There was a time in America when economic expansions bore more fruit for small towns than big cities. That time was the 1990s: Following the 1991 recession, according to Census data, counties with 100,000 residents or fewer saw faster employment growth and more net new business formation than medium-, large- or mega-size counties.
Those least-populated counties saw, on average, 16 percent employment growth in the first five years of the ‘90s recovery. They saw business formation growth of 9 percent. Both those rates are double what the largest counties, of more than 1 million people, experienced in that time.
What has happened since is an economic reprise of “Freaky Friday.” Big-city and small-town America have swapped places on job and business creation, according to an analysis released last week by the Economic Innovation Group, a bipartisan group in Washington that works on issues of entrepreneurship across the country.
Counties with more than 1 million people added jobs twice as fast as the least populated counties from 2010 through 2014. The largest counties continued to have a net increase of new businesses, while there was a net decrease of new businesses in the average low-population county.
For counties today, “size matters now in a way that it didn’t in the early 1990s,” said John Lettieri, one of EIG’s co-founders. “In fact, it’s inverted.” That shift, said Steve Glickman, the other co-founder, “means less and less people are able to take advantage of the recovery, and the people being left behind in communities have less and less tools to get out of it.”
Theoretically, this doesn’t have to be a problem: If workers moved freely and easily to follow opportunity, it might not matter whether they were clustering in big cities or small towns. But economists have found increasing evidence workers don’t move as much as they used to. Family keeps them rooted in place, or fear of being laid off from a new job, or the high costs of moving cities.
Even if they did move, many of those workers would see their quality of life fall, because the cost of living — especially housing — is so much higher in places like Silicon Valley or the New York City area than almost anywhere else. So when San Francisco residents, for example, block policies meant to add more affordable housing units in their city, they aren’t just hurting their own low-income residents — they’re hurting the workers stuck in places where opportunity has been pushed away.