Trickling Down: Are Rural and Rural Poor Family Incomes

The past decade has seen a number of studies of how the poverty incidence (the percentage of families below the poverty line) of certain demographic groups changes in response to economic growth. In the pre!3ent study, the responsiveness of family income to regional economic growth is examined for a sample of rural and rural poor Wisconsin families with nonaged, nQndisabled heads. Ordinary least squares regression is used to estimate the relationship between family income change over 1965-1967 and regional income and job growth over the same period. The results indicate th?t poor farm families do not get a proportional share of additional regional· income growth. Rural nonfarm (RNF) nonpoor families appear to be similarly unable to share proportionately in additional regional income growth .. While farm nonpoor and RNF poor families do appear to respond somewhat to regional income growth, it appears that, on the whole, additional regional income growth can be expected to widen the income gap between urban and rural families. The income changes of farm families (both poor and nonpoor) are· sensitive to additional jobs in a region although the coefficients suggest that quite a large number of new jobs must be created in order to have much effect. RNF family income is quite sensitive to the unemployment rate which suggests that wage rate increases accompanying tight labor markets are a major component of income change for these families. There appears to be no single regional development strategy which can be effective in improving the incomes of all rural families. Different groups of rural families respond to different components of regional growth. Development programs emphasizin~ job growth would probably improve farm family incomes much more than those of RNF famil:Les. Programs to tighten labor markets~ raise the minimum wage or stim~late regional dema~d would be expected tb help .the RNF families (and farm nonpoor families to some extent) bu~ would have little effect on the incomes of poor farm families. TRICKLING 'DOWN: ARE RURAL AND RURAL POOR FAMILY INCOMES RESPONSIVE TO REGIONAL ECONOMIC GROWTH? Bruce A. Weber During the past decade,' a number of economists have addressed the question of the responsiveness of poverty incidence to economic growth, that is, how the-percentage of families in poverty changes with economic growth. Empirical research has concentrated on estimating the elasticity of poverty of various subgroups of the population with respect to economic growth. ,A demographic group is considered responsive to economic growth if the elasticity for that group is greater ' than unity, that is, if poverty incidence for that group declines by more than one percent for each, percentage increase in national income. (or national product). Economic growth is considered to "trickle down" to the po~r_in groups whose po.verty elasticity is greater than one. Responsiveness of Poverty vs. Responsiveness of Poor Family Income This "trickle down" literature [1,2,5,6,7,10,12] has identified demographic groups whose poverty incidence appears to be responsive to economic growth: nonfarm families, families headed by nonaged persons, and male-headed families. While the evidence on differences between races is mixed, the poverty of whites appears to be more responsive than that of racial minorities. One implication which is often drawn from these findings is that poor families in these groups are "reached" by the trickle down of economic growth, that the incomes of the poor families in these groups increase in response to economic growth. 2 It is clear, however, that responsiveness of poverty incide~ce does not necessarily imply responsiveness of the incomes of poor families. Economic growth could reduce, poverty incidence merely by reducing the number of families who fall into poverty while having no effect on the number of poor families who escape poverty eac~ year. Growth might well have no effect on the average income changes of poor families. In such a situation,poor families (presumably the target population of those ,concerned about growth and poverty) would be unaffected by economic growth even though poverty incidence declined due to economic growth. \.Jllile the poverty of ~lhite, nonaged, or nonfarm families may be responsive to economic growth, the' incomes of poor families who are white nonaged or nonfarmers may not be responsive, as has been assumed. A critical relationship which has been ignored in the trickle down literature, therefore, ,is the 'relationship between the incomes of poor families and economic growth: how responsi~e are the incomes of poor families (and especially the incomes of the most "reachable" poor families whose heads are white, nonaged, male or not farm operators) to economic growth? Regional Growth and the "Reachable" Rural Poor Although the rural poor have not-been studied as a separate demographic group with respect to their responsiveness to economic growth, there are several factors~ which argue for such a study. First, although only 26.8 percent of the families in this country are rural, well over one-third of the poor families (38.0 percent) in the u.s. live in rural areas [18, Table 95]. There is then a particular urgency to find ways of improving the incomes of rural poor families. 3 At the same time, however, ' rural residents are generally assumed to'be on the periphery of the economy, attached weakly if at all to economic growth nodes, There is thus a higherprobabil~ty' that current antirural poverty strategies, based on the notion that growth will trickle down to the rural poor, will be ineffective. The question of the responsiveness of the poor to economic growth is commonly framed with respect to the national economy', It is questionable whether this is appropriate for making general judgments about their economic sensitivity, especially for rural families with their presumed tenuous attachment to the economic main-stream, ~fuereas 'I'1U'al poor families might not show resporisiveness to national growth, they might be highly sensitive to changes in the economy of their immediate region. While policymakers have an interest in the responsiveness of the poor to both national and local or regional trends, knowledge of responsiveness'to local area growth is particularly important in view of the current emphasis on regional growth as an anti-poverty weapon. The notion that regional growth is beneficial to ,the rural poor has been popular for many years in both government circles and the academic community, The Appalachian Regional Commission was created on the assumption that the rural poor would respond to regional economic growth. The same premise was implicit in the subsequent creation and funding of the other regional commissions, Two of the criteria which an area must meet in order to be considered for designation as an "Economic Development Region" are that the area has substantial unemployment and low median family income. Hhile the