Economist Olugbenga Ajilore explains how policymakers should be thinking about rural America (it’s not a monolith), and what interventions we should pursue to provide what he calls a “different kind of help.”
Olugbenga Ajilore is a senior economist at the Center for American Progress. His expertise includes regional economic development, macroeconomic policy, and issues in diversity and inclusion.
Twitter: @gbenga_ajilore
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Further reading:
COVID and Rural America: https://democracyjournal.org/magazine/covid-and-rural-america/
Congress Must Help Rural America Respond to the Coronavirus: https://www.americanprogress.org/issues/economy/reports/2020/07/27/488129/congress-must-help-rural-america-respond-coronavirus/
Economic Recovery and Business Dynamism in Rural America: https://www.americanprogress.org/issues/economy/reports/2020/02/20/480129/economic-recovery-business-dynamism-rural-america/
Rural Americans are Vulnerable to the Coronavirus: https://www.americanprogress.org/issues/economy/news/2020/03/05/481340/rural-communities-vulnerable-coronavirus/
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Nick Hanauer:
Talking about rural America actually is one of our favorite subjects because it’s such an important challenge for this country in particular.
Olugbenga Ajilore:
One of the problems with these rural communities is that you have all this wealth that’s actually generated, but that wealth gets extracted out. There’s no good policies being promoted to actually keep some of that wealth in the community.
David Goldstein:
It’s about having an opportunity to have a dignified, middle-class life in the town where you grew up.
Speaker 4:
From the offices of Civic Ventures in downtown Seattle. This is Pitchfork Economics with Nick Hanauer. A pointed conversation about who gets what and why, with one of America’s most provocative capitalists.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures. So Nick, one of the things we’ve talked about a number of times on the podcast is the rising spatial inequality in the US. The inequality between regions, between rural America, which lost a lot of jobs in the great recession and has not nearly recovered even before the pandemic hit. And the urban areas like Seattle, which have been going gangbusters and doing great in the new economy.
And it’s really has come to the forefront recently in the COVID pandemic, where just recently we’re now seeing the pandemic really take hold in many rural areas in Washington state. That’s where most of the case loads are growing, but that’s happening throughout the country. And it’s not by accident.
Nick Hanauer:
No. What’s super sad is that there was a slowly unfolding economic crisis in rural America. And then COVID-19 came along and made it that much worse, and made it … I think maybe this is a good thing that much more obvious. From the fragility of the local economies, to the lack of healthcare available in those places, it really has been for most of rural America.
And I suspect it’s going to get a lot worse, a total shit show. And of course our Congress has been almost completely unhelpful, but it’s highly problematic.
David Goldstein:
And to be clear, when we talk about this geographic inequality, I’ll use that term instead of spatial inequality.
Nick Hanauer:
Yeah. Okay.
David Goldstein:
Because it seems a little more accessible and understandable. When we talk about this rising geographic inequality, we’re not saying that, “Oh, we need to make things equal. We need to give people in small rural towns the exact same opportunities that we have in Seattle.” Because that’s impossible.
Nick Hanauer:
It is.
David Goldstein:
There’s just certain structural elements of the modern information economy that agglomeration effect, that requires innovative industries to concentrate in areas with very thick labor markets, where there’s a high density of highly educated specialists in these areas. And you’re just not going to get that in small town America. But that doesn’t mean there can’t be opportunities there.
It’s not about having the same opportunities, it’s about having an opportunity to have a dignified middle class life in the town where you grew up, where your parents grew up, where your grandparents grew up instead of being told, “Well, if you want a job, the pays more than 725 an hour, if you want to have access to a hospital within 200 miles of you. If you want to have a good education, well, you better pick up and leave and move to the big town.”
That’s not the way it was and that’s not the way it should be. And so when we talk about closing this gap, it’s not about making everything the same. It’s about equity, not equality, and we don’t have much equity today.
