From Foresight, Vol. 10, No.2
published 2003
This is the first in a series of four reports documenting economic changes in four regions of the Commonwealth during the decade of the 1990s and examining the ways in which these changes relate to the framework presented in Table 1. Here, we use Area Development District (ADD) boundaries to divide the state into four regions: eastern, western, south central, and the urban triangle of Kentucky. This report analyzes some of the social and economic changes that occurred in eastern Kentucky during the 1990s and their potential implications for the future.
Table 1: The Building Blocks of Community Development
The convergence of structural economic changes, such as globalization and technological advances, compels Kentucky communities to adopt a more comprehensive approach to economic development. This involves moving away from the traditional concept of economic development as merely jobs creation to one of development as a process by which a community or region raises the standard of living of its residents.(1) This more holistic viewpoint recognizes the interconnections between the development of human capital, business enterprises, and the social fabric of community. North Carolina’s MDC, Inc., which specializes in research into the unique economic structure of the southern United States, concludes that economic development efforts demand a comprehensive framework for building communities from within and reckoning with the larger changes in the world that influence all economies. Table 1 shows the six building blocks MDC suggests and the shift from dated concepts of economic development to this new structure.
The challenges Kentucky faces in economic development are readily apparent in the social and economic changes that have taken place over the past decade. In some areas, communities are becoming more vulnerable to the structural changes afoot in the new economy, not less. In addition, government at all levels is once again feeling acute pressure to do more with less as budgetary constraints conflict with the ever-increasing demands of citizens for more services.
Eastern Kentucky, known to most natives simply as “East Kentucky,” lies in the heart of the Appalachian Mountains, a unique geographic region of the Commonwealth known for both its rich cultural history and its persistent economic woes. For the purposes of this report, eastern Kentucky includes 36 counties (see Figure 1), covering approximately 12,053 square miles of land.(2) In 2000, approximately 75 percent of the residents in this region lived in rural communities. Many of these counties, 33 of the 36, fall within the purview of the Appalachian Regional Commission (ARC), a federal agency created by Congress in 1965 to support and promote social and economic development in this multistate region. The persistence of poverty in this region is best illustrated by the fact that the ARC’s designation of 30 of the 33 Kentucky Appalachian counties as “distressed” in 1960 remained unchanged in 2000.(3)
Figure 1: East Kentucky Region
When we examine eastern Kentucky in light of the first building block of MDC’s development model, “building the economic base and creating larger numbers of higher-quality jobs—jobs that provide a living wage, good benefits and the potential for advancement,”(4) we find progress in the quantity but not necessarily the quality of jobs in the region. Despite an increasing number of jobs and lower unemployment rates in the region, prosperity remained elusive for many during the 1990s. The total number of full- and part-time jobs increased over the decade for eastern Kentucky by 38,127 or 13 percent. The average unemployment rate for the counties in the region dropped from 9.2 percent in 1990 to 6.9 percent in 2000. However, this unemployment rate was higher than that of the state (4.1 percent) and the U.S. average (4.0 percent).
This growth in jobs is at least in part a product of a development strategy—“quantitative development” or industrial recruitment—that emerged in the southern United States during the 1950s. The vestiges of the strategy can be found throughout communities in Kentucky and, indeed, the entire South.(5) The change in the industrial mix of jobs that we see in eastern Kentucky today illustrates what was and is the weakness of a simple jobs creation strategy: without concerted attention to human capital and community development, the region attracts principally low-wage industries.
The economic mainstays on which eastern Kentucky’s economy and, some have argued, its culture were founded—mining and agriculture—declined sharply as employment in these sectors plummeted over the decade. Long dependent on coal mining as a source of relatively high-wage jobs for low-skilled labor, the region saw employment in this industry fall 49 percent, compared with 32 percent elsewhere (see Figure 2). Farm employment declined by 13 percent and jobs in agricultural services, forestry, fishing, and other related industries fell 70 percent compared to a 64 percent increase for the rest of the state.
