The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Worker Wages (Page 1 of 2)

Memo To CEOs: Invest in the Company, Not Yourself

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)


To: CEOs – S & P – 500

From: The Progressive Ensign

Subject: Stock Buybacks Are Out of Control

Date: November 5, 2018

Congratulations, this past quarter you knocked earnings out of the park, profits were higher in particular, though revenues lower and you did well by raising stock prices to new highs in September via stock buybacks.

Source: Standard & Poors – 11/4/18

Ok, you did well on stock compensation too with soaring stock prices.  You can take that trip to Cancun, buy a boat and a villa for extended stays.  You have worked hard, your team has gone all out to make your companies successful, and worked harder.  Remember, while you were traveling and making decisions on sales, financing, product development and marketing they are actually designing, building, shipping, selling and supporting your products and services.

Sources: The Labor Department, The Wall Street Journal, The Daily Shot – 11/5/18

Next, you have not been making the investments in capital equipment , R & D and innovation to move companies along and be prepared for more overseas competition or increase productivity. Thanks for moving wages higher for less than high school educated workers recently they still aren’t enough to keep up with inflation though. If you can increase productivity we can give workers raises without it hitting the bottom line an increasing cost, and earning would be stabilized or even get better. You wouldn’t need to use financial gimmicks like stock buy backs to take stock off the market, and goose the price so earnings look better on a per share basis.  Between 2010 and 2017 S & P companies spent 51 % of their operating earnings on stock buy backs.  That’s money just hyping stock nothing else.  Note that business investment is continuing to decline with lower highs and investments flat since 1998.

Sources: The Wall Street Journal, The Daily Shot – 11/5/18

Your joy ride on $1 trillion of stock buybacks needs to end.  We want to see a plan by the end of the month on how you will use that $1 trillion dollars in meaningful long term ways such as raising wages, job training, purchasing new equipment and systems, and innovating new products.  You are basically taking away the future of your workers and the country for your short term gain. Show by quarter how you will implement the plan and get your businesses actually growing again (in real dollars not financial gimmicks), workers supporting their families in sustainable lifestyle and making America stronger.

P.S. By the way, it is time to end your constant borrowing, rates are going up, and you spent most of the money on stock buybacks or other goodies not investing in the company.  You are mortgaging the future of the business by taking on a record amount of debt.  Please submit a plan for retiring this debt as part of your financial plan for investing in the company by the end of the month.

P.P.S.  For those of you ( a minority) who are not doing stock buybacks, thank you, and you who are spending on capex and raising wages thanks a lot!  Just submit a set of graphs showing your investments so we can show the other CEOs how it is done – as a best practice.

Corporations Are Taking Worker Wages To Increase Profits



Eight-three percent of all workers are ‘non-supervisory’ workers in the Federal Reserve classification of types of workers, yet they have not seen a fair cut of the profits since 2000.  Corporations have used financial engineering techniques like stock buybacks where funds are used to buy corporate stock and goose the price up. J.P. Morgan estimates that with dollars repatriated from the tax cut bill, that stock buybacks will hit a new record of $800 billion for 2018.  This $800 billion is absolutely wasted on driving stock prices up while not investing in employee wages, capital expenditures, research and development, instead stock buy backs increase executive compensation tied to stock price.

Source; Real Investment Advice – 6/29/18

Since before the Great Recession wages have been stagnant for working class people, the 80 % of the workforce that make corporations prosper.  The wages to profits ratio arc shows a continuing decline since the 1980s – interestingly when the GOP was telling us that ‘trickle down’ economics would bring economic prosperity to all.  Instead working class families are having to take two or three jobs and borrow on their credit cards just to keep their household finances afloat.

Next Steps:

The country is run by Corporate Nation States who make the contributions, fund the campaigns and essentially buy off the legislative influence that counts in the U.S.  Each year corporations spend hundreds of millions of dollars in Washington DC lobbying alone, i.e. Amazon has 94 lobbyists keeping DOJ anti-trust lawyers distracted, the FCC at bay on drones and lobby other interests to keep its juggernaut growing.

It is time we wake up to what is happening from Supreme Court decisions that favor American Express over merchants, to the GOP tax cut bill, to relaxing the Dodd-Frank rules on banking Corporate Nation States are running this country.  The basic economic trends in America are not going to change unless we have corporate reform.  Will this reform come in the form of legislation like Sen. Booker’s Dividend Reform Act or letters from investment banks to corporate CEOs like Blackrock CEO Larry Fink sent recently.  We are not sure, but we need to take a path that takes on the dominant power of Corporate Nation States or we are going to see the middle class wiped out and our economy with it. After all, as we pointed out in a recent post on the Common Good, when the working class has little money to spend the rich will lose too.  The working class has earned a fair share of the profits. Fair share means when profits go up by 5 % wages go up by at least 5 % otherwise the economy deteriorates like it is today deeply in public and corporate debt.

in the end the rich will need to see that it is in their interest to build the Common Good, by contributing to our institutions of government and common people or they will lose what they already have and probably a lot more.”