Nick Hanauer:
I think the thing that we have to keep top of mind is that over the 40 year neoliberal period, all of the policies that we had evolved before then to support prosperity in non urban areas were eliminated or ignored or swept away. And as a consequence, among them antitrust, which led to this massive wave of constant corporate concentration, which pulled all of the regional companies out of the rural areas and into the cities.
And one of the consequences of that is that in the four year period after the great recession, there were … By the way, this numbers are down 166,000 new businesses created. But virtually 100% of that was driven by 20 metropolitan counties. The net change in new businesses in rural counties since the great recession, has been effectively zero. And so it’s not a surprise that folks are struggling in these places.
In any case, we have a fantastic guest today. Who’s going to talk to us about all of this stuff. He’s a senior economist at the center for American progress Olugbenga Ajilore. And he’s done a lot of really interesting work talking about rural America.
Olugbenga Ajilore:
My name is Olugbenga Ajilore. I’m a senior economist at the center for American progress. I have a couple of reports and pieces about rural America. One was in democracy journal called COVID in rural America, basically talks about how COVID impacts rural America and the way out in a post COVID recovery for rural America.
And then a report that talked about what Congress needs to do, and why do you need to help out rural America through federal fiscal policy, and to combat both the public health crisis and economic crisis.
Nick Hanauer:
Talking about rural America actually is one of our favorite subjects, because it’s such an important challenge for this country in particular, which is so geographically large. And includes so much territory that is rural. But let’s start first with how you define rural, because that’s not as simple as it may seem.
Olugbenga Ajilore:
No. It’s actually the million dollar question. Talking with some other rural advocates, we’ve talked about how there’s actually up to 13 different definitions of rural America. And so when I talk about rural America, I always start with the basic definition from the Office of Management and Budget. Where it’s basically based off of population. And it’s basically a simple definition as a place that’s not a metropolitan statistical area.
And so population come from 50,000. So any place 50,000 above is called a Metro area and anything below would be rural. And so what’s funny about that is that it shows the problem with how we look at rural communities. Because that basic definition, is it relative to urban areas that we don’t define rural as itself? It’s as it was not urban, it’s not a Metro area, therefore it’s rural. And then it gets shuttered away.
A lot of the work that I’ve done, a lot of work that we’ve done at cap has been really to try to push past the myths about rural America, about the narrative that we have. And a lot of the problem is because we define everything in terms of cities and Metro areas.
Nick Hanauer:
Do you happen to know what percent of the American population lives in rural areas, standardly defined plus or minus?
Olugbenga Ajilore:
So roughly it’ll be probably in the mid 20%. And so that’s one of the other issues, is that it’s not highly populated. One of the other definitions of virality is based off the population density.
Nick Hanauer:
Right?
Olugbenga Ajilore:
And so these places are not as dense as cities. And so we have a broader area of region. So one of the things is that, is about 20 to say 25% of the population, but it’s 72% of the landmass.
Nick Hanauer:
Right? That leads to those handy all red electoral maps?
David Goldstein:
Right?
Olugbenga Ajilore:
Exactly. But the problem with those pro maps is that it might be red, but we don’t know if that’s 5248 or 955.
Nick Hanauer:
Yeah, right.
Olugbenga Ajilore:
It’s just red.
Nick Hanauer:
We have studied this question really, really hard because it’s our view that the divide between urban and rural is one of the great challenges to American democracy.
David Goldstein:
And getting worse.
Nick Hanauer:
Yeah. Right.
David Goldstein:
I mean, the spatial inequality has increased dramatically since the great recession.
Nick Hanauer:
That’s right. And in our own analysis, one of the most surprising findings was … And this basically speaks to the mythmaking that you were alluding to, is that your image of a rural community is a bunch of small businesses employing most people. When in fact, if you do the analysis, the majority of citizens in small towns are working for giant … Either giant agribusinesses or Walmart or Exxon or Bank of America.
Olugbenga Ajilore:
Definitely.
Nick Hanauer:
Right? It’s really striking that in non urban areas, people over index for working for large corporations. It’s big cities where more people work for small businesses.
