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Tom Barkin

A Silver Lining for Smaller Towns

Tom Barkin

June 22, 2020

Tom Barkin

President, Federal Reserve Bank of Richmond

We’re used to thinking about the density of urban areas as a benefit: Lots of people means lots of employers and jobs, lots of restaurants, and plenty of things to do on the weekend. Conversely, we’re used to thinking about the distance in smaller towns as an obstacle: Fewer employers, fewer health care options, and less access to quality education and other amenities.

As a result, a big story in recent decades has been the growth of bigger cities and the decline of many smaller towns.

But the COVID-19 pandemic has revealed that density can be dangerous and that geographic proximity isn’t necessarily an obstacle to connection. And stories change. In the 1970s, few could have imagined the revitalization that’s occurred in cities like Pittsburgh or Detroit (although not everyone in those cities has benefited equally). So I wonder if this is  an opportunity for smaller towns to rewrite their endings.

Are people going to start moving out of cities? It’s reasonable to think at least some will, as the risks posed by density could nullify some of the reasons people live in cities in the first place.

If you live in an urban area so that you can go to plays and concerts, for example, but you’re worried about the risk of infection at a large event, is it still worth paying a premium to live near those amenities? Similarly, if you live in an urban area to be close to your work but the past few months have demonstrated that you can successfully work remotely, do you still need to live close to the office? Could you move back to your hometown — closer to family — to a place where you are less exposed to community transmission? And for years, public transportation has been an amenity. Just look at the development along Metro’s Orange Line in Northern Virginia. But ridership has plummeted more than 90 percent relative to last spring. Living in a smaller home to be close to a subway line might not seem that appealing anymore.

At the same time cities might be less attractive, some of the hurdles facing smaller communities might be more surmountable than we thought. Take health care, for example. Smaller communities generally have less access, particularly to hospitals and specialists, which contributes to poorer health outcomes in these communities. But telemedicine can increase the network of care and reduce overall costs by reducing readmissions and avoidable emergency room visits. This crisis has dramatically accelerated telemedicine’s use where it’s available. This is partly because many people want to avoid health care settings because they fear infection, and partly because many regulations that inhibited widespread use, such as drug prescription rules, state licensure limits, and Medicare reimbursement rules, have been temporarily waived. Making such waivers permanent is a critical step toward expanding the availability of telemedicine for people who live in smaller towns.

High-quality education, particularly postsecondary education and workforce training, is another challenge in many smaller communities, which tend to have fewer college graduates. Many things contribute, including physical distance to schools, less information about the options available to students and workers, and a lack of role models. But we’re seeing a huge expansion of online learning options. Further developing virtual education could open doors for people to continue their education and workforce training when it might not have been otherwise feasible.

We’re also thinking differently about the labor market. Telecommuting means workers can live anywhere, and employers can recruit talent from everywhere. And of course there’s shopping. Many people want to live in close proximity to grocery stores, clothing stores, and other retail outlets. But we’ve been shopping from home for months now; if you can buy everything you need online, it doesn’t matter as much where you live.

The caveat, of course, is that everything I’ve just described requires high-speed internet access. And the lack of broadband access is a serious issue in smaller towns and rural areas, from the perspectives of both availability and affordability. The pandemic has underscored just how critical it is: If kids are going to be educated from home, for example, they need the tools to do so. This is a complicated issue, or we would have solved it already — but never has there been more political agreement on the need. If the country is going to do something — and we should — now is the time. Additional stimulus money is being debated as I write this. What better place to invest it?

Of course, it’s easy to say “build it and they will come.” But broadband access is far from the entire answer. Small towns that want to change their trajectory also need to put themselves on the map for those looking to relocate. This requires three key ingredients. The first is a good story — maybe it’s about natural beauty, or local amenities, or nearby colleges. The story is for employers, and the story is for talent. The story is also about marketing to those who already live there — not only why one should come, but also why one should stay.

The second ingredient is an integrated regional approach. Almost by definition, small towns are surrounded by other small towns, and the strategy for that region needs to be integrated across jurisdictions. The path to success isn’t going it alone; instead, it’s working together. One community might have better elementary schools, another more employers, and another the regional airport. The story needs to encompass the region.

Third, smaller communities need to find a source of committed funding, whether it’s federal or state agencies, local donors or foundations, local businesses, hotel taxes, tobacco settlement funds, or asset sales. It also requires developing the capacity to absorb that funding: A lot of money is being allocated federally right now and some local organizations are going to be challenged. The towns that seem to have the most momentum are the ones that seem to make the most out of their potential funding sources.

None of this is easy. But our nation is in the midst of an unprecedented crisis — and as we have shown throughout our history, unprecedented changes can turn into opportunities. Telemedicine, telecommuting, online learning, and broadband can be funded at levels that would have been inconceivable just a few months ago. As a result, to the extent our health concerns persist, we might find a silver lining for the smaller towns that can tell their story well.

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