Job growth occurred mostly in industries known for their low wages and lack of opportunity for advancement or which are highly vulnerable to decisions made outside the region itself. Manufacturing, the historic harbinger of “jobs, jobs, jobs” in the South, saw a slight increase, 5 percent for eastern Kentucky. Unfortunately, earnings from this industry actually declined for the region from 16 percent of total earnings in 1990 to 13 percent in 2000 despite the increase in employment, heralding the end of an era during which manufacturing was a reliable source of strong wages for low-skilled workers. Approximately equal increases occurred in eastern Kentucky and the rest of the state in the traditionally low-wage sectors of retail trade and services. The growth in employment in services was driven mainly by an increase in health services jobs. The only considerable growth over the rest of the state came from employment in government and government enterprises. Excluding manufacturing, changes in earnings mirrored the changes in employment.
Changes in personal income and its component, wages and salary, reveal further evidence of a relative lack of high-quality jobs. While the average real county per capita income (CPCI) rose for this region over the decade, it remained approximately 78 percent of the average CPCI for the rest of the state. The average real CPCI for the region increased 17 percent from $14,482 in 1990 to $16,991 in 2000.(6) This remained well below the $21,726 average of the counties in the remaining regions for 2000.
The relatively slower pace of growth in average salary and wages in eastern Kentucky, a component of CPCI, further illustrates the lagging earnings potential of the jobs in this region. Figure 3 shows an increase in average salary and wages from 1990 to 2001 for both eastern Kentucky and the rest of the state. With a 1.03 ratio between average salary and wages of the two regions, this indicator was approximately equal in 1990. However, by 2000 the ratio between average salary and wages of the counties outside eastern Kentucky and those within eastern Kentucky had risen to approximately 1.18 (see Figure 4).
Figure 3: Average Salary and Wages by Region, 1990-2001
Figure 4: Ratio of Average Salary and Wages Between Noneastern and Eastern Kentucky, 1990-2001
Continuing to follow MDC, Inc.’s recommended infrastructure for development, we examine the region’s progress in light of its success in “building a high-skill, high-value workforce, the human resource base for the knowledge economy.”(7) Data show that eastern Kentucky, like the rest of the state, has taken steps to address the impediment of its reliance on low-skill labor to fill low-wage jobs through broad investment in educational reform. However, data also show that the journey is just beginning. While the percent of high school graduates in this region increased from 1990 to 2000, the region continued to lag the rest of the state, Kentucky as a whole, and the nation in this important indicator (see Figure 5). The region progressed similarly over the decade in the percent of adults who attained a four-year postsecondary degree or higher (see Figure 6).
Figure 5: Percent of Adults Aged 25 and Older with a High School Diploma or Higher
Figure 6: Percent of Adults Aged 25 and Older with a Bachelor's Degree or Higher
A comparison of educational attainment levels between the two regions by age groups shows that a greater portion of the younger age groups are attaining high school diplomas. However, eastern Kentucky’s levels still fall behind those in the rest of the state. Of eastern Kentuckians 18 to 24 years old, approximately 69 percent had graduated high school in 2000 compared to 76 percent in the rest of the state. The next age group performed much better, however, with 76 percent of eastern Kentuckians 25 to 34 years old with at least a high school diploma compared to 86 percent in the remaining portions of Kentucky. Attainment of a four-year college degree does not vary much by age however. Those age 25 to 34, 35 to 44, and 45 to 64 had an 11 percent bachelor’s degree attainment rate in eastern Kentucky, compared to approximately 23, 20, and 20 percent, respectively, for the rest of the state. Approximately 7 and 11 percent of those age 65 and older had attained a bachelor’s degree in eastern Kentucky and the rest of the state, respectively.
Analysis of data on indicators of educational achievement produced similar results. Figures 7, 8, and 9 show the average CATS scores for elementary, middle, and high school districts, respectively, in Kentucky and the region.(8) In each case the scores improved but remained lower than the improvements made in Kentucky as a whole. In addition, the largest gaps were found at the high school level, reflecting the concerns of some educators that Kentucky high schools have been slow to adapt to educational reforms.(9)
Figure 7: Elementary Schools District-Level CATS Scores
Figure 8: Middle Schools District-Level CATS Scores
Figure 9: High Schools District-Level CATS Scores
The region also suffered disproportionate losses of its future workforce and thus some of the potential returns on the human capital investments it is making in its children over the decade. While eastern Kentucky saw moderate population growth over the decade, it was the only region to experience a decline in its child population. With a population increase of 24,326 between 1990 to 2000, approximately 786,773 people lived in eastern Kentucky in 2000. Compared to the rest of the state, which experienced an 11 percent increase in population, however, eastern Kentucky’s population grew by just 3 percent. The age 18 and under population declined by 8 percent compared to an 8 percent increase in the rest of the state. The adult population, which includes those age 18 to 64, grew 8 percent in eastern Kentucky compared to 13 percent for the remaining portions of the state. The age 65 and older population grew by approximately 7 percent in both Kentucky regions.