Olugbenga Ajilore:
It definitely is. And one of the things we talked about in our work in a piece last … They wrote last year called the Modern Company Town. And we talk about labor market monopsony and this rise in labor market concentration. Now there was a lot of academic work out on monopsony, and a lot of us found that labor market concentration that is actually decreased over time.
But if you look at rural communities, it’s actually increased, because you have these large firms knowing that they could move into these small rural towns, dominate the market, and then be able to exert market power. What we see it as not just agribusiness, but if you look at meat packing plants.
There was a big move of meat packing plants in the last century from large cities, like Chicago, to a smaller town where they could be the dominate industry. So that threw out a lot of rural communities.
Nick Hanauer:
And when you couple that with the massive amount of corporate consolidation that happened over this … The neoliberal era, you end up with this terrible circumstance where the anchor companies that made rural places prosperous have been consolidated away to be replaced by these outposts of giant multinational corporations that exploit people.
Olugbenga Ajilore:
Definitely.
David Goldstein:
To make it clear, the monopsony power is not just in terms of the labor market. It’s also in the commodity market. Most farmers have only one or two large companies to sell their product to. So, a Tyson can basically dictate not just the prices in the … For checking growers, but also the growing practices.
Olugbenga Ajilore:
Exactly. The farmers are feeling the squeeze on both ends, where they are dictated at those contracts especially I think in the pork markets to [inaudible 00:11:52] give them … Dictate these contracts to them of like, “This is how you’re going to do things. This is where you sell it.” And farmers don’t have options of like, “Well, I’m actually just going to go to the other person?”
Because there is no other person. One of the problems with these rural communities, and this falls into the political aspect of it is that you have all this wealth that’s actually generated in these rural communities, but that wealth gets extracted out. Doesn’t stay in, it doesn’t come back in. So these communities say, “Well, we are being left behind.”
And they are. There’s no good policies being promoted, being pushed to actually keep some of that wealth in the community.
Nick Hanauer:
Right. Absolutely. And then as if things weren’t bad enough along comes COVID-19 and then what happened?
Olugbenga Ajilore:
And so one of the things that people talk about COVID-19 has hit these rural communities, their case counts are high. The death counts, especially now are surpassing the ones that were in New York city in April and March. And a lot of people are talking about, “Well, we need to help these communities out.” But when I talk about the impact of the pandemic, I’ll have to go back to the great recession.
Because these communities, as all the communities throughout the country were hit hard, but the recovery left them behind. And so I wrote a report last fall, looking at employment growth and labor force participation. And the levels at 2017, 2018 were lower than they were in the great recession. And so they actually hadn’t recovered by the time the pandemic hit and it just hit certain communities even harder.
So we look at African American areas in the South, in the rural South. We look at tribal communities in the Southwest, especially Arizona and Mexico. They’ve been devastated by this pandemic and there’s no help to be found.
Nick Hanauer:
In your writing, one of the places that I think you’ve really usefully explored is company formation in these places, in rural places relative to big cities. And it has been horrendous.
Olugbenga Ajilore:
It has been going back to the great recession. You looking at business dynamics, this was a … We’re following what the economic and innovation group had done before saying that over the past 50 years, that business dynamics has decreased since then, especially since the great recession. So I was looking at rural communities, and you find that just there aren’t new businesses growing in these communities.
And in some places, there are some areas that … Tourist areas, recreation type communities that have done all right, but there is no business growth in these rural communities. And a lot of that is because they don’t have access to capital, venture capital only goes to certain cities. Brookies I know did a lot of research, so in that you have these superstar cities, the San Francisco, San Diego’s, Boston, where all the venture capital goes to. And so investment money doesn’t go into these rural communities.
And these communities don’t have access to capital because a lot of times there’s not a lot of banks. Not a lot of financial institutions in these places that would support entrepreneurial activity in these places.
Nick Hanauer:
And this is something we’ve talked about a lot on this podcast, that the problem is deeper than a lack of access to capital. Because in an increasingly technological society where most of the business activity requires either the deployment of technology or the development of technology in order to create value.
