August 1967 AGRICULTURE AND INDUSTRIAL DEVELOPMENT in a Six- County Area of Alabama )F AUBURN UNIVERSITY ar, Aqr _.!It I_-------------- Contents INTRODUCTION . . . . . . . . . . . . **** 1 EMPLOYMENT AND POPULATION CHANGES DURING 1950-59 . . . . . . a 2 EFFECTS OF AGRICULTURAL AND INDUSTRIAL DEVELOPMENT UPON SERVICE EMPY YMENT. .... .. 0. . .. ... . 4 CAPITAL INVESTMENT PER WORKER AND TYPE OF INDUSTRY . . " . . . 5 SOME PROSPECTS FOR THE FUTURE .. a . . . . . . . . . . . . . . 10 SUMMARY . . . . e . . , *.*.*.. . . . . .. . . 12 APPENDIX . . 0. . . . . . . . 0. *. . . *.*0*.*.*.*0*.*0*s*0*.* 15 Preface Many individuals and organizations are becoming interested in plan- ning for economic development. The first step in such an undertaking is a review of the .present problems and opportunities. Fortunately, there is a wealth of statistical information available for such a study. The purpose of this report is to emphasize a framework of analysis that can be applied to the available information. Sources of information that are likely to prove useful are: publications of the Bureau of Busi- ness Research, University of Alabama, the Alabama Agricultural Extension Service, Auburn University; the Census of Manufacturing for Alabama, he Census of Business for Alabama, the Census of Agriculture for Alabama; the Census of Population; the Statistical abstract of the United States; and the Alabama Department of Industrial Relations. The State Planning and Industrial Development Board, the Alabama Power Co., the Alabama State Chamber of Commerce and local chambers of Commerce also have ma- terial on file that can be of interest and use to local planners. Data from several of the sources listed were compiled for this re- port by John Elliot, Jr., as part of the requirement for the Master of Agriculture degree (1). Additional data and framework applicable for resource inventory may be found in the Inventory of Human and Physical Resources Cherokee, Dekalb, Jackson, and Marshall Counties, Alabama, Agricultural Economics Series 10, Agricultural Experiment Station, Auburn University. Agriculture and Industrial Development in a Six-County Area of Alabama. John R. Elliot and Bill R. Miller* Community leaders in many counties of Alabama are actively engaged in promoting employment opportunities and attempting to make more adequate use of resources leading to improved standards of living. People in counties that have predominately rural and agriculturally based economies face problems of development that are unique from those of an urban-industrial economy. Rural areas that face problems of growth must also face the problem of declining job opportunities in their major industry, agriculture. But paradoxically, this problem is a measure of the success of agriculture. As concluded in a recent report, "the hall- mark of modern economic development is the capacity of a nation to meet its food and fiber needs, while at the same time releasing its human and physical resources for the production of other goods and services. The more rapidly agriculture declines in relative importance within an ex- panding economy the greater is its contribution to the growth process."(2) This report describes how some of the key economic variables (employ- ment, population, investment, and income) have been involved in growth and contrasts growth in an urban county with that in nearby rural areas. Six Alabama counties, Fayette, Lamar, Marion, Winston, Pickens (all rural), and Tuscaloosa (urban) were studied. The approach was essentially that of studying the economic base of an area and its relation to economic growth, Briefly, products of the economic *Specialist in Pesticide Education, Cooperative Extension Service, and Assistant Professor in Agricultural Economics, Agricultural Experiment Station; Auburn University. base were defined as: (1) products produced at the primary level and ex- ported, such as lumber, paper, and clays; and (2) finished products for export produced at a secondary level using raw materials of the area plus larger amounts of imports. This important secondary group of basic in* dustries includes textile, apparel, furniture, rubber, chemical, steel and electrical goods. An additional group of industries were either ser- vice or market oriented and their presence was partly dependent on the presence of the growth generating basic industries. Examples of these are wholesalers, retailers, doctors, lawyers, teachers, and other service groups. A more complete discussion of the concept, economic base, is given by Andrews (3). Extensive use of the concept of basic and service industry is used in the following sections. Agriculture is a basic