When we turn to MDC, Inc.’s vision of physical infrastructure “... utilizing transportation and telecommunications to connect the community with distant markets, people, and educational options and providing essential infrastructure to ensure public health and safety,”(10) we find evidence of important progress in eastern Kentucky. Bridging the so-called digital divide has become as key to the economic development of communities as ensuring safe roads and adequate clean water and wastewater management.
Data for eastern Kentucky indicate that the gap in connectedness is narrowing. Figure 10 shows that by 2002 approximately 75 percent of eastern Kentucky residents had access to the Internet, substantially reducing the gap between this and other regions in the state. A 2002 report on Kentucky network access revealed that at 45 percent, eastern Kentucky surpasses the remaining regions in the percent of residents with cable modem access.(11) However, at 31 percent of the region’s population with DSL access it trails the remaining regions in this capability. The study goes on further to note that “significant remote and rural areas [still] do not have any broadband services.”(12) High speed access is fast becoming a necessity of businesses in many rural areas that lack this resource. Without it, many are unable to connect to headquarters, receive online orders, and execute many other tasks that require high-capacity, high-speed Internet access.
Figure 10: Internet Access, by Region
In the building and maintenance of traditional physical infrastructure, such as clean water, sewer, and roads, some challenges remain. The strategic plans for clean water and wastewater management in this area reveal that most of the construction of proposed new public water and sewer lines are to take place in this region of the state. Of the new public water lines proposed for the whole state from 2000 to 2020 by the Governor’s Water Resource Development Commission in 1999, 57 percent were in this 36-county area.(13) Of the projected costs for public sewer lines from 2000 to 2020, eastern Kentucky needs constitute 42 percent of the state total.(14) Of the $6.2 billion cost to complete the planned improvements in the long-range highway plan element of the statewide transportation plan, approximately 48 percent will be spent in the 36 eastern Kentucky counties analyzed here for approximately 40 percent of the planned improvement mileage throughout the state.(15) The projected work and costs laid out in these plans are considerable and indicate the poor condition of infrastructure in this part of the state and the challenges this region faces in financing these proposed projects.
MDC, Inc. also proposes that “...[a] comprehensive vision for a strong social infrastructure entails providing social supports to enable all people to live and work with dignity.”(16) The goals MDC outlines for communities in this area include: provide affordable, quality health care for all people; provide pathways to self-sufficiency for economically vulnerable persons and families; and view safe, affordable housing as a human right and home ownership as an asset-building tool for families and communities.(17)
Changes in the distribution of income reveal some of the challenges this region faces in meeting the demands of a strong social infrastructure. A disproportionately heavy reliance on government transfer payments in this region suggests a level of economic fragility that could clearly be expected to undermine its social infrastructure. They are indicative of high rates of poverty, dependency, poor health, and lower standards of living.
Figure 11 shows the percent of personal income derived from earnings dropping approximately 5 percentage points while income from dividends, interest, and rent remained unchanged. The loss in earnings was compensated by an increase in transfer payments as a source of income. Further breaking down transfer payments into its various components reveals that in 2000, the primary sources were income paid for retirement and disability insurance through Social Security and Supplemental Security Income, a reflection of the aging of the population and high rates of disability among the nonelderly (see Figure 12). Approximately 45 percent of the age 45 and older population in eastern Kentucky depends or will depend on Social Security as their major source of income in retirement, compared to 34 percent in the rest of the state.(18) Also, as shown in Figure 12, medical services provide considerable resources for the region through the federal Medicare program and the state-federal Medicaid program, which serves indigent citizens of all ages. Furthermore, Medicaid payments comprise 61 percent of all medical transfer payments made in the region.