Standing up those businesses in rural places is exceedingly hard, because the rate of innovation is basically inextricably tied to the density of the network of innovators you can create. And Amazon.com was never going to put HQ2 in a rural community ever.
Olugbenga Ajilore:
Right.
Nick Hanauer:
Ever. It was just a joke that people ever thought that that was plausible. And almost no technology innovator or entrepreneur is going to move to a small town with no labor pool with advanced skills to start one of these businesses. It’s exceedingly hard. I mean, there is a silver lining, maybe the beginnings of a silver lining to COVID, which is that it has massively advanced both our ability to work remotely, but also our willingness to do it. And so there is a glimmer of hope there.
David Goldstein:
I know of Benga in the democracy journal piece, the first thing you suggest is expanding Medicaid, or I suppose you could go broader and just say, “Hey, universal healthcare of some sort.” Talk a little bit about how important this is in rural communities in particular.
Olugbenga Ajilore:
So talking about silver linings. One thing that this pandemic has shown, it has shown the cracks in the system and how these … All the communities and not just rural communities have been vulnerable. And so when we look at expanding Medicaid, what we’re talking about here is not just about providing health care for all residents, so that when they do get sick, they’re able to go see a doctor.
They are able to go get medical care. But expansion of Medicaid also helps out hospitals and helps out with their costs. And so one of the biggest problems that we’ve had over the last 10, 15 years is hospital closures. They’ve had a lot of difficulties in terms of financing their operation. And one thing that Medicaid does is it helps out with a lot of the unfunded care that the hospitals provide.
One of the things, the stats I always like to quote is that 90% of hospital closures happen in rural communities. And so if you look at expanding Medicaid, it helps these hospitals stay afloat so that they can provide care. So when this pandemic hits, these rural communities are able to tackle it and able to get the … Have the beds, have the resources to be able to tackle that. So once you have that taken care of, then you have that healthy population and even then be able to provide services.
One of the things we talk about in terms of rural communities is population decline. And if you don’t have hospitals or the hospitals lose say their OB practices, young couples are not going to want to move to an area if they don’t have to health care. And so expansion of Medicaid, or even going bigger to universal health care, is going to help that and help these rural communities at least survive.
David Goldstein:
Right. So to be clear, it’s not just about improving healthcare in these communities, it’s about creating a healthy economy? You can’t have a healthy local economy without a healthy local health care system.
Olugbenga Ajilore:
Exactly.
Nick Hanauer:
And that’s a twofer if I may say so, because obviously people will not move to a place where healthcare is absent. No person is going to stand up a company in a place where healthcare is absent. But also a big effective regional hospital is an incredible economic anchor for a place.
Olugbenga Ajilore:
Right. Definitely.
Nick Hanauer:
So a deliberate effort to bring high quality healthcare to rural regions is … There’s a lot of benefits to that, that go around.
Olugbenga Ajilore:
It definitely is.
David Goldstein:
The second thing you recommended in the democracy journal piece was strengthening worker power, collective bargaining and such. Explain that … Why that’s so important to rural workers.
Olugbenga Ajilore:
People need to be able to have quality job, and therefore to be able to afford services. And so it’s not even just about pay, but as we’re talking about with healthcare, being about benefits. Paid sick leave, paid family medical leave, which was, as we found was really important during this pandemic. That if you have a family member who gets sick, or if you get sick, that you’re able to take time off, paid time off.
You’re looking at collective bargaining, being able to counteract. So we talked about monopsony, we talked about these large dominant firms that artificially suppressed wages low. But then if you have strong collective bargaining, if you have unions, there’s going to be that counterweight against those large firms. And therefore it … When people have better benefits, higher pay, that’s money that goes back into the economy. One thing there was a study done a number of years ago in Hattiesburg, Mississippi wage theft.
So where people are … Their wages are taken away or they’re not paid as much as they should be, costs the economy of Hattiesburg, $10 billion. And so that’s money that’s not just going through … Circling through the economy, but that’s also tax base. And that helps up the government, the local governments to be able to spend money. So having strong worker power is benefit, not just for the worker themselves, but for the community as a whole.
