Social Security’s role underappreciated in rural economies

Aitkin County lost 26 jobs in the past year, according to state employment data. On the other hand, Social Security recipients across the nation got the news this month that they’ll get a 3.6 percent cost-of-living increase in their checks in January.

Which of those developments is more important if you live in the north central Minnesota county of 16,000?

Here’s one way to think about it:

If each of those lost jobs paid, say, $30,000 a year, then there’s $780,000 a year less washing around the central Minnesota county, money not getting spent at the Ford dealership or the Holiday station or the new grocery store in Aitkin.

But that cost-of-living increase for the 4,400 Social Security recipients in Aitkin County could add up to about $2 million in 2012, a lot of which will get spent on groceries, gas and even cars.

Obviously jobs matter, and there’s a lot more to a local economy than this simple comparison, but it does point out that the value of Social Security payments can be huge and sometimes underappreciated, especially in rural areas.

That’s why the Daily Yonder, an online publication covering rural America, has pulled together an analysis of the impact of Social Security payments for retirees, survivors and disabled people for the nation. Rural areas tend to rely more on Social Security payments to shore up local economies than urban and suburban areas.

The Daily Yonder compiled figures for every county in the nation and agreed to share the data ahead of time with Minnesota Public Radio News’ Ground Level project.

It turns out that in Minnesota, Aitkin County leads the way — 11.9 percent of all personal income arrives in residents’ hands in the form of Social Security payments. Most of those recipients are retirees. The county is part of a corridor of retirement extending north to the Canadian border. There are six Minnesota counties, all in that region, in which 10 percent or more of personal income comes from Social Security.

By contrast, Carver County in the Twin Cities metro area gets only 2.9 percent of its income from Social Security.

For the state as a whole, the number is 5.1 percent, slightly less than the national average.

So what?

To Ben Winchester, a rural sociologist from Hancock who does research for the University of Minnesota Extension Center for Community Vitality and who studies rural demographics intensely, there’s a lesson for economic development.

Enticing new jobs and helping employers grow is important, but so is understanding that Social Security and other non-wage payments like private pensions and income from rents or investments are important, too.

“Don’t silo economic development apart from retirement issues,” Winchester said.

Maybe that means developing ways to keep or entice senior citizens; maybe it means realizing there’s a buffer in the local economy against tough times. “Think about condos as economic development,” Winchester said, for example.

You can see from the map where the reliance on Social Security is greatest — the north central retirement corridor. It’s interesting to note other parts of the country that fit the pattern — the Ozarks, northern Idaho, parts of Florida — retirement meccas that don’t necessarily have high-income economies otherwise.

Social Security income -- unitedstates.JPG

It all makes sense to David Hasskamp, who runs the Aitkin County Growth non-profit to foster development. One of the big job engines in Aitkin County lately has been the hospital in the city of Aitkin. “The health care system has grown to take care of these folks. It’s not like having Ford Motor Co. come in but these are good jobs.”

Mark Partridge, a rural economist at Ohio State University, told the Daily Yonder, “The seniors who get these payments are primarily going to spend their money locally. And they are a key reason why some communities are still viable. If this money dried up, there wouldn’t be a lot of these small towns.”

You can see all the county-by-county numbers here. (Note that OASDI stands for Old-Age, Survivors, and Disability Insurance, known to most of us as Social Security.) The Daily Yonder’s full coverage is here.

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