Figure 11: Distribution of Personal Income in Eastern Kentucky
Figure 12: Sources of Transfer Payments, Eastern Kentucky, 2000
These estimates pointedly illustrate the region’s vulnerability to changes in the structure of government support for various transfer payment or entitlement programs. Welfare, for example, does not alleviate poverty. Indeed, many would argue that it merely perpetuates it. Transfer payments for medical services comprise 40 percent of the payments made to the region. Thus, the growth in the services sector shown in Figure 2, driven primarily by growth in health services, illustrates that not only are the recipients of these publicly funded health services vulnerable to cuts in Medicare and Medicaid, but the jobs that rely on these payments could also be at risk. According to one study, the profitability of hospitals in the Appalachian region had fallen by the end of the 1990s due to reductions in Medicare payments mandated by the Balanced Budget Act of 1997.(19)
The MDC framework suggests “...[a] comprehensive vision of cultural and environmental preservation [that] entails preserving and enhancing the natural, cultural, historical and built environment of these communities.”(20) The Appalachian Mountains of eastern Kentucky are a coveted environmental asset, not just by the residents but by those who visit to enjoy their rich beauty and culture. The area is widely known for its bountiful contributions to the arts and for a network of artisans. These assets have not gone unnoticed by community leaders and inhabitants. According to survey results, approximately 40 to 50 percent of the residents of the area had visited a museum, festival, arts performance, or historic site in their home counties in the previous 12 months, in 1996, 1998, and 2000, compared with 46 to 55 percent of Kentuckians in the rest of the state during the same time period.(21) Further, a majority of eastern Kentucky households, approximately 70 percent, recycled items like glass containers, plastic containers, or newspapers in 2000, compared with 67 percent in the rest of the state, indicating the presence of a strong awareness of and commitment to environmental protection.(22)
Coal mining and solid waste disposal are just two of the areas in which eastern Kentucky has long struggled with environmental and natural resource stewardship. While coal mining represents economic development opportunities for the area, the process of mining disturbs the land and surrounding communities in a variety of ways. The most extreme example of the environmental impact of mining came in 2000, when a Martin County coal slurry impoundment failed, sending 300 million gallons of sludge and waste into area creeks and eventually the Big Sandy River, where it affected drinking water supplies for a 60-mile stretch.(23) More typically, the successful reclamation of surface mined lands presents an ongoing challenge. A variety of state and federal laws and regulations are in place to ensure that coal mining and reclamation operations are conducted in a manner that protects the environment and provides for the safety of the public, but thousands of acres of unreclaimed land remains. Illegal dumping of municipal solid waste threatens groundwater, ecosystems, and public health. In 1991, Senate Bill 2 passed in the special legislative session, mandating, among other things, that counties make available disposal services to all citizens, including drop off centers and door-to-door collection. County-level data show the percentage of households participating in door-to-door garbage collection was an estimated 73 percent in 2001. By comparison, the statewide participation rate was 81 percent.(24)
The final building block of economic development we borrow from MDC proposes that “...[a] comprehensive vision for a strong civic infrastructure entails creating a culture of civic decision-making and problem-solving that is forward-looking, accountable, and inclusive.”(25) Ensuring open and accountable governments that value all voices and develop the civic capacity of communities to address their own challenges and opportunities are among the goals that MDC suggests southern communities focus their efforts upon. We find high levels of civic pride, safe communities, and trust of others throughout the Commonwealth, including the eastern region. In 2002, approximately 90 percent of eastern Kentuckians were extremely or somewhat proud of their communities, compared with 94 percent in the rest of the state.(26) Approximately 93 percent always or usually felt safe there compared with 96 percent elsewhere.(27) Over half, approximately 53 percent, said that you can usually trust others, compared with 60 percent in the rest of the state.(28) Approximately 58 percent of Kentuckians in both the eastern part and the rest of the state volunteered on a regular basis while approximately 74 and 82 percent made charitable contributions in that year, respectively.(29) Similar to the rest of the state, most adult eastern Kentuckians, approximately 86 percent, were registered to vote in 2002.(30)