The Rich View Our Government as A Trusted Rule Keeper, The Common Man Not So Much

Image: Your Little Planet

Thomas Jefferson and James Madison saw the need to frame a government such that ‘forced compromises’ would push political leaders to focus on the Common Good.  The institutions that maintain our common good include the federal government three estates:  The Supreme Court, Congress and The Executive.  In addition, the Fourth Estate, a Free Press is crucial for our citizens to have access to fair and impartial reporting about the activity of government officials and their policies. We have spotlighted the key role Education, as the Fifth estate, plays in educating our people to make critical decisions and understand comprehensively the information they receive from a Free Press.

Trust in our federal government has been falling since the presidency of Lyndon Johnson in 1965.

Source: Pew Research Center – 12/14/17

We noted in our first post on the Common Good that there were two factors contributing to the decline in trust:

We see two major factors for the lack of trust.  One, is that economic inequality has been increasing over the last 60 years to the point where it is at the worst it has ever been since 1929.  Americans expect their government to be the rule keeper of a fair shot at economic opportunity not a bastion for the rich and powerful.  As wealthy donors have taken over control of both major parties, the influence of the average citizen has been reduced to nearly nothing except at the ballot box – but not in legislative policy.”

The second major factor is the change in information access and news viewing habits of our society.

In the 1950s and 1960s families gathered around the television set to watch Walter Cronkite or Huntley and Brinkley bring them the news for the day.  These news anchors had teams of trained journalists in how to gather news, provide airing of opposing views and investigation to reveal the facts of the story. As cable news programs became popular people drifted away from central network journalist supported news programs toward popular ‘viewpoint news’ programs like Fox News or CNN.  Then, from 1995 until today, the Internet was a catalyst for the growth of blogging, and ‘friend news’ on Facebook which had virtually no formally trained journalists and limited understanding of the difference between facts and opinions.  Opinions spread virally through the Internet often with no foundation in formal fact gathering or fact finding investigation techniques. Today, we even have presidential spokespersons talking about ‘alternative facts’ to justify their policies or opinions.

Trust gaps by income level are increasing around the world with many developed countries showing double digit gaps between the top income quartile and the bottom income quartile and the U.S. with the largest gap:

In the U.S. incomes for the lower 80 % have been largely stagnant for the past three decades since the Reagan years, higher education costs rising to levels never seen before with student loan debt at $1.5 trillion dollars. In short, lower and middle income parents expect their children to have fewer opportunities and to make less money over their lifetime. This growing sense of hopelessness is in part triggering the populist movements we see world-wide. The top quartile trust government institutions the most because they are getting the benefits, tax cuts, relaxed environmental policies to allow their businesses to make as much money as they can, and continued stock buy backs to make even more money instead of increasing worker wages.  Workers see their votes not making a difference as Congress is at the beck and call of Corporate Nation States who make multi-million dollar campaign contributions and the Executive Branch now run by billionaires.

Little wonder the Common Good is not embraced by all people, for the rich they are on top of the economic pyramid. The rich get the laws they want and aren’t interested in sharing their wealth or time to build the Common Good.

Here is what will likely happen, in the end the rich will need to see that it is in their interest to build the Common Good, by contributing to our institutions of government and common people or they will lose what they already have and probably a lot more.

Workers Struggling Under Credit Card Debt


While consumers did pay down their credit card debt by $40 billion during the first quarter of 2018, they still owe a giant $1.021 trillion in revolving debt.  Credit card debt is at the second highest level since 2008, during the Great Recession.  Consumers piled on another $91.6 billion by the end of 2017, at a run rate of 104 % of the average over the past 10 years.

Sources: Marketwatch, WalletHub – 6/13/18

Adding to consumer woes are interest rates that are rising, adding to the servicing costs of credit card, auto loan, and student loan debts. Below the chart shows debt servicing costs as a percentage of disposable income, while mortgage debt servicing is declining consumer servicing costs are rising.

Sources: Federal Reserve, National Bureau of Economic Research, The Wall Street Journal, The Daily Shot – 6/13/18

Finally, non-supervisory worker’s wages are stuck at 2.5% and when inflation is taken into account are largely flat. As consumers continue to try and maintain their standard of living, they are taking on more revolving debt which is costing more for them to pay. This financial squeeze is sustainable as long as jobs are abundant as they seem to be now, but if the economy turns down and layoffs happen it will be hard times for workers.  A survey published today in the Wall Street Journal blog – The Daily Shot showed executives plan layoffs as the first approach to deal with tightened financial conditions and slow sales.

