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Why rural Americans are far less optimistic about their financial future

MarketWatch logo MarketWatch 5/26/2018 Jacob Passy

Across the country, Americans’ anxiety about their finances is worsening. And rural residents are far more pessimistic about their financial prospects.

Only 36% of Americans living in rural counties — who don’t earn enough to pay for the lifestyle they want — believed that situation would improve in the future, according to a new report from the Pew Research Center. Comparatively, nearly half of those living in urban and suburban areas who were in the same boat were optimistic about their financial futures. The findings were based on a survey of more than 6,000 people conducted between February and March.

Driving this gap are rural residents who don’t have a bachelor’s degree. Among these people, only 34% believe they will eventually earn enough to lead the life they want. This demographic represents a larger share of residents in rural counties than it does in other parts of the country. Only 19% of people in rural areas have a bachelor’s degree, versus 31% of those in the suburbs and 35% of urban residents.

Overall, the poverty rate is the highest in rural areas at 18%, versus 17% for urban areas and 14% for the suburbs. But it’s actually the suburbs that have seen a dramatic uptick in poverty: The number of residents in suburban counties who live below the poverty line increased 51% between 2000 and 2016, but only increased by 23% in rural areas.

Only 4% of families talk regularly about money - and that's a problem Money avoidance is prevalent among American families. Here's why that can have dangerous consequences for their finances. 

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So why then are rural residents more inclined to view their financial futures negatively? For starters, they’re earning less than their counterparts in other parts of the country. On average, a worker in a rural county earned just over $35,000 per year, which is more than $10,000 per year less than the average income of workers in urban and suburban regions.

Rural residents also have greater anxiety about the job market: 42% say that the availability of jobs in their community is a major problem, compared to 34% of urban residents and 22% of suburbanites. The only problems more commonly cited among rural residents were drug addiction and access to public transit. Non-white residents of rural counties were even more likely (53%) to say that job availability was a concern.

And unlike their counterparts in other areas of the country, inhabitants of rural communities are less likely to move. Among people under the age of 50 in rural counties, 54% have lived in their community for 11 or more years, versus 38% of suburban and 32% of urban residents.

Related gallery: Counties where the American dream is dead (provided by GoBankingRates)

an old stone building: The American dream means economic opportunity and mobility, especially to new generations of Americans. While debates rage on about whether the American dream is as it used to be, research certainly indicates it is not uniform across the country. While opportunities and upward income mobility exist in some areas, they are close to zero in others and have been falling sharply in recent decades.It used to be that the vast majority of children ended up earning more than their parents. Today, however, the situation is vastly different. According to recent research on intergenerational mobility, approximately 90% of children born in the 1940s earned more than their parents, while only roughly 50% of children born in the 1980s -- many of whom are entering the labor force today -- do.The Equality of Opportunity Project considered average incomes of 26-year-olds raised in the bottom quartile of income in 2,973 U.S. counties. A 26-year-old from this background who earns more than the national average for the bottom quartile is said to have managed upward income mobility.The researchers found that neighborhood environments have substantial effects on children’s long-term economic outcomes. The probability of earning in adulthood more than $26,090 -- the average annual income for the bottom quartile nationally -- goes down every year of childhood spent in nearly 1,000 counties. To highlight the substantial geographic variation of this pattern, 24/7 Wall St. reviewed the 50 counties where the average income losses are greatest.Children growing up in counties with less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates are significantly more likely to surpass their parents later in life.
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