David Goldstein:
Right. When a Walmart or mint or a McDonald’s is paying 725 an hour in one of these communities, they’re extracting a lot of wealth out. When they’re forced to pay $15 an hour, that’s extra money staying in the community, being spent at other local businesses.
Olugbenga Ajilore:
Exactly.
David Goldstein:
It’s interesting, one of the things I noticed in … I don’t know if you saw the Netflix series, Stranger Things, a lot of people my age loved it because we recognized the 80s in there. And one of the things that was interesting is one of the characters essentially raises two kids working at a local variety store. You couldn’t imagine a clerk at a Walmart being able to maintain a house and two children today.
Olugbenga Ajilore:
No. Not at all.
David Goldstein:
And that’s what replaced those locally owned stores on Main Street. And all of that has happened over the past 40 years.
Olugbenga Ajilore:
It has. And it’s interesting that you bring up Stranger Things because that store in that most recent season was actually losing business because they opened that new mall.
David Goldstein:
Right.
Olugbenga Ajilore:
And so that was the start of the process that, in 20 years in Hawkins, there’s going to be a Walmart. And then we’re going to see the mall being hauled out. That’s the start of it.
David Goldstein:
Right. And that is what has happened all over the country. The malls destroyed Main Street, and then the big box stores destroyed the malls.
Olugbenga Ajilore:
Yes.
Nick Hanauer:
And everybody destroyed the middle-class.
David Goldstein:
Right. Which segues into your third recommendation in that piece, which is breaking up monopolies, addressing monopoly power in rural areas.
Olugbenga Ajilore:
Yeah. And that just goes along with the worker power on the other side is that we’ve had these corporate consolidation, and we’ve had that these … Especially if you look at in the agriculture industry with seeds and pork producers, and these conglomerates, are able then to put the squeeze on farmers on both ends, and it makes it harder for these farms to do well.
But then it’s also, we look at the meat packing plants, and this is the thing that falls into … Goes back to the worker power issue is that, these firms have forced these workers to go back to work, even though COVID has spread rapidly. If you look at some of the data over the March, April, May, you look at the counties that had the highest outbreaks. And the top ones, it was either a meat packing plant, a prison or a nursing home that was driving that.
And so it’s not just about what’s happening in those plants, but then those people go back home and then it spreads through there and it goes throughout the community. Some of the research I’m doing right now is looking at federal government, and what’s happening with the decrease in enforcement. So you look at the rules, and the fact that OSHA is been diminished. They can’t push these meat packing plants to enforce worker protection, safety, hazard, pay, things like that.
And that’s the problems that’s happening in these rural communities. And that’s why if you break up these firms and have them compete over each other, then that’s going to bring back more safety, higher benefits, and help out workers and thereby help out the community.
David Goldstein:
And finally, let’s get to the fourth area you’ve recommended addressing. And that is particularly salient today with what’s going on. We still have the protests in the street, and it would be addressing racial discrimination in these communities. And it speaks to one of those myths about the demographics. There’s actually very large nonwhite communities in rural areas.
Olugbenga Ajilore:
They’re very much are. Which is why I bring that up is that it [inaudible 00:24:24] all the other issues. Is that we’re able to push these anti competitive policy. We’re able to push these policies by … Because we use race as a defensive tool. And we’re able to address these issues of structural races or others sorts of systemic inequality.
Then we’re able to say, “Okay, we can’t use race as a divider anymore.” And therefore we get this common collective solidarity. One of the things about rural community is that there’s a lot of benefits in the rural community. Some of these assets are like community social capital. But when you use race as a divider, that minimizes the benefit of that rural community.
And so if we’re able to have this class consciousness and say, “Okay, we need to actually compete against the top 1%. We need to have more benefits spread out through lower 99%. Focus on worker protection by having more expansive public services by expanding Medicaid and to have antitrust and other ways of breaking up these firms.”
This is going to have benefits for rural communities for all the residents who are in the area. And that’s why we have to focus on racial discrimination and actually really face up to it and use that to help us benefit.