 Next Steps:

 Workers need to receive a living wage that is not stagnant as wages have been for the past 10 years since the recession. Over 14 % of all workers have not received a raise in the last year versus 11% prior to the recession. Stock buy backs need to end and those funds invested in raising worker wages, increasing productivity and providing job training and development.  Corporations stash over 40 % of their profits in overseas tax sheltered accounts – all those funds need to come back to the US with companies paying their fair share of taxes. Corporations are the beneficiaries of job training and education, and should pick up more responsibility in terms of taxes for apprenticeship programs on par with those in Germany to provide US workers with the advanced skills needed to obtain a good paying job and create a dual track besides college. Today, there are more job openings than candidates available to fill those jobs, we need to invest developing worker’s job skills to close the gap.

Opioids Are Killing Our Young People Reducing Our Labor Force

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)


The Opioid Epidemic is devastating for our young people.  The size of the opioid addiction death wave is so high that it is leading to a sharp decrease in the size of the 24 – 54 year old labor force group.

Sources: JAMA Open Network, Marketwarch – 6/7/2018

A paper recently published in the Journal of the American Medi­­cal Association found that 20 % of all Millennials deaths in 2016 were caused by opioid overdoses.  From 2001 to 2016 opioid deaths have increased by 292­­ %.  Experts believe the dip in the size of the 25 – 54 year old group is in part caused by the opioid epidemic compared to other developed countries.

Source: OECD Employment and Labor Market Statistics – 6/7/18

A comparison to OECD countries finds the U.S. labor force in the key mid-career 25 – 54-year-old group at 5 % less, which converts to millions of our young people left out of the labor force. When our labor force is not growing in this key age segment we are in store for a continuing decline in GDP growth, standards of living and few people to support our retired population. The total labor force even with the recovery since 2008 has been dropping to a 10-year low of 63 % overall:

Source: Department of Labor, The Wall Street Journal, The Daily Shot, 6/3/18

Certainly, more than the opioid epidemic is contributing to our low labor force participation rate including: companies automating many jobs so they are not hiring more workers, workers leaving the work force due to not finding work, a skills mismatch between job openings and candidates with the right skill set and the baby boomer population aging into retirement.

Next Steps:

The opioid epidemic strikes hardest in our Heartland as we recommended in an earlier blog on Heartland Development Centers that among other development investments to fund mental health, addiction and counseling services to help our young people in rural regions of the Midwest and South to return to active productive lives. Every day, families are suffering from the drug addiction crisis and our economy is suffering along with our young people.  Our Congress, corporations, non-government organizations, government and health services groups need to establish a partnership to target the problem of drug addiction head on, with a major funding commitment, the latest strategies in drug rehabilitation, and job training programs which include high quality apprenticeship skills development leading to good paying jobs.

14 % of Workers Have Not Received Wage Increases In the Last Year



While CEOs at the top 100 corporations received a 5 %  raise in average compensation  of  $15.7 million last year,  14 % of all workers have received no raises at all, higher than before the Great Recession. The recovery has not come for many workers.

Sources: San Francisco Federal Reserve, National Bureau of Economic Research, Haver Analytics, Marketwatch – 5/29/18

Prior to the 2008 recession there were 11 % of all workers not receiving raises, still too high but much lower when considering the size in millions of the US workforce. After the recession companies were slow to give all workers raises as the rate rose to almost 17 % without raises.  Then, over time more workers are receiving raises as the economy recovered for the top 20 % in income. Still, 14 % is still too high.  The Federal Reserve economists note that the no raise rate would have to drop to 12.5 % or so for enough wage pressure to cause a move from the present stagnant 2.5 % to increase to 3 % and cause wage push inflation.  The fact the number of employees not receiving wages is actually going up is a concern that wage raises may actually fall or stay the same.

Next Steps:

We continue to see the extreme inequity of executives and professionals continuing to receive raises, for many twice the 2 % inflation rate versus workers. The reality is that employees just do not have the same wage power that they used to. We have previously discussed the combination of factors that contribute to extreme lack of wage power for workers including: lack of union representation, automation, fewer corporations due to mergers reducing the number of jobs,  low wage H1-B visas being approved,  using profits for stocky buybacks instead of investment in productivity increases, Internet recruiting nationwide and worldwide for some positions, and the shift to outsourcing jobs and the gig economy.