in- dustry treated separately in the report to emphasize its role in the de- velopment process. Employment and Population Changes during 1950-1959 Significant economic changes have occurred in rural and urban coun- ties of the six-county area. Industrial growth has taken place, farms have declined in number, and the traditional agricultural economy has been supplemented by many types of nonagricultural activities. Employ- ment and population data in Table I1 indicate the interaction of agricul- tural and other basic industrial activities during a period of rapid change. During the 10-year period 1950-59, agricultural employment de- clined by 70 per cent in the rural counties and 64 per cent in Tdsca- loosa County. Nonagricultural employment increased by 44 per cent in the rural counties and 32 per cent in Tuscaloosa County. The rural counties had a population decline of 16,696 people during the decade. Tuscaloosa, the urban county, gained 14,955 in population. TABLE 1. Employment and Population Changes in Tuscaloosa County and the Surrounding Five-County Rural Area, 1950-1959 Item Tuscaloosa Five-County County Rural Area Total agricultural employment, 1950 ......... 4320 16,280 Total agricultural employment, 1959 ......... 1,567 4,848 Per cent change from 1950 ., ........... -64 O70 Change in total agricultural employment, 1950-1959 0.0........ -2,753 -11,432 Total nonagricultural employment, 1950 ...... 25,631 16,287 Total nonagricultural employment, 1959 .". . 33,714 23s518 Per cent change from 1950 ...... . 32 44 Total increase in nonagricultural employment, 1950-1959 .......... 8,083 7,231 New employment in basic industry, 1950-1959 ........... 2,907 8,105 Change in total employment, 1950-1959 . ". .. . 5,330 49,201 Change in service employment2/ ... ,.........., 5,176 -874 Change in population, 1950-1959 ...... a...... 14,955 -46,696 Source: Elliot, John Jr., Unpublished Master of Agriculture Paper, Agr. Econ. Dept., Auburn University, June, 1964, 1/ Increase in nonagricultural employment minus new employment in basic industry. '4 A loss of 11,L32 agricultural workers and a gain of 7,231 nonagricul- tural workers resulted in a net decline of 4,201 workers in the rural area. A corresponding population decline during the period of 16,696 people in- dicated that for each net loss of 100 workers a population decline of 394 people occurred. Based on this ratio, which does not take into considera- tion differences in family size of in-migrants and out-migrants, the new nonagricultural jobs prevented a further population decline of approximate- ly 28,000 people from the rural area. Tuscaloosa County experienced a different situation. Agricultural em- ployment declined by 2,753 workers, but nonagricultural employment increased by 8,083 workers, resulting in a net increase of 5,330. A corresponding population increase of 14,955 people during the 10-year period means that each 100 net increase in workers in Tuscaloosa County resulted in a popu- lation increase of 280 people. Effects of Agricultural and Industrial Development Upon Service Employment Data in Table 1 also illustrate the effects of development upon service employment in the rural and urban counties. An unusual situation existed in the rural counties during the period of 1950-1959. Although new or expanded basic industry had a reported increase of 8,105 new workers, the net reported increase in nonagricultural employment was only 7,231. The hypothesis sug- gested here is that service or market-related employment actually declined because of the decline in agricultural employment. As a result of 11,432 workers leaving agriculture, total employment in the rural area declined by 4,201. Therefore, new basic industrial employment did not have the multi- plier effect upon service employment that it might have had if agricultural employment had remained stationary rather than declining. Service employ- ment was estimated to have declined by more than 800 jobs, Table 1. This is in direct contrast to what might have been hoped for by planners in- terested in development. The effects of basic industrial development on service industry in Tuscaloosa County were much more positive than in the aural area. An es- timated 2,907 new jobs were created by basic industry between 1950-1959. During the same 10-year period, total nonbasic and nonagricultural em- ployment increased by an estimated 5,176 jobs. On this basis, each 100 new basic industry jobs resulted in 178 new jobs in service employment. This estimate is, however, biased upwards because of institutions in the county, principally the University of Alabama, which have grown with- out regard to growth in basic industry