Does the ‘Future of Work’ Open a New Growth Horizon for Small Towns?
Does the ‘Future of Work’ Open a New Growth Horizon for Small Towns?
By Erik Richardson, The Daily Yonder, April 19, 2022
word count: 1767
The economic history of many small towns, beyond agriculture, is closely tied to manufacturing and production businesses. A good example of this is Mexico, Missouri, a small town of about 11,500 people located two hours northwest of St. Louis. Here, ties to manufacturing include a number of companies past and present, who design and manufacture everything from commercial refrigeration units to golf carts and light metal products for the automotive and transportation industries.
The paradigm case in Mexico was the A.P. Green refractory. Green was a world-leader in the production of firebrick used in boiler systems and in kilns for the steel industry. As it scaled down and closed, from 1998 to 2003, the town lost more than a thousand jobs — not just production-line positions, but engineering and executive management positions, as well.
To offset the impact crater that closures like this cause, a common strategy is to work at bringing other, similar businesses to the area, and Mexico has had mixed success in that regard. When it comes to the fortunes of rural places, it now takes more than one big business or one big solution to help a community thrive.
With the changing shape of remote and hybrid workplaces, and the continuing spread of high-speed internet access in rural areas, new options are opening up for bringing small-scale jobs and companies to towns all over the map. More specifically, with $65 billion for improvements to rural high-speed internet access in President Biden’s infrastructure plan, the potential for a renaissance and reinvention of small towns looms large.
Leveraging that potential in a way that creates sustainable growth, will take a multi-dimensional approach.
Work from Anywhere?
Research by McKinsey Global Institute found that as much as 25 percent of the workforce in advanced economies like the U.S. could work from home between three and five days a week. That would be more than four times the level of remote work than baselines before the pandemic.
Even more workers would take the opportunity if they could. Not only is there feasibility for growing the remote sector, but there is high demand as well. According to Global Workplace Analytics, about 37% of remote employees would take a 10% pay cut to continue working from home. This trend will grow even further as new technology in development makes current options seem like baby steps.
Back in Mexico, the local Chamber of Commerce, led by Executive Director Dana Keller, is considering a number of proactive strategies to tap into this new opportunity.
One possibility is using a newly renovated office building, just off the square, to create a co-working space. This could be used for smaller operations looking to possibly relocate to Mexico, while saving on the costs of developing its own offices, or it could be used to house new businesses in the start-up phase—much like incubator and accelerator facilities in larger urban areas. This option would help serve sectors of the market that still require some on-site equipment and resources or space for team meetings and thus are not yet able to operate one hundred percent work-from-home.
In any case, shared office spaces, where remote employees can gather to work, have become more widely available in different cities and will accommodate a growing percentage of remote workers in coming years.
No Home Office Without a Home
As much as technology and pandemic-era trends are accelerating people’s ability to work remotely, there are still some old-fashioned obstacles in place. One of the biggest of these is the shortage of affordable housing for people and families looking to relocate.
Marissa Lightsey, a realtor and brokerage owner, explained that it is still common to have a house list on the market for a day or less before it gets an offer. While there might seem like a number of houses available at a given time on the listing sites, many of those either need significant repair or they are priced out of the range of many working families. “A fair percent of the time there are people already lined up looking for a house, so I can connect them with a newly-available house even before it is listed,” Lightsey says of Mexico.
In theory, a high-demand market would draw developers to step in and put up new houses to push the supply curve toward a new balance point. Unfortunately, small-town markets are not able to offer the same profit margin on development that even mid-sized cities can—also illustrated in the above comparison.
One of the forward-thinking decisions Mexico has put in place to help solve that is a housing committee — a small-town think tank of sorts — made up of key business and community leaders. Among the options they have begun testing out is a program providing grants to close that profit gap for builders. The program has shown some early success, but it has not yet begun to scale up.