We recommend the following actions be taken by Congress and Corporate Leaders:

  1. Place Workers on Boards– as Germany has so effectively setup, engaging management with required representation of workers on Boards.
  2. End Outsourcing– corporations would pay 50 % tax on each job moved overseas making the move costly, encouraging corporations to move jobs to low cost or inland areas of the US, or innovation economic zones (special tax geographies) and to invest in worker training to receive training tax credits.
  3. End Low Cost H1-B Visas– the practice of importing inexpensive labor to drive down wages in US markets would be ended.
  4. Offer Lower Taxes on Repatriated Funds– only if the profits from overseas are invested in productivity actions, increasing wages of workers (not executives), reducing costs or innovation. Stock buybacks or dividends would be prohibited.
  5. End Stock buybacks– these funds are totally wasted, mislead investors on earnings reports and only serve to increase compensation for executives and shareholders. These funds are better allocated to increase worker wages or increase productivity so workers can receive higher wage increases.
  6. Breakup Oligopolies– breakup market concentrations in key sectors: information technology, banks and financial services, health insurers, airlines, hospitals and clinics, entertainment, media and distribution and others as deemed in the public interest.
  7. Balance Job Market Process– require companies over 100 employees to offer information on their website for contacts, phone numbers, job listings with identified contacts, and to let the candidate know the status of his consideration, and candidate introductions held monthly for F2F communication.
  8. Balance Worker and Executive Pay– tax corporations 25 % surcharge on any corporate income where any executive makes greater than 150 % than any the average worker wage – this would force executives to share their income with workers while not increasing costs. End federal tax deductions on corporate income taxes for executive stock compensation above $1 million. End golden parachute packages by taxing 50 % of every dollar received above $1 million. Severance packages for workers would have to be in proportion to the highest executive package ie, executive receives 10x of monthly salary a worker would receive 10x of his/her monthly salary.
  9. Fund Worker Training and Increase Wages – for each robot employed, the corporation would be required to offer training, skills development for the displaced worker to find a comparable job within the company or outside. Where automation software or technology is deployed 10 % of the realized cost benefit would be used to raise the wages of all workers in the company.

Corporate Executives, Congress Misled Citizens On Tax Bill Benefits


The latest reports show that Corporate Executives, and Congressional GOP Leaders misrepresented to us the benefits of the Tax Cut Bill – capital spending has gone down, wages have stagnated and stock buybacks have hit $1 trillion.  So much for stimulating the economy, raising wages and making capital improvements.

The latest report from the Richmond Federal Reserve shows capital expenditures falling:

Sources: Federal Reserve – Richmond, The Wall Street Journal, The Daily Shot – 5/23/18

Other regions in the US show similar falloffs. While some jobs and regions are showing increases in wages in our Heartland they were lagging and still lag at 2 % wage growth vs 8% nationally:

Sources: US Bureau of Economic Analysis, The Wall Street Journal, The Daily Shot – 5/22/18

Today, corporate executives are doing a good job of juicing the price of their company stock with stock buyback funds that could be invested in increasing productivity, raising worker wages, reducing the price of their products and services or increasing job and career training.  Corporate stock buybacks have hit a new all-time high with repatriated funds from overseas at steep tax discounts and tax bill operating income reductions to $1 trillion!

Sources: Standard and Poors, The Wall Street Journal, The Daily Shot – 5/22/18

Donors told our elected representatives ‘not to call’ unless they got a tax bill done – which of course 80 % of the benefits went to them not the people. The top 1 % wealthy class has control of the key levers of government – our elected representatives by providing hundreds of millions of dollars in campaign contributions which corrupt their representation of us.

Next Steps:

We need to win back control of Congress to set the right priorities for taxes that are fair for all not just a gift to the rich.

In congressional primaries across the country many women and progressives are winning in districts where Democrats did not run or corporate controlled Democrats held seats for years.  In Pennsylvania, seven women won primaries from the suburbs of Philadelphia to the rural conservative regions of the southwest.  Democrats are focusing on small donor funding to bring representative power back to the people.

Sources: The Wall Street Journal, The Daily Shot – 5/23/18

Plus, Democrats are beating the GOP in the funding race by appealing to the people again, some are renouncing PACs as Sen. Kamala Harris of California has done, others will follow. The mid-term election is crucial to win back the House and maybe the Senate and put an end to the oligarchy running our government.

Employers Should Pay Hourly Employees Fairly, Not Chip Away at Stagnant Wages


As more corporations use software to track hourly employee hours some have tipped the data collection rules in their favor.   American Airlines is facing a suit from 400 employees for shorting their hours, Kroger and Montage are facing similar suits.  We realize that corporations are under great pressure to cut costs on labor to increase profits and meet shareholder and Wall Street expectations.  However, since the wages of production employees and non-supervisors have been essentially stagnant for the past 5 years we ask:  who is really getting hurt?  Corporations have all time low taxes, all time high stock buy backs to juice executive salaries, and all time cash nearly $1 trillion stashed in most offshore accounts.

Meantime employees are at the lowest point of wage power in the workplace in decades with reduced health benefits at greater cost, competition for their jobs from other workers on the Internet, automation, corporate mergers reducing the number of jobs available, and union busting laws.  So who are the wage scales tipped toward?  Corporations.  Average hour worker income has continued to fall when inflation is included.

