Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915
PLAIN ECONOMIC SENSE
For release May 17, 1999
Column 378
The Future of Iowa's Communities
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
The Iowa League of Cities recently held a Centennial Forum to celebrate its 100th birthday. More than a typical party, the event offered speakers and panels that discussed the past, current and future contentious issues facing Iowa's communities--where more than 80 percent of Iowans currently live. I was on a panel discussing the future. Here is a sense of that panel's questions and discussion.
What do you expect in the way of economic changes over the next 20 years? We are creating more skilled jobs in some larger communities than can be filled by natural growth in the labor supply. If the jobs available paid enough and provided benefits that people wanted, we could slow down the brain drain. We can provide better training for more Iowans so we have a bigger supply of skilled labor.
In recent years, Iowa's wage gap has been growing rather than declining. This means Iowa's average wage is farther below the national average than it was a couple decades ago, particularly in rural areas. Working at home or with telecommunications may help to fill the gap. Iowa can also benefit from attracting more people back to the state or by opening our doors to skilled immigrants from other places.
What do you expect in the way of demographic changes over the next 20 years? We have an aging population. Iowa has the second or third highest proportion of senior citizens in the nation depending on the numbers used. We will face the intergenerational worker crunch quicker, longer and harder than most other states. Relative to seniors and youth, we have fewer people in the labor force generating earnings to pay for the education and senior services. This particularly shows up in Iowa's rural communities.
There are only three options for solving this problem. We generate more investment and earnings per person to pay for the growing service demands for the old and the young. We cut back on services that to many people represent our quality of life. Or, we increase the squeeze on those who generate income. So far, our state and local taxes in relation to our income have stayed relatively constant over the past four decades.
Should we focus on developing the state's agriculture base or diversifying the state's economy? We now have 90,000 farms left in the state. The farm population is about 200,000, or less than 8 percent of the total population. Those trends are going to continue for the next 20 years. We ought to avoid policies that target or limit our investment options, unless we believe the Iowa Department of Economic Development and the state's political elite can pick winners better than the citizenry. While agriculture will always be important, Iowa's economy, even in rural communities, is more diverse. The historical evidence suggests that the more sage advice is "Don't put all your eggs in one basket."
While Iowa's leaders may want Iowa to become the food capital of the world and value-added agriculture is important for multiplying the benefits of our natural resource base, many value-added agribusinesses represent cyclical and low margin segments of the overall economy. Many segments of agribusiness tend to bottom out after the farm sector bottoms out. So if we want to reduce the gyrations in our state's economy, diversification beyond agriculture must be a priority, in addition to diversifying the markets and uses for agricultural products.
While biotech and genetics have the potential to create growth segments in agricultural research and development, we shouldn't create false hope that everyone in rural Iowa is going to benefit uniformly. Increasingly more of the benefits are retained by those corporations who do the research and development and license the use of the new products or services created.
If you look at the economic bases of Mount Pleasant and Carroll, they have enjoyed more growth and stability compared to other rural Iowa communities because their economic base has been more diverse. Their leaders specifically focused their economic development efforts on economic diversification. Value-added agriculture that diversifies the uses and markets for agriculture should be a priority for Iowa and many of its rural communities; however, it should not be the only priority.
How do you create more economic vitality for Iowa? Quality of life requires investments by both the public sector and private sector. Perhaps our biggest assets to attract investment are Iowa's reputation for educational quality and communities where people care about each other. We are in danger of losing our national reputation. It will happen if we continue to refuse to make investments necessary for quality education and quality of life. We know 25 percent of the school bond issues failed over the past decade even though they had a 50 percent majority support--they failed because they didn't reach the 60 percent majority required. We also know a quarter of Iowa's schools have serious infrastructure problems. Is this coincidence, or are the outcomes related? Duh!
On the private sector side, the Pappajohn Centers and entrepreneur development programs represent an important step in changing our "brain drain" culture. More college students are developing business plans for startup companies instead of buying plane tickets to their first job in Chicago.
Iowa also ranks at the bottom of national surveys on availability of capital for new companies and ventures. The 1999 legislature took a positive step toward solving this problem by creating a tax credit for insurance companies to invest their premium taxes in new Iowa ventures. While this is a positive step, not much may happen in rural communities unless we give the same tax credit incentives to banks, venture capitalists and all citizens to invest in the future of their economic base.
We have all kinds of ways to make monthly paycheck deductions for buying stock. No ways exist for making similar monthly deductions for critical investments in new ventures to grow and sustain the local and regional economic base for the future.
ml: isupes
Extension programs are available to all without regard to race, color, national origin, religion, sex, age, or disability.