On the flip side of the residential housing market, another key driver is the condition of the commercial real-estate market. Among the initiatives that have helped Mexico attract new business is a matching grant program for renovating and updating facades — particularly around the historic town square — as well as effective efforts to clear away old, unusable structures. Those are understandably helpful, but it is also the case that this factor will have less impact in attracting businesses and workers based from home, as that new sector is not constrained by the limits in available commercial space or buildable commercial-zoned property.
More Than a Mailing Address
Based on her experience working with more than a thousand startups over the years, in different roles, Chris Shipley, author of the book “The Adaptation Advantage: Let Go, Learn Fast, and Thrive in the Future of Work,” explained that small towns are attractive to startup businesses for a lot of reasons. Only some of them have to do with measurable economic variables, like affordability or available housing.
One Case for Rural Relocation
There are many possible benefits of living in a smaller community, like shorter commute times, easier access to natural landscapes, and lower rates of crime. There’s also lower cost of living. In the case of Mexico, looking at one cost-of-living comparison to the nearest city over 100,000, Columbia, shows the following:
For comparison, another source shows the cost of living index for Mexico at 74.5, with a median home price at $98.8K, and Columbia’s index at 86.5, with a median home price of $218K — an even larger difference in cost in both categories.
Even with the smaller housing differential, potential savings over the course of a typical 30-year home loan exceed tens of thousands of dollars.
“The founders are also looking at whether there is a sense of community and what kind of place it would be to raise their kids,” Shipley explained.
This came through when talking with current business owners in Mexico as well. “Really, the thing that seems to come up again and again when I’m talking with different people about relocating to our small town, is the sense of warmth and being part of a community,” said Lightsey, the realtor. “For all the positive things people like about big cities, a downside is the feeling of being just another face in the crowd, so to speak.”
Shipley echoed and extended that thought. While technology solutions like broadband access are critical to tapping into the potential for a renaissance in rural areas, “That’s just the start,” she says. “These communities have a dual challenge of talent attraction and talent retention.” She explains:
This isn’t just a physical infrastructure challenge; it’s a social infrastructure challenge, too. So programs to create a vibrant small town have to address both things. You can’t just plug a community into bandwidth and be done with it. You really need to look at what a community needs, whether people feel like their voices are being heard, what will lead to sustainable growth in the workforce, and so on.
And that’s the challenge with most consultants: they look for what can be done to make a community viable for outsiders. They look at how to get more (usually tech) founders to come and live in these towns and assume that whatever those things are will be good for the people of the town, too. That’s a recipe for disaster and projects that generally wilt over time.
Here to Stay
In unpacking the things Mexico has done, or is doing, to strengthen and sustain business growth as the future of work evolves, Chamber director Keller says that Mexico is the first town in the state to have a workforce specialist on its staff. This person goes to local companies, especially larger ones, to listen and collaborate with employee, striving to boost workforce satisfaction and retention.
The first year of the program was funded by a grant, and with the benefits realized, companies themselves will cover appropriate percentages of the specialist’s salary in subsequent years. The success of the program, for Keller, is helping people who come to work in Mexico really “feel like the company sees them as people and is working to help them reach their goals,” she says.
“Showing them they matter, helping them get involved beyond the workplace, raising a family and growing roots—those are the things that change it from a ‘city’ to a ‘community.’”
There are also a number of initiatives going full steam that tackle both attraction and retention challenges—and which are aiming to shape the image of a vibrant, growing city instead of an aging, if charming, relic of the past. That includes a recent $3.9 million upgrade of the city pool and aquatic center, city-funded programs for removal of abandoned houses to provide green lots for development, and the recent launch of a smartphone app that gives visitors a quick and thorough picture of area businesses across various categories and shows the variety of community events happening throughout the year.
In many ways, the emerging opportunities small towns have to bring in more remote workers, more co-working spaces, and more small businesses — either relocating ones or new start-ups — should align nicely with their innate competitive advantages, such as a greater sense of belonging and the chance to feel like more than one worker on a production line or one face in a crowd. At the same time, strategic planning and thoughtful economic development will nonetheless be needed to tap into the technology and broader forces that are driving the “future of work.” As Shipley is quick to recount, “Innovation doesn’t happen in a vacuum.”