Sources: Bureau of Labor Statistics, Real Investment Advice – 5/15/18

So, when companies use software to track employee hours, then ‘round hours up’ for breaks or deduct breaks that didn’t happen – like for nurses in healthcare at the University of Missouri Health Care using time tracking software where they cared for patients during their breaks but the software recorded a break anyway.  The nurses are losing money, and even more than just wages respect for the work they do.

Next Steps:

Employers wake up! Work is a social contract that is two-way and should be equitable, time cards should be signed by employees in some manner before wages are dispersed.  The signing which used to be performed is a confirmation that the employee and employer understand the work being performed and the fair hours completed. Software should not just automatically capture data and cut checks.  When time cards were used, filled out by employees – now done online, yet most systems allowed for electronic signatures.  In haste, these companies are just using the software to capture the hours, record the hours and post checks. Company IT departments set the rules of the software sometimes in favor the company not the employee.  These rules changes can be for just minutes or more but at infrequent times so it is hard for employees to discern what is happening to their paycheck.  Time tracking software should be required to show an audit trail for the employee to see to ensure that it is a just capture of their hours. Let’s be clear when these systems don’t treat employees fairly, and allow for confirmation of hours worked the employer is committing a real in justice to the employee.  Corporations need to review the process of their time recording software for hour employees, ensure adequate safeguards are in place for employee input and install these systems with employee support.

Blackrock CEO To Corporations: Focus on Social Responsibility Too, Are They Listening?


Laurence Fink, CEO of Blackrock with $6.3 trillion of assets under management sent a letter to one thousand CEOs outlining that in the future they will be evaluating companies on their societal impact not just profits.  Blackrock manages major index funds which require that they invest in firms included in the index even when they don’t like the direction management is taking the company or take actions that are detrimental to their employees or community.  Fink tells executives that a new age has arrived where shareholders and company management need to be more actively engaged. Plus, companies need to take the long term view related to rising automation,  slow wage growth and climate change and explain their plans to shareholders.

Next Steps: 

We applaud Fink’s focus on social responsibility by corporations.  As he notes governments maybe way behind in the seeing the needs of society and solving those problems.  Corporations can even add value, as Deloitte observes in five ways: creating new market opportunities, taking regulatory relationships from reactive to proactive, retaining top talent, enhancing brand value,  and building sustainable supply chains. Now, let’s make this a priority on Wall Street.  Fink in an interview on NPR’s Marketplace today, clarifying that Blackrock was not Wall Street.  We have a ways to go with Wall Street expectations for quarterly results – we can hope that Wall Street was listening to a major investor like Blackrock.

The Hallowing Out of Heartland America – Requires A Major Investment Now

(Editor Note: The following blog is the result of a completed in depth research project into multi-dimensional problems facing our Heartland and we developed an innovative renewing sustainable solution. References are in the Research tab under this blog name, please right click on the charts to see them larger in a separate browser tab.)

The View:

Rural and inland regions in the Heartland have been left out of the robust growth centered mainly in coastal regions.  The Heartland of America has been falling behind in education, entrepreneurship, health, housing, mobility digital infrastructure for the past 20 years.  The rebuilding of these key regions is a multi-dimensional problem requiring a major investment similar in scale to the Marshall Plan after WWII.  Yet with a different funding approach – building a startup non-government organization. We are recommending a difference approach by the Federal government to act as an investor in a non-government organization called a Heartland Development Center.  An HDC acts as a central hub of critical services and infrastructure development while providing a continuous innovation system. The Heartland Development Center acts as a catalyst creating an innovation ecosystem to jumpstart local economics and social structures. HDCs would focus on all the key issues that a region needs to address to rebuild their economy and people’s lives: business formation, education and training, digital infrastructure, affordable housing, engaged local innovation media and health care. The Federal government would seed the financing of these NGOs in key regions with additional funding from local and state governments, and major corporations who would benefit from the newly available job force tuned to their needs. HDCs would be ‘startup’ organizations bringing in leaders in their respective fields – ie. business formation – Y Incubator, preventive health – Cleveland Clinic, or training – Opportunity@Work as contractors to the HDC.  These NGOs would establish continuously renewing innovation processes to stay in touch with their citizen – customers and businesses. Administration services would all be contracted using cloud software services for HR, Payroll, Training, Benefits and other internal systems to keep costs down. The HDC startups would be piloted in 3 non metro areas, where they would tune their business and socio economic models for maximum impact, then use those working models to implement HDCs in 25 or more other key regions for 5 – 10 years.