and which probably exerted a strong influence on the growth of service employment. Capital Investment per Worker-and Type of Industry The amount of capital investment required per worker employed is an important guide for groups planning economic development programs. The information provides a basis for determining capital needs and expected employment as an outgrowth of investment. As in the case of employment, there were significant differences in capital investment between the ru- ral and urban counties, Table 2. During the period 1940 through 1962, capital investment per new worker in the rural area ranged from $909 in the apparel industry to $12,499 in the chemical industry. The average investment for all industry in the area was $2,282 per new worker. The apparel industry provided a major part of rural new employment through- out the period. TABLE 2. Capital Investment in Basic Industry Per New Worker in Tuscaloosa, Fayette, Lamar, Winston, Pick and Marion Counties from 1940 to 1962 New firms Total new Avera Name of industrial group or New capital inve expansions employees investment per empl 1940 to 1962 1940 to 1962 1940 to 1962(Dol.) 1940 to Rural Urban Rural Urban Rural Urban Rural Five Tusca- Five Tusca- Five Tusca- Five County loosa County loosa County loosa County Agricultural processing ................ 15 6 506 65 1,037,500 430,000 2,050 Textile mill products .................. 1 1 50 50 500,000 250,000 10,000 Apparel and related products ........... 30 4 6,135 105 5,574,000 100,000 909 Lumber and wood products ................ 24 12 942 264 1,634,000 523,500 1,735 Furniture and fixtures ................ 3 5 177 115 180,000 330,000 1,017 Paper and allied products .............. 1 3 300 1,750 3,500,000 20,275,000 11,667 Chemical and allied products ........... 6 10 245 560 3,050,000 12,535,000 12,449 Rubber and plastic ..................... 2 5 175 1,050 225,000 17,345,000 1,286 Concrete, plaster and bric, products ... 7 6 175 100 455,000 172,500 2,600 Structural and fabricated metal ......... 4 5 435 695 1,293,000 5,715,000 2,972 Electircal products ..................... 3 8 780 255 5,150,000 590,000 6,603 Petroleum, coal, and mineral ............ 4 6 150 298 380,000 1,900,000 2,533 Total 100 71 10,070 5,307 22,978,500 60,166,000 2,282- Source: Elliot, John, Jr. Unpublished Master of Agriculture Paper, Agr. Econ. Dept., Auburn Univ., June, 1964 1/ Investments in factory expansions are not separated from investments in entirely new plants. 2/ Average new investment per worker. ens ge new stment new oyee 1962(Dol.) Urban Tusca- loosa 6,615 5,000 952 1,983 2,870 11,586 22,384 16,519 1,725 8,223 2,314 6,376 11,337 o0' 3/ Average new investment per worker. Average investment per new worker in the rural five counties tended to increase during the periods studied. Between 1940-1944 an average in- vestment of $807 per new worker was made. Amounts changed as follows: For successive 5-year periods, the investment per new worker was $1,557 (1945-49); $3,061 (1950-54); $1,339 (1955-59). But, during the 3-year period 1960-62, the amount invested appeared to be approaching the 1950- 1954 level. The average rate of increase in new investment was about $120 per new worker each year. 1 / The period of highest investment per new worker, 1950-1955, was a time of expansion in the paper, chemical, and electrical industries. During the next period, 1955-1959, low in- vestment per new man in the apparel industry accounted for most of the new development which explains the sharp drop in investment per worker during that period. 2 Investment per new worker in Tuscaloosa County was not analyzed by 5-year time periods because of the confidential nature of information on number of employees in certain industries. The following inferences, how- ever, were made: Investment per new worker was observed at $8,380 in the period 1940-1945 and from 1960 through 1962 the amount was $43,820 per new worker. This would represent a large increase through time in Tusca- loosa County if the 1960-1965 average per new worker remains anywhere near $40,000. Average investment per new worker was $11,337 for the 23-year period and 5 times greater than the same long-term average in the rural area, 1/Regression estimate. 