David Goldstein:
Well, can we talk for just two seconds about the CARES Act? It included some funding.
Olugbenga Ajilore:
Yes.
David Goldstein:
But what else do we need to do?
Olugbenga Ajilore:
So thinking about the CARES Act that was actually frustrating for rural advocates, is that there was money for state and local governments. However, it was very restricted and limited. Those might’ve went to States and then to cities of population of 500,000 and more. So any city with a smaller population got left out. So there was nothing for these rural communities. There was money for education and for health care that rural community were able to benefit from, but it wasn’t a lot.
The other thing was there was $8 billion that was dedicated for tribal communities for them to combat this pandemic. But the administration is actually holding onto that money, and these communities are having to sue them to be able to get that money. So even though the CARES Act was passed months ago, these communities still haven’t seen that $8 billion.
Nick Hanauer:
Wow.
Olugbenga Ajilore:
So now we’re looking and talking about what we should do and, the HEROES Act that was passed two months ago I think now, had money to state local governments, money that would go to all the counties so that rural communities were part of it. But the Republican plan has nothing outside of education spending to go to rural communities. And so one of the things that we really have to see is significant state local relief, because this pandemic has hit them on two ends.
So one, they have increased spending to combat the COVID crisis. But then because of loss of jobs, high unemployment, small business closures, they’ve lost a lot of income tax revenue. Plus people are not spending money, so they’re losing sales tax revenue. So the revenue basis dropped while their costs have gone up. And unlike the federal government, most States have a balanced budget requirements.
So they have these budget for falls that they have to close, and they have to make up. And the money in CARES too that went to state and local governments, was restricted from being used to cover these shortfalls. So what would have been helpful about the HEROES Act, is it that state local government relief, would have help them close those shortfalls. But there’s no money for that.
So they’ve had to make cuts elsewhere, which has impacts throughout in the education, health, all these different … Police, fire. These services have to be cut to make up for the massive budget shortfall. So what has to happen now to the fiscal relief is, a lot of money going to state local governments to cover these shortfalls and to help them combat this crisis and figure out what’s going to happen in the fall.
Nick Hanauer:
Interesting. So Benga, one of the concluding questions we always ask people is the … What do we call it Goldy?
David Goldstein:
The benevolent dictator question.
Nick Hanauer:
Yeah. Benevolent dictator question, which is, if you were in charge, what would you do about this problem?
David Goldstein:
And this is no constraints. No political or financial constraints. What would you do to address this?
Olugbenga Ajilore:
I actually have a simple answer to this question, universal broadband. Every home they have high speed internet. And what that would do is solve a lot of problems, especially that we’ve seen in this pandemic. So we think about remote work and working from home, a lot of places can’t do that. We think about remote education, which we’ll probably going to have to do this fall at schools. And a lot of kids don’t have access to that.
But if we had universal broadband, that money can be spent elsewhere. And then when you talk about Amazon’s not going to go, our business is not going to go to rural communities. If we have universal broadband, then people may want to go there because there’s lower cost of living might be smaller. But if you don’t have that broadband and-
David Goldstein:
It’s impossible.
Olugbenga Ajilore:
It’s going to be impossible. So I think the universal broadband, having every home with high speed internet, being a great start to solve a lot of the problems that we have.
Nick Hanauer:
That’s awesome. Well, thank you so much for being with us and for your work on this incredibly important problem. It’s not likely to go away soon and-
David Goldstein:
You think?
Nick Hanauer:
Yeah. And for sure it is a tremendous challenge to our democracy. Because if you live in a country where the folks in 75% of the territory are being left behind by the economy all the time, it is going to be very difficult to build consensus around politics and policy.
David Goldstein:
And if you live in a country where 75% of the folks are being … Of the country … The real estate is being left behind. And we have a constitution that over represents the residents of small rural States who are being left behind. Oh man, are you creating a bad situation?
Nick Hanauer:
Yes, You are. That’s right.
Olugbenga Ajilore:
I think there’s a solution, I think we can do this. We just have to promote the right policies, get a better sense of who lives in rural America and actually speak to them.