The Story:

The Heartland of America been spiraling downward in terms of education, entrepreneurship, health, housing, mobility, digital infrastructure and jobs for over 20 years.  All of these factors combine to create sub-nation apart from coastal and metro prosperity. Jobs programs in rural areas will not be enough to bring these regions to a tipping point in socio-economic growth.  Other factors create huge challenges: the opioid epidemic has hard hit heartland communities where for example. some Ohio machine shop employers find 50 % of their job applicants for machinist jobs test positive for drugs.  The Heartland is where: (1) mobility to take new jobs is the lowest in rural and small cities in the Midwest and South (2) there is the highest concentration of young people without a 4-year degree (3)  the lowest concentration of entrepreneurs is holding back business formation and development to create new higher paying jobs with a future (4) the largest number of people without health insurance are found in the South and rural areas of the Southwest and West  (5) slow speed Internet connections are the norm leaving many heartland regions way behind in the digital revolution where new jobs, opportunities for education and quality health are being developed and accessed (6) accounting for births, deaths and migration rural population has declined for five consecutive years.  It is deplorable that a complete socio-economic region of the country has so many factors that have not been addressed to extent necessary to transform people’s lives toward good health and fair share of prosperity.

Rural and small town America enjoyed a renaissance of increasing jobs and prosperity into the mid 1990s. During this time rural counties were home to more than one-third of all net new businesses establishments fueling the job creation engine. Yet, in the past ten years the economic conditions have changed dramatically, leaving these regions out of robust growth in coastal areas since the Great Recession.


 Rural or Non Metro areas have not regained the same level of employment as pre-2008 recession levels:

Sources: USDA – Economic Research Service, Bureau of Labor Statistics – 12/2016

Non Metro areas lost more jobs as a percentage of the labor force than Metro areas did during the recession and has not caught up.  Non Metro employment was estimated to be 20.684M jobs in the 1st quarter of 2007 versus the 2nd quarter of 2016 with 20.091M jobs a 2.9% reduction or a loss of almost 600k jobs.  While Metro areas during the same period exceeded recession employment levels by 4.8%. At least 50 % of the Non Metro deficit relative to Metro areas was due to zero population growth between 2010 and 2013. This factor was partially offset by an increase in hiring in the oil and gas industry when gas prices were high and fracking exploration was exploding in Midwest oil fields.

The distribution of industry sectors hurt Non Metro employment as the number of manufacturing jobs fell 20 % from 2001 to 2015.  Non Metro areas were severely impacted as they had nearly twice the number of manufacturing jobs as a percentage of total employment versus Metro areas.

Sources: USDA – Economic Research Service, Bureau of Economic Analysis – 2016

Non Metro areas exceed Metro employment in sectors like Farming and Mining, Forestry and Fishing, Construction is about even with Trade, Transportation and Utilities is comparable. Yet, in Services, the fastest growing sector of the economy, Metro areas have a 16 % employment advantage over Non Metro areas.

Manufacturing companies concentrated in rural counties and near metro areas have increased employment by about 5 % in the last 6 years.  However, due to automation far fewer workers are needed to increase output up to 20 %:

Sources: FiveThirtyEight, The Federal Reserve, Bureau of Labor Statistics – 3/2016

The ability of companies to dramatically increase output with fewer workers translates into fewer job opportunities for factory workers many without college degrees needed for knowledge management based work.

Other factors need to be addressed – like ensuring that workers even when trained are not in such despair that they are taking drugs.  Or when on the job, their illnesses can be dealt with quickly and return to work immediately.


Rural health providers face a daunting set of challenges in providing healthcare to a declining population, with high unemployment rates, reduced insurance coverage and limited access to broadband Internet for treatment information and patient records.

Excess deaths in heart disease, cancer, non-intentional injury and chronic lower respiratory disease are higher in Non Metro areas:

Source: CDC – 2015

In heartland states drug overdoses are at epidemic levels:

Source: CDC – 2016

Unfortunately, many Non Metro regions have limited or no insurance coverage, some have decided not to accept Medicaid help from the federal government – ie Texas.  These no-coverage policies for many of the working class and poor mean that their health care is drastically reduced as shown in the charts above.

Sources: The Kaiser Family Foundation – 2016

The Affordable Care Act or Obamacare helped to reduce the total number of uninsured people from about 14 % total to about 9.2 %.  However, as noted in the chart below for insurance plans under the ACA for 2018 many areas in the South and Southwest, and rural western states have only one insurer or some have none.

Source: Robert Wood Johnson Foundation – 6/6/2017

One major issue for health care providers and business leaders interested in bringing in new businesses is high speed Internet access and the lack of a digital infrastructure.


University of Texas researchers found in a study of rural communications in Oklahoma, Texas and Mississippi that rural household incomes went up and unemployment rates dropped in rural counties where broad band internet was installed.

The number of rural households connected to the Internet is directly proportional to Internet speed. As this graph shows Internet subscriptions per 1000 households by county where metro areas like St. Louis dense household connectivity vs a rural town like Caledonia, MO.

Sources: FCC, Broadband Now, The Wall Street Journal – 6/15/17

The FCC defines fast speed Internet as 25 Mbps about 39 % rural households in the US or 23 million people lack access to broadband Internet service. Only 4 % of of urban – metro households do not have high speed access.