2/ The data were not deflated and therefore included the effects of inflation and increased automation. Investment per new worker in apparel manufacturing has been quite stable through time, whereas industries in the urban county, such as chemi- cal, paper, electridal machinery, and rubber, have steadily increased in- vestment per new worker, As investment per new worker has increased in Tuscaloosa County, the number of new workers in basic industry has shown a tendency to decine at an average rate of approximately 130 new workers per year.1/ This does not mean that total number of new workers was de- clining but the yearly increase was smaller each year. This is in direct contrast to the rural area where, although investment per new worker in- creased on a small scale, the yearly increase of new workers in basic in- dustry other than agriculture has been larger each year. New jobs have increased in the rural counties at an average rate of about 188 per year. 2 ' The difference in the way new jobs are increasing is also shown in off-farm employment opportunities for farmers. Although the number of farms in both areas declined by 49 per cent during 1950-1959, opportuni- ties for off-farm employment appeared more favorable in the rural counties. The number of farmers employed off the farm more than 100 days decreased by 31 per cent in Tuscaloosa and by only 17 per cent in the rural counties, Table 3. Under some conditions of development, off-farm employment would be expected to increase as shown in a study of Indiana development by Stevens and Wallace (4). Rural counties in that state have had absolute increases in number of off-farm workers as well as small increases in the percentage 1/Regression estimate, 2/Regression estimate. 9. TABLE 3. "Off-Farm" Employment Characteristics of Farm Operators in Tus- caloosa County and the Five-County Area of Lamar, Marion, Pickens, Winston, and Fayette Counties Farmers reporting 100 or more days County and year Total farms2/ of "off-farm" employment Tuscaloosa No. No. Pct. of all farms 1949 .. _ ...... ... 3,806631 1959 ................ 1,907 808 12 Net Change ....... ,... - 1,899 (-49/) -358 (-31%) 11 Five-County Area 194+9 . ............... 13,813 3,005 22 1959 ........ f......... 7,-.914.2,502 35 Net Change ..... .... . -6,719 (_49/) -503 (-17%) 13 Source: part 32, culitur e, 1/ Adjusted for change in definition of a "farm." U. S. Bureau of Census, U. S. Census of Agriculture, 1959, Vol. I, County Tables 1 and 4 ; U. S. Bureau of Census, U. S. Census of Agri- 1950, Vol. 1, part 21, County. Table 1. 10 of farmers working off the farm. The situation in that state seems to be that urban development offers more part-time work to farmers who intend to stay in farming. Perhaps one of the most significant differences bet- ween Indiana and Alabama conditions was the far greater number of Alabama farms in 1950. The counties studied by Wallace and Stevens were approxi- mately the same size as the Alabama counties discussed in this report and under present conditions counties in both states appear to be approaching approximately the same number of farms per county. However, during the 1950-1959 decade, farms in Alabama declined in number at least two and one-half times as fast as in Indiana. Apparently, the combination of industrialization and farm size in Alabama has meant that many part-time farmers have been willing to aban- don farming in response to urban development and non-farm employment op- portunities. There are some indications this will continue to be true (See the appendix.) In the counties of this study, the rate of farmers working off the farm 100 days or more, 35-42 per cent, Table 3, indicates a level of underemployment in farming that is high in relation to Indiana conditions. Another indication of underemployment is given by Bishop. In 1960 there were 17 farm males between the ages of 10-19 for each re- tirement age farmer in the South who was operating a farm with $10,000 or more of marketings (5). This relationship holds to a similar degree in Alabama. Some Prospects for the Future Many of the elements of change noted in this report have been cata- loged previously. The decline in number of farms and farm workers, in- creased industrialization, and increased investment per worker have become 11 almost commonplace facts. However, data shown here with respect to new workers employed is slightly at variance with the accepted concept of nodal economic growth. According to the nodal concept, growth at a cen- tral place builds at a faster rate than the surrounding areas because of complementarity among industries and because future investment and employ- ment decisions are likely to be dependent on the extension of existing plant and equipment. Although new jobs have been increasing in both the rural and urban areas, large increases in investment per worker in the urban area have been associated with new jobs increasing at a decreasing rate, whereas jobs in the rural area have been increasing at an increas- ing rate. This is probably one indication of the strong resistance many farmers have