Economic Recovery Bypasses Many Rural Americans

While the economic expansion has continued for more than 10 years, CUNA Chief Economist Mike Schenk said its benefits have largely bypassed rural areas, home to 17% of the nation’s population and 8% of credit union members.

Credit unions are more commonly based in rural areas than banks, putting them in a unique position to help, Schenk said in CUNA’s November “Economic Update” video.

“Nearly all the contemporary demographic and economic data we have suggest that the nation’s rural areas continue to suffer from a steady decline and increasing despair,” Schenk said.

Rural counties cover 97% of the nation’s land mass, but were home to only 20% of the nation’s population in 2017.

While much manufacturing has shifted overseas, those that remain tend to be closer to the transportation and communications infrastructure of cities, and more dependent on highly trained workers.

“The movement of these jobs toward urban cores, along with global competition and automation, means rural areas lost nearly a quarter of their manufacturing jobs over the past 20 years alone – a trend that not surprisingly accelerated during the Great Recession,” Schenk said.

“Recent trade policies, and tariffs in particular, are having far-reaching negative effects,” he said.

Those trends have drawn many younger people to move to cities to find better-paying jobs, leaving a dwindling rural population that is becoming older and poorer.

“Businesses and services decline in that context until they cease to operate. Government shrinks and ceases to provide services as the tax base declines,” he said.

Census and U.S. Department of Agriculture data show higher poverty rates in rural areas. In 2017, 16.4% of those living in rural areas were below the poverty level, and 12.9% in metro areas. In the South, it was highest at 20.8% in rural areas and 15% in metro areas.

And whether a person is African American, Hispanic, a child or elderly, they were more likely to be poor if they were living in rural areas.

Meanwhile, Schenk said credit unions are in a better position to serve rural residents than banks because they have a higher percentage of branches in low- and medium-income areas compared with banks in both urban and rural areas.

Membership growth at rural credit unions has been slower than at metro ones. Rural credit unions had a 2% gain in membership for the 12 months ending in June, while metro credit union membership grew about 4% to 111 million.

Since 2013, membership of urban-based credit unions grew 25% while rural ones grew 15% “despite population declines,” Schenk said.

Some rural credit unions have been merging to obtain the scale they need to survive and provide higher levels of service. One of these is Superior Credit Union of Lima, Ohio, which surpassed $1 billion in assets this year with 94,616 members dotted across a rural swath of northwest Ohio. Its growth has been boosted by five acquisitions of smaller credit unions in the past few years.

Schenk said the not-for-profit structure of credit unions allowed them to pass along benefits in the form of lower interest rates on loans, higher yields on savings, and fewer and lower fees compared to banks.

Loan growth in rural areas has averaged 7.8% per year since 2013, compared with bank annual growth rates of 3% to 6.5%.

“In many of today’s small towns, the presence of an active, engaged financial institution is critical,” he said. These communities need “infusions of capital help to revitalize businesses, and loans to assist young people in advancing their education and improving their skills to help to stem the tide of rural manufacturing flight.”

Schenk added, “Credit unions alone can’t solve the problems faced by rural Americans. But the record is clear: Credit unions are engaged and committed to these communities, providing substantial capital infusions and providing significant financial benefits.”