Economic Divide Between Rural and Urban America in Spotlight at Ways and Means Committee Hearing

A photograph of West Virginia shows why the state is known as the Mountain State. Courtesy of Jon Bilious/Dreamstime.com

The economic divide between rural and urban America was on full display on Feb. 6 during a House Ways and Means Committee field hearing in Petersburg, West Virginia.

The first full hearing of the Ways and Means Committee was hosted in the Mountain State instead of Washington, to prioritize the “voices” of residents and business owners outside of the “Washington political class,” according to Committee Chair Rep. Jason Smith (R-Mo.).

The event highlighted the plethora of challenges facing “Americans on the front lines of our economy,” exposing the problems of higher food and gasoline prices, labor shortages, supply-chain setbacks, a lack of broadband internet infrastructure, and too many federal regulations.

Republican and Democratic lawmakers heard from four witnesses, who listed hurdles they and the rural communities where they live must overcome on a day-to-day basis.

‘Struggling to Live’

Tom Plaugher, the vice president of operations at Allegheny Wood Products, outlined several critical problems that have materialized over the past two years: surging fuel costs, the supply-chain crisis, worker shortages, bureaucracy, and rising interest rates.

“A trip to the grocery store will convince you that inflation has gotten out of hand,” he said.

Ashley Bachman, the owner and operator of Cheeta B’s Restaurant, has been balancing keeping up with operating costs and considering the budgets of her company’s clientele. She cited the rising cost of bone-in chicken wings, which have increased to $150 per case from $40. In addition, energy costs to cook the food have risen, since the equipment runs on propane.

“During some months, the cost of propane has more than doubled the price that it was in the corresponding months of 2020,” she said. “The rise in price and all other energy costs have caused our lease payment to increase from $2,000 to $4,500 a month, and in only five years’ time, our little restaurant has been bleeding money due to all the increased costs.”

Her business has also faced higher labor costs. She noted that she pays a higher wage than her competitors to retain her staff. But other companies in her industry have altered their business hours due to a paucity of workers. Even organizations in her community, whether her doctor’s office or the local CVS Pharmacy, can’t stay open on the weekends because of staffing shortages.

Bachman suggested that “the amount of money that has been handed out through the years has definitely contributed to this.”

According to the Bureau of Labor Statistics (BLS), the labor force participation rate for West Virginia slumped to a 17-month low of 54.8 percent in December 2022 compared to the national level of 62.4 percent.

She shared the same message that people “are just struggling to live.”

“Some of the biggest financial worries I hear from my community is the cost of goods, the price of gas, price of utilities, and just life in general,” Bachman said. “The cost of everything has gone up. I see lots of my old customers at the grocery store, and they tell me they are sorry they haven’t eaten at my restaurant lately because they are just struggling to live.”

“My community is having a hard time right now,” she said.

Housing has become another crucial issue for rural Americans, mainly because the distance needed to travel to buy groceries, fill up a gasoline tank, or visit a hospital often is significant. Some of the witnesses, including Wiley McDade, the co-owner of Devil’s Due Distillery, proposed efforts to “stabilize local housing availability.”

Jamie Ward, the Itmann Prep Plant manager at CONSOL Energy, says that policies being pushed by “people who had never even been here where I grew up” have led to an “economic disaster to the people of Appalachia.”

One of these areas has been energy initiatives that have targeted the coal industry.

“The coal industry has consistently been under pressure from Washington, which makes it harder to do business that provides the materials needed for steel and other fuel with affordable electricity,” Ward said. “Federal agencies make it difficult for the operators to even get off the ground, especially when agencies make the rules that are very hard to follow.”

Miner holds coal. Parilov/Adobe Stock

Ward noted that the sector favors the diversification of energy sources and supports clean energy but not at the expense of conventional options that are affordable and reliable.

In November 2022, America’s Coal Associations, including the West Virginia Coal Association, wrote a letter to President Joe Biden, slamming the administration’s efforts to shut down coal plants across the country.

Although coal country has experienced a rebirth amid the worldwide energy crisis in the past couple of years, the Energy Information Administration estimates that one-quarter of the operating U.S. coal-fired fleet will retire by 2029. In 2022, coal retirements totaled about 11,783 megawatts.

“I remember a time when someone could not stop more than three or four miles without seeing a coal mine where you'd be able to find work,” he noted.

When asked by Rep. Nicole Malliotakis (R-N.Y.) what would happen if their businesses emulated Washington and spent more money than they took in, the witnesses noted that they would have to shut their doors.

The Divide Between Urban, Rural America

While the annual U.S. inflation rate has eased to 6.5 percent, the high cost of living, from food to gasoline, still concerns families in rural America.

According to a recent Save the Children Action Network survey, gasoline prices continue to be the top concern for 23 percent of rural families. Food and grocery prices are another chief fear for 15 percent of respondents, followed by a lack of good jobs or employment positions that don’t pay well (9 percent). But nearly one-fifth (18 percent) of rural voters note that general inflation is their biggest problem.

Policymakers in Washington might be unaware of these worries because the Bureau of Labor Statistics’ Consumer Price Index specifically targets what urban Americans pay for goods and services.

A recent study (pdf) by Iowa State University found that urban dwellers have faced an average inflation rate of 14.5 percent over the past two years. By comparison, rural households have endured 18.5 percent inflation.

Incomes have also taken a hit since 2020. Rural discretionary incomes declined by 50 percent, while urban discretionary incomes fell by 13 percent.

Dr. David Peters, an extension rural sociologist and professor of sociology at Iowa State University, estimates that rural households have paid an estimated $8,120 from 2020 to 2022, driven mainly by rising transportation costs. The researchers projected that rural residents paid roughly $1,620 more for diesel and gasoline costs during this span.

The Federal Reserve Bank of New York concluded in a recent report that rural households were hit the hardest by inflation in 2021 and 2022, adding that the “South experienced higher inflation than the national average, while the Northeast experienced lower inflation.”

“Under the assumption that urban price growth is similar to rural price growth within relatively narrow categories of goods, rural households experienced considerably higher inflation than urban households did, especially relative to what was the case before the 2021 inflationary episode,” regional central bank economists wrote.

In response to growing concerns among rural American residents, President Joe Biden and his administration recently announced that the federal government would spend $2.7 billion to improve and expand electric infrastructure “for decades to come.”