The loss of children is not only a potential drain on the future workforce of the area, but it robs the region of potential community leaders. Fortunately, eastern Kentucky is relatively strong in this area. Approximately 46 percent of Kentuckians in both the eastern region and the rest of the state had participated in a group to solve a problem or address a need in their community, while approximately 11 percent of both regions had actually led such a project.(31) However, eastern Kentucky trailed the rest of the state in its leadership development program participation with a rate of 22 percent, compared with 29 percent in the rest of the state.(32)
In the coming years, eastern Kentucky will have to draw upon its strengths to seize opportunities and confront the challenges that remain in its quest for a rising standard of living. Globalization and technological change compel all regions, including the 36 counties here, to draw upon comprehensive development strategies, such as that offered by MDC, Inc. Increasingly, communities will have to seek high-quality jobs, rather than just more jobs. This is especially true here, where jobs have increased but indicators of standard of living remain well below the rest of the state. In time, the area could capitalize on its considerable investments in the development of human capital, creating opportunities within that will hold youth to the region and compel young families to return to or make this exquisitely beautiful region their home. Some of the ingredients for future success, such as the region’s technological infrastructure and a comparable civic capacity, are in place while other more basic amenities that are essential to development are yet to be fully realized. As many natives of eastern Kentucky will attest, this is the homeland of the heart, the place where they would be if they could be. In the years ahead, it will be the work of this region’s pool of leadership talent to transform its emerging assets into opportunities that will enable those who want to live in eastern Kentucky to prosper there.
* Dr. Amy L. Watts is a policy analyst at the Kentucky Long-Term Policy Research Center. The author would like to thank Michal Smith-Mello for her invaluable editorial contributions. Return to text.
1 MDC, Inc., The Building Blocks of Community Development (Chapel Hill, NC: Author, 2002). Return to text.
2 The counties included in this region are: Bath, Bell, Boyd, Bracken, Breathitt, Carter, Clay, Elliott, Fleming, Floyd, Greenup, Harlan, Jackson, Johnson, Knott, Knox, Laurel, Lawrence, Lee, Leslie, Letcher, Lewis, Magoffin, Martin, Mason, Menifee, Montgomery, Morgan, Owsley, Perry, Pike, Robertson, Rockcastle, Rowan, Whitley, and Wolfe. Return to text.
3 Distressed counties are those with poverty and unemployment rates 1.5 times the national rates and with per capita market incomes (i.e., per capita income less transfer payments) that are two thirds or less than the national rate. Lawrence E. Wood and Gregory A. Bischak, "Progress and Challenges in Reducing Economic Distress in Appalachia: An Analysis of National and Regional Trends Since 1960," (Washington, DC: Appalachian Regional Commission [ARC], 2000), and ARC, "ARC-Designated Distressed Counties, Fiscal Year 2000," 26 June 2003, 26 June 2003 www.arc.gov/index.do?nodeId=518. Return to text.
4 MDC 5. Return to text.
5 Michal Smith-Mello, Reclaiming Community, Reckoning with Change (Frankfort: Kentucky Long-Term Policy Research Center [KLTPRC], 1995) 26. Return to text.
6 All estimates reflect constant 2000 dollars. Return to text.
7 MDC 7. Return to text.
8 The regional data reflect unweighted means of district-level scores for districts included in the 36-county eastern region. Return to text.
9 Amy Watts, "No One Left Behind?" in The Road Ahead: Uncertainty and Opportunity in a Changed World (KLTPRC, 2002) 78. Return to text.
10 MDC 8-9. Return to text.
11 Center for Information Technology Enterprise (CITE), Kentucky Prepares for the Networked World (Bowling Green, KY: Author, 2002) 10-11. The eastern Kentucky region referred to here is slightly different than the one in our analysis. Return to text.
12 CITE 11. Return to text.
13 Author’s calculations from "Public Water Needs: 2000-2020," in Governor’s Water Resource Development Commission (Governor’s Commission), Water-Resource: Development: A Strategic Plan, Frankfort, KY, Oct. 1999: 6-8. Return to text.
14 Author’s calculations from "Public Sewer Needs: 2000-2020," in Governor’s Commission, Water Resource Development: A Strategic Plan for Wastewater Treatment, Frankfort, KY, March 2000: 10-12. Return to text.
15 Author’s calculations from "Long-Range Highway Plan Element (FY 2005-2018)" in Kentucky Transportation Cabinet, Statewide Transportation Plan (FY 1999-2018), Frankfort, KY, December 1999: 127-165. Return to text.
