In July 1979, Paul Volcker, Chair of the Federal Reserve, was faced with the task of ending one of the worst periods of inflation in the country’s history. To do so, the Federal Reserve steadily raised interest rates to historic levels, reaching 20 percent by 1981. Though inflation did recede, many side effects, such as an ensuing recession, a strong dollar, and tax reform, combined to accelerate the transition of the U.S. economy from manufacturing to a service-based economy.
This economic shift brought with it a demographic realignment. Population growth occurred in large metro areas, where service industries thrived. Today, we are undergoing another shift that is unlike any before 1980.
In the decades that followed 1980, America’s large cities and metro areas grew more economically and demographically different from its small towns and rural areas where many manufacturing facilities were located. Most white-collar service industries were clustered in the largest cities where companies and their employees could benefit from bigger networks of expertise and the rapid exchange of ideas. This influx of young white-collar workers meant that in the following decades, nearly 80 percent of the country’s growth in the under-45 population would be concentrated in metro areas with over a million residents.
Source: Age-Specific Net Migration Estimates for US Counties, 1950-2020. Applied Population Laboratory, University of Wisconsin, Census Age Estimates. Migration rates for previous decades are over three-year periods for comparison with 2020 to 2023.
The migration of young adults to large metro areas for higher-paying service jobs slowed the aging of many urban counties while accelerating the aging of the rural counties they left behind. In Arlington County, Virginia, outside of Washington D.C., for example, the median age rose by just 2 years between 1980 and 2019, while in more than a third of Virginia’s counties, it increased by over 15 years.
Source: Census Bureau 1980 Age Estimates
Source: Census Bureau 2019 Age Estimates
How the Pandemic Changed The Trend
Heading into the 2020s, the demographic divide between large cities and rural areas was expected to widen even further as the labor supply tightened and large metro areas intensified their efforts to sustain workforces. In competition for a shrinking supply of young workers, thanks to lower birthrates, large metro areas were positioned to continue attracting the large majority of them.
Then came the pandemic, making the 2020s turn out very differently from any recent decade.
The 2023 county population estimates released by the Census Bureau this spring showed that last year migration rose in small towns and rural counties, making them the top destination within the U.S. The 2023 age estimates show that most of the growth that small towns and rural areas have experienced since 2020 is being driven by growth in their population of 25-44-year-olds at the highest rate in nearly a century.
Since 2020, two-thirds of growth in the 25-44 population has occurred in metro areas with fewer than one million residents or in rural counties, a stark contrast to the last decade, when 90 percent of this growth was concentrated in the largest metro areas with over four million residents. Instead of returning to pre-pandemic trends, the migration of younger adults into rural counties and metro areas with under a quarter million residents accelerated last year.
Source: Census Bureau, Annual Age Estimates
Source: Census Bureau, Annual Age Estimates
Natural Amenities are a Big Factor
The scale of the demographic shift since the last decade is remarkable. During the first three years of the 2010s, only 27 percent of counties in rural and small metro counties saw an increase in their 25 to 44 population. So far this decade, that figure has risen to 63 percent, even though the country’s 25 to 44 population grew at a similar rate in both time periods. In rural counties where the younger half of the workforce continues to shrink, the economy often remains tied to an industry with declining employment, such as coal mining in Southern Appalachia or tobacco growing in Southwestern Virginia.
Many of these counties also lack the natural amenities that attract young adults. This decade, the 25 to 44 population has declined in counties with the lowest USDA natural amenity scores, which are determined based on each county’s landscape and climate and include winter sun, temperate summers, low summer humidity, topographic variation, and water/snow availability. In contrast, in rural and often remote counties with high amenity scores, the workforce has grown at twice the national rate.
Incomes are Increasing
Just as younger adults have increasingly migrated to rural counties with high natural amenities, the incomes of new residents in these areas have risen sharply since the pandemic.
IRS data from 2021 and 2022 shows that in counties with the highest natural amenity scores, incomes of new residents have grown three times faster than the national average since 2018 and 2019. In contrast, counties with the lowest scores saw income grow at only half the national rate. In Virginia’s remote Allegheny Highlands, Highland County saw a 68 percent increase in new residents’ incomes after 2020, the third highest in Southern Appalachia. Neighboring Bath County, with the highest natural amenity score in Virginia, experienced the largest income growth among new residents in Southern Appalachia.
Source: Internal Revenue Service, Annual Migration Estimates
An Uptick in New Businesses has Accompanied the Shift
Between 2019 and 2023, IRS applications to start new businesses in the country’s smallest metro areas and rural counties increased 13 percent faster than in other parts of the country. Counties with higher USDA amenity scores saw the most significant growth in new business applications. In Virginia, rural communities along the Chesapeake Bay led the state with a 33 percent faster increase in new business applications compared to the state average, followed by Southwest Virginia at 21 percent. In contrast, counties in Northern Virginia, the state’s wealthiest and most populous region, saw slower growth in business applications.
Source: Business Formation Statistics produced by the Census Bureau using Internal Revenue Service data
As workforce growth stalls, attracting young adults will grow more vital for communities
The exodus of younger adults from most large metro areas since the pandemic has tightened their labor supply and made it harder for many companies to expand or fill vacant positions. This labor shortage is expected to worsen after 2025 as the number of Americans turning 18 begins a multi-decade-long decline. An analysis of Census Bureau 2023 Age Estimates shows that the out-migration of families and lower birth rates have caused the population under age five in large urban counties to shrink twice as fast as the rest of the country since 2020. Although most small towns and rural counties have seen their labor force stabilize from an influx of younger adults, after 2025, the steady decline in the number of Americans turning 18 will make it more difficult for the workforce to grow in every part of the country.
If remote work remains much more widespread than before 2020 and labor markets stay tight, the 2020s are likely to offer workers more geographic flexibility than in any recent decade. The Census Age Estimates suggest that communities with enticing amenities (particularly affordable housing) rather than only major job centers will continue to attract younger adults.
Adapted from an article by the UVA Weldon Cooper for public service written by Hamilton Lombard for StatChat. To read the entire article and see more charts go to:
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