capital at the regional level. Thus, to succeed in sustaining regional economic development policy should be designed to do two things: provide high quality education and training for human resources and provide the kind of local amenities that will attract human capital and prevent a "brain drain" to competing regions. Often rural amenities can be affected by investments in infrastructure and the role of rural infrastructure continues to be a central concern in the regional development process (Nijkamp 1998). The hard elements, like transportation and communications networks, have received most of the attention in the past, often in the framework of an aggregate production function where they are another input (Aschauer 1989 and Button 1998). But the soft elements (that are the hardest to measure) like the socioeconomic milieu (Hansen 1993). or the 2 Journal of Rural Social Sciences, Vol. 15 [1999], Iss. 1, Art. 3 https://egrove.olemiss. edu/jrss/vol15/iss1/3 40 Southern Rural Sociology Vol. 15, 1999 "social capital" of Coleman (1988) and Putnam (1993) are topics that are at the forefront of current regional development thinking (Funck 1998). However, a third dimension is also important where will these investments occur? The spatial labor market that reflects impacts of added human capital and amenity investments in rural areas of the South needs to be defined. From the demand side of the labor market, firms will be attracted to spatial labor markets that have highly productive labor. On the supply side, households providing labor will be attracted to places with high amenities (or wilj require compensation through higher wages). To prosper within these spatial labor markets, rural communities in the South need to recognize where they fit into the dynamics of the spatial labor market of which they are part. Economic Regions and Rural Niches Two issues that immediately confront research efforts in identifying how rural economies in the South can prosper in spatial labor markets are: how to define economic development and how to define the spatial labor market that affects a rural area. A practical definition of econonlic development is a "process of change in employment in a region" (Mathur 1998:4). Employment change is critical for two reasons. First, labor and human capital account for abput two-thirds of the share of income in the US, with the other third attributable to physical capital. ' Second. as a region "develops" it changes its mix of employment as a result of external stimuli (like export demand) and internal investments (like human capital accumulation). So a focus on labor markets fits well with the analysis of economic ' This kind of accounting for the sources of economic growth follows the neoclassical Solow 1956 aggregate production function model. As augmented in Mankiw, Romer and Weil(1992), for human capital, labor, physical capital and human capital each contribute about one-third to real output over time (see Mankiw et al. 1992:432). Of course, financial "capital" in this real model only serves as a conduit of savings into investment in physical or human capital and thus is not counted as an independent contributor to economic growth. 3 Henry: Spatial Labor Markets, New Economic Geography, and Urban-Rural Linkages in the Rural South Published by eGrove, 1999 Implications for the Rural South Henry 41 development and provides the key question for policy makers -what makes employment grow in the labor markets of the region? (Mathur 1998:4-5). However. analysis of labor markets with a goal of understanding why rural areas lag urban areas requires a spatial perspective that encompasses both rural communities and proximate urban centers. A practical solution is to use functional economic regions (FERs) defined using employment commuter sheds. FERs as defined by the U.S. Department of Commerce (Johnson 1995) capture rural-urban tensions within the regional labor market. Most FERs are comprised of an urban center and nearby rural counties -often with a low skill labor force that has progressed little since World War I1 (Malecki 1995). It is important to recognize that leading scholars of spatial labor markets give the urban center in these FERs the leading role in promoting regional development: Economic growth takes place in a matrix of urban regions through which the space economy is organized. The crux of the link between regional growth and modern growth center concepts is that it is cities within the urban system, linked by filtering mechanisms -not the heartland-hinterland lever in the regional system, linked by export base multipliers, that today organize the economy spatially. The cities are centers of activity and of innovation. focal points of the transport and communication networks, locations of superior accessibility at which firms can most easily reap scale economies of localization and urbanization. They encourage labor specialization, areas specializing in productive activities and efficiency in the provision of services. Agricultural enterprise is more efficient in the vicinity of cities. The more prosperous commercialized agriculture encircle the major cities, whereas the peripheries of the great urban regions are characterized by backward lower-income economic systems. (Berry and Kasarda 1977: 279) 4 Journal of Rural Social Sciences, Vol. 15 [1999], Iss. 1, Art. 3 https://egrove.olemiss. edu/jrss/vol15/iss1/3 42 Southern Rural Sociology Vol. 15, 1999 From this perspective, spatial labor markets are simply networks of urban centers -the rural role in spatial labor markets seems to be only agricultural. But surely this is an outdated view of the key economic forces of change in the rural