Nick Hanauer:
Benga is definitely on the right track here. I think it’s really important to understand precisely what we mean when we both think and talk about rural America. And it’s definitely to his point, not just a middle aged white dude on a tractor, in a field, it’s much more complex than that. And there’s a whole bunch of stuff that we have to do to get on top of this very, very serious problem.
David Goldstein:
What I find encouraging about this is that a lot of the things that should be done can be done. And they’re not much different from the things we need to do to help working Americans throughout the country. He talked about expanding Medicaid. Well, I think you and I agree that there should be some kind of universal healthcare throughout the country.
Nick Hanauer:
Correct.
David Goldstein:
To another point that I think is overlooked in these rural areas where … And it’s an amazing number that 90% of the hospital closures in America have been in rural areas. And that’s because, it’s not a good business. It’s not a good business model to have a rural hospital where a lot of your beds are going to be left empty for much of the time.
And it’s hard to attract doctors and nurses and it takes forever for people to get there. Because they got to drive across miles and miles of rural roads. So who wants to open a hospital there when you can open one up in a suburban or urban area? So if you’re going to leave it to the market, the market is not going to serve these areas in the same way. And he brought up at the end, Broadband.
They’re not serving those areas for a reason and they’re not serving them for the same reason that the electric utilities did not serve rural America during The Great Depression. And before why we had to have rural electrification basically led by, paid for, funded, financed by the federal government. Same thing was with telephone service.
We were all paying this universal service charge, just $5 a month in our bills, which was to pay to subsidize phone service throughout America and the rural areas where there isn’t the same return on your investment buck. So if it doesn’t pay for private companies to do Broadband, well, then we need some municipal Broadband, County Broadband, State Broadband, federal government Broadband, if that’s what it takes. You just can’t leave it to the market, if the market decides to can’t make a buck there.
Nick Hanauer:
Right. I think the other thing that he hit and we have spent a ton of time working on this, is just worker power and decent wages in these rural communities. Which tend to be dominated either by some giant exploitive multinational that has monopsony power in the area. Or just Walmart’s and McDonald’s and all the big companies, all the big service companies that replaced all the small businesses that used to be in these small towns … In these small and medium sized towns.
I think this is a great time to recall this idea that we’ve had called progressive labor standards. Which is a very simple but powerful policy framework in which you impose labor standards, essentially not geographically where you have a high … For instance, a high minimum wage in the city and a lower one in the country because “The living standards are lower.”
But by company size where the largest companies pay the highest wages irrespective of their locations. And if for instance, you raise the minimum wage to $20 an hour for all large corporations, that would instantaneously transform the economies of every small town in America. Because the employment is totally dominated by these big companies. And instead of those companies essentially extracting prosperity from those geographies, they would be injecting prosperity into those geographies.
And that huge agribusiness couldn’t explain those workers, it would actually have to pay them fairly. And now all of a sudden you have a base upon which you can actually build the local economy.
David Goldstein:
We’ve talked about this before Nick, and there’s studies that show that when Walmart moves into a rural County, the average wages for retail workers and grocery workers in particular go down. Not just at Walmart, but at all other stores because Walmart-
Nick Hanauer:
You have to compete.
David Goldstein:
That’s right. And they’re forcing down wages. Now imagine if you have this rural County struggling economically, and a Walmart comes in. And instead of paying 7.25 an hour or $9 an hour or whatever they are now $11 an hour, they’re paying $15 an hour.
Nick Hanauer:
Or 20.
David Goldstein:
They’re paying more than the local businesses we’re paying. What’s going to happen in that community? That is a net plus because the people that work at Walmart are going to be making more money and they’re going to be spending it in the community. And the other businesses around there, they’re going to be competing for workers. They’re going to be doing better because there’s more money being spent in the community.
But now they need to compete for workers and they’re going to have to pay more. And it’s that virtuous cycle we keep talking about. That when workers make more money, businesses have more customers and hire more workers and more importantly, pay them more.
Nick Hanauer:
That’s right.
Speaker 4:
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