There is evidence that the old way of jobs creation never worked that well. Some rural areas, especially in Appalachia, may be worse off than 30 years ago. The state appears to have kept up with the rest of the country only because of increased government transfer payments, especially to distressed mountain counties. Labor markets in distressed counties seem to have common threads, such as entrenched poverty, low education levels, and few job opportunities. Workers extract the product, but add little value to it.
Workers add little value to the product.
There is little or no potential for growth, and owners can move on fairly easily. Distressed communities are vulnerable to fluctuating natural-resources markets and competition from overseas workers with lower wages. States with a high percentage of low-skill workers face a hard bottom line. They can no longer afford growing welfare roles, and they face global competition for low-skill jobs. Their incentives for these businesses are less effective because of a skilled labor shortage.