Facility Closures and Downsizing in the Rural Midwest: A Preliminary Assessment of Extent and Effects

Rural communities across the United States have been undergoing dramatic economic restructuring. As a result, many rural communities are struggling to recover from the closure or downsizing of manufacturing facilities and to implement economic development programs. The goal of this study was to gain new insights into community, organizational, and economic factors that underlie effective rural community response to economic distress. The study covers communities with populations between 500 and 10,000 in the states of Illinois, Iowa, Minnesota, Missouri, North Dakota, and South Dakota. Data come from a survey of local government officials of all towns in the six states with populations between 500 and 10,000. Surveys were mailed to 2,118 towns during the summer of 1993, of which 1,396 useable questionnaires were returned, for an overall response rate of almost 66 percent. Among the towns that responded, 16.3 percent reported closures or downsizing affecting 25 workers or more during the 1989 to 1992 period Retail stores were the business type that were most often reported as being closed, followed by manufacturers. The number of jobs lost per establishment was greatest in the manufacturing sector. When the community representatives were asked about the effect of the plant closing(s) on displaced workers, their responses indicated that about 38 percent of the displaced workers either remained unemployed or underemployed (11%), took lower paying jobs (14.5%), or retired early (13%). Further, about 24 percent of the workers were forced to leave the community to find work. Only 31 percent of the workers reportedly stayed in the community and obtained comparable replacement jobs. Of the towns with closures or downsizing, 46 percent evaluated the overall impacts on the community as "serious" or "severe", while 48 percent of the communities reported "serious' or "severe" economic effects. The communities utilized a wide variety of economic development strategies to adapt to business downturns and to foster business and economic growth. A major objective of the next phase of this research will be to investigate the degree to which various communities have been able to overcome their economic problems and establish stable or growing economies whereas others have had less success in sustaining their economies at pre-closure levels.