A major challenge is that a city like St. Louis has 5,000 people per square mile compared to rural counties like Washington where Caledonia is located with 33 per square mile. Installation of fiber optic trunk lines cost about $30,000 per mile including access rights – so population density is crucial to meet financial targets for providers.

Broadband Internet access is like electricity was in the past – in 1935 only 10 % of rural America had electricity.  President Franklin D. Roosevelt drove an initiative to connect every rural household to electric power and two decades later 90 % of all rural households have electricity.


Rural communities once thrived in starting new businesses, however today the percentage of startups in rural areas has dropped from 20 % in the 1980s to 12.2 % in the 2010s.

Source: The Kaufmann Foundation – 2016

There are gaps between the largely white young entrepreneur often thought of in starting a Silicon Valley startup compared to a minority entrepreneur.  Experts estimate that if minorities started and owned businesses at the same rate as whites that there would be over 1 million more new businesses creating an extra 9.5 million jobs.

Education impacts the propensity of young people to start businesses.  Rural areas have a lower percentage of college graduates than metro areas.  Adults without a college degree make up 11.6 % of the population but only 3.4 % of entrepreneurs.


 Americans have been always willing to move to ‘greener pastures’ for a new career or business opportunity, as evidenced in the Dust Bowl days of the 1930s and the migration to California, or the movement of southern African-Americans to northern states like Michigan for jobs in auto manufacturing after WWII.

Yet today that attitude and confidence is fast draining away, into a sense of not ‘fitting in’ for rural community members moving to a metro area or even small cities surrounding metro areas.

Mobility is at its lowest level on record since records were first kept after WWII, dropping by 50 % since a peak in 1985. After WWII about 20 % of Americans reported moving in the last year, that figure has now fallen to 12 %, a 40 % decline.

Source: Census Bureau, The Wall Street Journal – 8/2/17

There are three aspects related to reluctance to move:  culture, housing, and education.  On a cultural basis in many rural regions people are devout in their religion who don’t feel when they talk with ‘coastal people’ they are not appreciated, understood and end up being ridiculed for their values.  In housing, over the last 8 years since the recession in metro areas restrictive zoning laws have reduced the availability of housing driving prices way up. Yet in rural areas housing prices are just now getting even with pre-recession levels.  For a school custodian in a rural area, without a college degree a job in a metro area may pay 50 % more but housing could be 3 or 4 times more expensive.  For those with college degrees, in a profession like an attorney can move from a rural area and handle the increase in housing costs due to a much higher salary ratio to housing costs, based on recent research. Finally, lack of education prevents young adults from taking jobs in higher paying metro areas where the knowledge economy requires a 4-year degree and in many cases an advanced degree.

Another issue is the possible ‘brain drain’ of losing young people to larger cities and where they stay.  The small town loses the talents and innovation of its bright ambitious younger people.  Investments in Non Metro areas need to offer both incentives for movement across county lines but opportunities that are created locally to build the local economy.


Rural areas have endured lower education rates than urban areas.  For example, rural areas achieved a higher rate of bachelor’s degrees from 2000 to 2015 but they still are 73 % lower than the bachelor’s degree rates of urban areas. Rural residents often have to travel further for college studies and of those schools serving these areas they have experienced continuous cutbacks due to regional economic downturns.


Sources: USDA, Census Bureau – 2016

There is a direct relationship between education attainment and earnings – yet here again rural residents are earning much less than urban residents by 25 % for bachelor’s degrees.

Sources USDA – Economic Research Service, Census Bureau – 2016

While rural job holders with 4 year degrees experienced higher demand for their skills they were still behind urban residents – largely due to lack of local employment prospects.

While there is a high rate of poor attainment of high school diplomas in inner cities, the problem is larger in rural areas.  Of adults without a high school diploma 4 out of 5 are in located in rural areas.

Sources: USDA – Economic Research Service, Census Bureau – 2014

Rural areas hardest hit by unemployment are also those with the highest percentage of non-high school graduates in the South, East Central mountains and along the Mexican border.

The Solution:

The Rural Socio – Economic Crisis – Calls for Major Investment Now!

There is a major reason for the civil conflict we see today across America – it is the hallowing out of America’s heartland.  Rural areas have been hardest by globalization, automation, fewer new business formations, lack of education opportunities, poor digital infrastructure, inadequate or non-existent health services and economic loss since the Great Recession leading to limited mobility to obtain better jobs or education.