16 MDC 10. Return to text.
17 MDC 10. Return to text.
18 Author’s calculations from "Planning for the Future," a 2000 Survey developed by the Kentucky Long-Term Policy Research Center and the UK Sanders-Brown Center on Aging and conducted by the UK Survey Research Center, which provides data on the state’s population age 45 and older. The 90 percent confidence intervals for eastern and noneastern Kentucky are 39 percent to 52 percent and 31 percent to 37 percent, respectively. Return to text.
19 Jeffrey Stensland, Curt Mueller, and Janet Sutton, "An Analysis of the Financial Conditions of Health Care Institutions in the Appalachian Region and their Economic Impacts," ARC, Dec. 2002: 27. Return to text.
20 MDC 12. Return to text.
21 The 95 percent confidence intervals for eastern Kentucky in 1996, 1998, and 2000 are 40 to 55, 33 to 50, and 50 to 64, respectively, and for noneastern Kentucky they are 50 to 60, 42 to 51, and 57 to 66. Return to text.
22 These data were obtained from surveys by KLTPRC conducted by the UK Survey Research Center (UKSRC) in the fall of 1996, 1998, and 2000. Households were selected using random-digit dialings, a procedure giving every residential telephone line in Kentucky an equal probability of being called. Calls for the Fall 1996 survey were made from December 9, 1996, until January 8, 1997. Calls for the Fall 1998 survey were made from March 4 to April 6, 1999. Calls for the Fall 2000 survey were made from October 28 to November 21, 2000. Samples for the 1996, 1998, and 2000 surveys include, respectively, 676, 628, and 859 noninstitutionalized Kentuckians aged 18 or older. The margins of error in the 1996, 1998, and 2000 surveys are slightly less than 3.0, 3.91, and 3.3 percentage points, respectively, with a 95 percent confidence level for all three surveys. The 95 percent confidence interval for recycling rates in eastern and noneastern Kentucky in 2000 are 64 to 77 and 64 to 71, respectively. Return to text.
23 Editorial Board, "Public Deserves a Real Solution to Slurry Spills," The Herald-Dispatch, June 27, 2003. Return to text.
24 Author’s calculations using data from 1994 County Annual Report Summary from the Division of Waste Management (DWM), Department for Natural Resources and Environmental Protection (DNREP), 1-34 and Resource Conservation and the Local Assistance Branch of the DWM, DNREP, Statewide Solid Waste Management Report, 2001 Update, 10-14. Two counties, Floyd and Pike, didn’t report household participation rates in 1994. These estimates are based solely on the reports of the 34 remaining counties in the region. Return to text.
25 MDC 13. Return to text.
26 The 95 percent confidence intervals for eastern and noneastern Kentucky are 86 to 95 and 93 to 96, respectively. Return to text.
27 The 95 percent confidence intervals for eastern and noneastern Kentucky are 89 to 97 and 94 to 97, respectively. Return to text.
28 The 95 percent confidence intervals for eastern and noneastern Kentucky are 45 to 61 and 56 to 63, respectively. Return to text.
29 The 95 percent confidence intervals for volunteerism in eastern and noneastern Kentucky are 50 to 66 and 54 to 62, respectively, and for charitable donations are 68 to 81 and 80 to 85, respectively. Return to text.
30 These data were obtained from surveys conducted by the UKSRC in the spring of 2002, using methods described in endnote 22. The calls were made from July 20 to August 16, 2002. The sample for the 2002 survey includes 882 noninstitutionalized Kentuckians 18 years of age or older. The margin of error for the survey is slightly less than 3 at the 95 percent confidence level. The 95 percent confidence intervals for eastern and noneastern Kentucky are 81 to 92 and 83 to 88, respectively. Return to text.
31 The 95 percent confidence intervals for group participation in eastern and noneastern Kentucky are 39 to 54 and 42 to 50, respectively, and for leading such a group are 7 to 16 and 8 to 12, respectively. Return to text.
32 Fall 1996, 1998, and 2000 surveys. See endnote 22 for more details. The 95 percent confidence intervals for eastern and noneastern Kentucky are 16 to 28 and 26 to 33, respectively. Return to text.