against moving from their home community. Also, it probably reflects the increased employment of rural women in the labor force. Decentralized growth in employment activity in the rural area may receive added stimulus in the future from increased growth in the service industries. As shown by this study, the effect of basic industry on ser- vice employment (the multiplier effect) has been essentially zero in the past because of the rapid exodus of agricultural workers from farms. This decline may not continue at the same pace in the future if we accept the Indiana conditions as representative of a more advanced relationship bet- ween industry and agriculture. However, with a high rate of underemploy- ment still indicated among farm operators and farm youth, Table 3 and the Appendix, there will be continuing attractions in the rural area for la- bor oriented basic industry. The added stimulus of multiplier effects on sales and employment in rural county service industries is expected on the premise that basic industry other than agriculture is becoming the major determinant of population. 12 One of the more interesting factors within the entire overall struc- ture of change has been the relation of agricultural incomes to those in the rest of the area economy. In 1939 and 1957, personal income per farm operator in the rural area was related to per capita personal incomes of non-farmers in the rural counties in essentially the same proportions. Relative shares of personal income between the farm and nonfarm segments of Tuscaloosa County were also about the same in the two time periods (6) (7). These facts lead to a hypothesis that regardless of the extreme- ly different types of general development in rural and urban areas the relative position of farm incomes has been unaffected. For those interested in agricultural development this hypothesis raises a serious question. Many observers have felt that rapid migration of "surplus" farmers into a ra- pidly growing economy is the solution to many of our "farm problems." Farm income has increased, but relative farm income improvement has not yet taken place in the presence of urban development. There is little evidence that the labor market is working differently than it did in 1939. Summary The implications of this report are several: (1) Service employment and service industry growth has been lower than might have been expected in rural counties because of greater off- farm migration that has not been absorbed by local basic industry. De- mand for services in rural counties will increase rapidly as basic indus- try other than agriculture is at this time becoming the basis of population. (2) Geographically, the growth pattern in employment has been decen- tralized. Employment increase apparently has been as good or better in the rural counties as in the nodal urban county. 13 (3) Data on off-farm employment indicate that a considerable pool of potential industrial labor still exists on the farm. Counties with high rates of off-farm employment are indicated in the appendix to the report. (4) The issue is still in doubt whether urban development has af- fected the returns to labor in agriculture relative to non-farm labor. The very close relationship between industrial growth and agricul- ture has been shown throughout the study. The conclusion that much of the growth in recent years has resulted from mobility of farm labor to new occupations will not be questioned by many, although the capital- labor ratio has increased significantly in the urban area. Mobility of labor into new occupations has been a mainspring of growth. Furthermore, the costs of retraining for new jobs has probably been small as witnessed by the type of industrial development. We must expect that mobility of labor into new occupations can con- tinue to be an important source of economic growth. This source will be denied, however, if proper attention is not given to the ever increasing difficulty of job mobility in a developing society. As an example, 5,000 computer programmers will be much more difficult to obtain from the ranks of industry than were 5,000 pulp and paper mill employees obtained from agriculture. The implications are that adult education and on-the-job training are rapidly becoming more important if we are to effectively employ the development of new technology requiring new skills, and by doing so avoid technological unemployment. 