A dedicated non-government organization (NGO) for centralizing multi-dimensional development in the heartland needs to be created, a Heartland Development Center (HDC).  An HDC acts as a central hub of critical services and infrastructure development while providing a continuous innovation system. The Heartland Development Center acts as a catalyst creating an innovation ecosystem to jumpstart local economics and social structures. HDCs would focus on all the key issues that a region needs to address to rebuild their economy and people’s lives: business formation, education and training, digital infrastructure, affordable housing, engaged local innovation media and health care. The federal government would provide ‘seed’ funding with major funding from state, local and city government and major corporations who would benefit from the new available job force.  HDCs would be ‘startup’ organizations bringing in leaders in their respective fields – ie. business formation – Y Incubator, or preventive health – Cleveland Clinic as contractors to the HDC.   Administration services would all be contracted using cloud software services for HR, Payroll, Training, Benefits and other internal systems to keep costs down.

Training and Employment

To plug the skills gap in rural areas initiatives like the Opportunity@Work program are one solution.  The training group started in the Obama White House focuses on providing Internet economy job training to workers in the heartland to gain digital skills for jobs in fields like programming and information technology.

Designing, developing and deploying focused apprenticeship programs for the Heartland is crucial to building a robust regional economy. Colorado has invested in its CareerWise to bring businesses, colleges and vocational training groups into partnerships providing all Colorado high school juniors and seniors with a dual career path leading to a community college associates degree plus key skills.  Students can begin working on the factory floor as juniors learning key company job skills, and are guaranteed full time employment at the end of their apprenticeship along with financial support to earn a community college degree.  This type of program provides a good template on how to implement a Heartland program.

However, an HDC goal to create over 1 million jobs in rural communities within 5 years will require significant investments by major corporations, foundations, Federal, State and Local government and universities to turn the present situation around.

In manufacturing, partnering with the ARM Institute (Advanced Robotics in Manufacturing Institute) is an alternative where ARM focuses on developing robotic solutions with partner companies and developing worker skills in robotics.  Automation is growing fast in manufacturing, so US workers need to learn robotics management, support, and collaborative work to be competitive in the world manufacturing marketplace.

Major high technology companies like Apple, Amazon, Facebook have business development departments planning today where they will be locating manufacturing sites, customer support centers and other services.  HDC leaders need to be developing relationships with fast growing companies to understand their business needs and ensure they are developing the local economies, infrastructure and workforce these companies need.


 The majority of new jobs come from new businesses, yet new business formations in Non – Metro areas are half of the rate in Metro areas.  Contracting with experts like the Y-Incubator in Mountain View, who has invested in over 1450 companies with a combined market capitalization of over $80b capitalization. They provide programs for non-profits and profit making organizations and a network of consultants on business fundamentals in legal, logistics, manufacturing, services, finance, and marketing to help startups.

The Kaufmann Foundation provides resources for entrepreneurs to learn business formation skills and development.  They setup entrepreneur and investor networks and complete research on the needs of entrepreneurs and the status of entrepreneurship in the US.

Digital Infrastructure

 Similar to the Rural Electrification project of the 1930s, the heartland needs to have its digital infrastructure upgraded to full broadband Internet service of at least 25 Mbps and ideally up to 100 Mbps to all households.  Google has been setting up mega bandwidth sites in areas like Utah and the SF Bay Area, possibly a program could be setup with them to target rural communities across the country.  In Rural Electrification, the federal government lent funds to local cooperatives of local merchants or farms could be setup as an alternative in areas where local telecom cooperatives have already been established. A possible successful model is in central Missouri, where The Co-Mo Electric Cooperative, Inc. installed a fiber optic network to over 25,000 subscribers.  The service has reached out to another 15,000 subscribers who are non-members in neighboring communities. Co-Mo funded their program with a $100 from each member upfront with 100 Mbps service costing $49.95 per subscriber per month. The FCC needs to ensure that all providers not just phone companies can participate and offer Internet access.


Rural regions have some of the highest rates of drug overdose, obesity and cancer and other diseases in the country. To support the economic development and job training programs to lift the region, healthcare services need to be upgraded and offered at reasonable rates to people.  The Cleveland Clinic has a start-of-the-art illness prevention and wellness program they have implemented for their own employees that has saved them tens of millions of dollars per year. Contracting with leaders like the Cleveland Clinic to setup innovative health services programs partnering with local providers would be a way to jumpstart the upgrade process for health services in these regions.

Local Feedback, Communication to HDCs

One aspect of a major development program like the Heartland Development Center project is to keep renewing itself and gain continuous feedback on how effective its programs are with its clients – the people in the region.  A non-profit, Spaceship Media, in cooperation with the Bay Area News Group and other media groups has deployed on the Internet ‘conversation experiences’ with local people over Facebook and other social media to connect people with each other to discuss issues and possible solutions.  Similar groups can be implemented by HDCs as focus groups to ensure they are receiving continuous feedback to tune their programs or make major changes as needed.  Teamed up with incubators, local business groups and universities a continuous innovation process can be implemented to constantly support HDCs to reinvent themselves and stay on track in meeting the needs of local people.



















Page 1 of 2

Powered by WordPress & Theme by Anders Norén