14 LIST OF REFERENCES (1) Elliot, John, Jr. 196k. The Economic Impact of Aricultural and In- dustrial Development in a Six-County Area of Alabama from 1940 throu 1960. Unpublished Master of Agr., Econ. and Rur. Soc. Dept.,.Auburn Univ., Auburn, Alabama. (2) Economic Research Service, 1964. Aqriculture and Economic Growth. Agr. Econ. Rept. No. 28, U. S. Dept. Agr., Washington, 0. C. (3) Andrews, Richard B. 1963. Economic Planning for Small Areas an Ana 1 ti cl System, Land Economics, Vol. 39, No. 2, (143-155). (4) Stevens, J. B. and L. T. Wallace.l1964. Impact of Industrial Develop- ment on Howard County, Indiana. Bull. No. 784, Agr. Exp. Sta., Purdue Univ., Lafayette, Ind. (5) Bishop, C. E. 1964. Aric ueadEooi v et Bull. 556, Agr. Exp. Sta., Virginia Polytechnic Inst., Blacksburg, Va. (6) U. S. Census of Agriculture, 1945, Vol. 1, part 21, Statistics for Counties, U. S. Census of Agriculture, 1959, Vol. 1, Part 35, Statistics for Counties. (7) Personal Income in Alabama Counties Since 1939. Marion Hawley, Bur. of Bus. Res.,, Univ. of Alabama. 15 Appendix This appendix contains a table comparing the number of farmers working off the farm 100 days or more in a census year and the decrease in number of farms in the following census year. Census data for the period 1954- 1964 is listed by county in Table 1. A statistical analysis of the data in the Appendix Table indicates that for 3 additional "off-farm" workers at least 1 farmer will abandon farming. This estimate takes trend into account since it can be seen in the 1954-59 data that in many cases a 1 to 1 ratio appears to have existed. Number of farms, however, is affected by more forces than the availability of off- farm work and this is an area for future work. 16 Appendix Table. Changes in Number of Off-Farm Workers and Net Decreases in Farms for 67 Counties in Alabama Off-Farm Decrease Off-Farm Decrease Off-Farm Counties workersil/ in farms2/ workers in farms workers 1954 1954-59 1959 1959-64 1964 Autauga ........ , 591 335 438 219 400 Baldwin ..,,,.....l,098 739 802 +25/' 859 Barbour ,...,,,,..* 458 715 417 484 320 Bib..~q.... 442 452 318 110 293 Blount ... .... ,lOO 1,479 760 209 826 Bullock *..,.1..... 353 503 311 167 297 Butler .... , 828 597 533 247 490 Calhoun ... ~.,O 830 590 218 484 Chambers .*........ 840 870 430 347 378 Cherokee .......,. 591 550 461 478 375 Chilton .........1,097 878 897 388 699 Choctaw ,........ 945 842 583 333 520 Clarke ..... ~... .. 876 1,000 557 408 431 Clay ...... 942 961 429 116 418 Cleburne ,.,,...,. 601 638 306 110 298 Coffee .,. ....., 454 891 470 484 451 Colbert .. , ., , 822 690 585 241 495 Conecuh ........ 735 872 477 364 390 Coosa .. .... 765 697 327 83 330 Covington ,...... 737 928 619 487 600 Crenshaw .,,. 370 526 353 435 294 Cullman .,........1l,357 1,927 1,274 659 1,240 Dale d...., ... 384 473 335 188 332 Dallas .... ,...,... 963 1, 327 720 751 556 Dekalb ...... ,1 1,584 1,344 1,036 1,143 Elmore .,.........1,126 920 799 434+ 611 Escambia ..,.....M 603 651 440 176 392 Etowah ...... , 1, 501221 886 237 877 Fayette .. + "...i. 535 764 421 283 441 Franklin*..,. 870 733 676 239 633 Geneva .,.., 244 604 374 436 362 Greene ... ,.1,... 399 604 435 233 360 Hale ......,.,. 5414 791 460 408 431 Continued 17- Appendix rable 1. Continued Off-Farm Decrease Off-Farm Decrease Off-Farm Counties workersi! in farms2/ workers 'in farms workers 1954 1954-59 1959 1959-64 1964 Limestone ........ 874 1,512 814 648 727 Lowndes *..,..s.. 559 649 482 121 474 Macon ... ,.,i...i 523 306 553 376 377 Madison .........1,017 1,510 966 1,272 631 Marengo .......... 857 1,284 539 218 570 Marion ..... ?.... 733 931 570 322 566 Marshall .... "... 968 1,558 io68 533 1,049 Mobile ......... 1,561 922 1,058 246 827 Monroe "........, 847 984 564 392 508 Montgomery .,.... 707 722 641 336 519 Morgan ......... ",1,125 1,217 1,112 456 1,052 Perry ,.,,....,... 601 762 326 276 317 Pickens ......... 631 1,054 664 273 519 Pike a...*....,?.. 309 752 358 392 370 Randolph ....... 735 872 624 353 548 Russell ...... 626 496 433 339 275 St. Clair ....... 842 938 512 247 308 Shelby ........... 831 625 468 70 457 Sumter .. ,........ 614 878 471 311 442 Talladega ".......1,152 1,025 661 217 561 Tallapoosa ..d.... 976 951 617 281 505 Tuscaloosa "......1,430 1,632 808 596 567 Walker .*.....+...1,266 1,419 852 473 577 Washington .,..... 761 484 557 247 464 Wilcox .......... , 626 1,004 512 287 456 Winston ......,.e.. 647 687 452 37 450 Total *,,*..53,316 60$459 39,723 23, 283 34,841 Av./peg- ccunty. 808 916 603 353 528 1/ The number of farm workers working off the farm 100 days or more. 2/ The net decrease in number of farms in the 5-year census ing the observed number of of f.f arm workers. period f oll1ow- Baldwin County was the only county in Alabama that has shown an increase in number of f arms. SOURCE: U. S. Census of Agriculture, 1959, Statistics for Counties, Table 5 and Preliminary U. S.. Census of Agriculture, 1964.