Uncovering the Economic Transformation and Challenges of Appalachia

Aaron is a consultant and researcher on the topic . It has been a senior fellow at the Manhattan Institute and the city on the topic of regional development . And Jesse Wall is a public policy researcher in Washington DC working with AEI set to pursue graduate study , by the way , at university in Oxford in England .

Originally from Southern Appalachia , jesse is dedicated to furthering Appalachia's flourishing and development . Jesse and Aaron , welcome Thanks . Thank you , joel . You want to kick us off , yeah .

And if there's a huge split within Appalachia that mirrors the split between you could think of it as the old north and the new south , between the frost belt and the sunbelt and the parts of Appalachia that are in the southern growth zone , which I define as the area south of the northern borders of Tennessee and North Carolina .

We're actually starting to see quite a bit of growth there in terms of population and jobs across a large number of counties . Mississippi sort of accepted , but in Tennessee , north Carolina , south Carolina , georgia , alabama , a lot of growth is happening .

I call this organic growth , not necessarily because it's all happening from within the community , but because it's happening by the force of the market , without any sort of public policy intervention . People are just moving south , they're moving to warm weather . We've seen rivers of people flowing into these places .

Southern Appalachia is heavily adjacent to major metropolitan areas like Atlanta , like Charlotte , nashville , birmingham , alabama and some smaller ones are doing well . Knoxville , chattanooga , huntsville , they're all inside the southern Appalachia region and so we're seeing a lot of people move in there .

A lot of people are moving in and that can be a mixed blessing for the existing residents , as you know , but we are seeing things move in there . The northern part of Appalachia is more stagnant , I would say , in keeping with the inordinate United States as a whole .

There's nothing particular , I think , to Appalachia about that , but even there I saw some opportunities developing from a remote work which we can talk about kind of separately , but that was a big focus of the report . Does remote work offer opportunities ? And I think provisionally it offers some incremental opportunities in the north as well as in the south .

That's the place I want to go because it's beautiful and it's cheap and the land is cheap . And that was odd to me . But every time I go home the community where I'm from was not a suburb when I was growing up . It's becoming a suburb and the land is changing quickly , as Aaron notes in the report . It's a mixed blessing .

It's exciting for the economy I'm from the southern part of the report that he's talking about , so that growth has been exciting . But there's also a want to preserve the land as it is , preserve the culture , and that tug of war , with progress as well as preservation , is going to be ongoing for Southern Appalachian .

I think for Northern Appalachian there's a lot of growth that is yet to be had . I'm curious to see the lessons Aaron has on offer here kind of be taken up by places in the north and see what they can do with it .

Pittsburgh is the largest metropolitan area , entirely within the Appalachian region , and it was obviously historically a steel town , but not anymore .

But you go along the Ohio River , you drive down these highways in West Virginia , you'll see some gigantic chemical plant or you'll see a gigantic marathon oil refinery or you'll see some other piece of heavy industry there .

Shell just built a $6 billion ethane cracker plant in Pennsylvania where they're going to take this cheap fracked natural gas and convert it into plastics , feedstock basically , and so there is a lot of heavy industry there . And then there's also tourism is also a big business , and so you can imagine that these things are sort of in conflict with each other .

And then I would say in limited numbers of places there is even some high tech in select metropolitan areas . Again , pittsburgh has become sort of a high tech metro area because of Carnegie Mellon University , huntsville , alabama , very associated with the space program .

Knoxville is a major university town , so there are sort of these places that we don't think of them as Appalachia , and that's what happens If we replace an Appalachia , get successful .

We sort of recoded as something else and it's nice to show you how poverty is sort of in rural and although there is a lot of that , there's also some pockets of other things as well .

For instance , in Minneapolis we see a lot of people from Africa who have come in from a refugee perspective . Is that happening within the Appalachian region or is it more kind of traditionalist ?

The Scots-Irish are the people who are most likely today to describe themselves as simply American on the census .

What I would say is the area has seen an influx of more kind of racial and ethnic diversity but it's still overwhelmingly white and in fact although it's becoming more diverse like the entire United States , it has actually been becoming more diverse at a slower rate than the nation as a whole , meaning Appalachia is actually getting whiter relative to the rest of the

country . There simply isn't a huge amount of diversity there . In most places when you do see an influx of Latinos or immigrants is in the North Georgia , for example , which is really part of Atlanta . Atlanta has now basically all of North Georgia and so a huge percentage of the diversity is in some of the places like that .

And then there are some areas in the rural South , especially in Mississippi , alabama , where there are historically large black populations . There are some counties in Appalachia in the ARC region that are majority black . Again , it's not thought of that way but that's really more of a historic , I think , population than that .

So a lot of places have said immigration is really what's going to drive repopulation or population growth . In Appalachia there's probably going to be some , and especially in North Georgia , but it's really probably more domestic migration .

I think it's some of those people who are talking about retiring there , as Jesse said , maybe the same sorts of people who are moving to places like Idaho in Montana , that kind of profile .

But it has really started to grow and there are new businesses .

Speaking of historic downtowns and the need to revitalize those , there's been new businesses crop up in our own historic downtown that are Hispanic restaurants or Hispanic small town businesses , and a lot of that dynamism and entrepreneurship that I think will help spark an exciting and flourishing Appalachia has come from the Hispanic community .

I think we're , like you were saying , erin , in the North kind of West Virginia , Kentucky , where maybe that won't be driven by Hispanic immigrants .

There's a lot of young people in the Washington DC area who are kind of thinking , oh well , I'll go hybrid work from West Virginia and I think that that domestic migration that you're talking about could really be a big driver as more people can hybrid work and we can circle back on the remote work point there .

But the short answer is yes , and I think it's an exciting thing for at least East Tennessee and North Georgia to see that influx .

So I do think maybe the housing is not as dirt cheap as some people might think it is , but it's still pretty cheap . So one of the people that I interviewed and featured in the report is this gentleman named Nick Solheim works in a nonprofit in DC .

He and his wife bought a three acre spread in the Harbors Ferry , west Virginia , which you can commute in a couple of days a week and it was about $300,000 , I think , which he said it would have cost twice as much to buy in Virginia .

And Joel and I actually together visited Chilicati , ohio , about an hour from Columbus , a beautiful little small town there and it's a little too far away that people in Ohio wouldn't want to be making an hour plus commute every day into Columbus . But if you're going , you know , a couple of days a week it's probably okay .

And again , you could get a four bedroom house in the center of town for under $250,000 . And I saw I was looking at real estate listings and I'm seeing this like 5,000 square foot historic mansion that's like 600 K . I'm like this is amazing .

How much of a shift are we seeing in growth of educational quality in the region , both North and South Probably born North right , I would think , would be a problem .

So you're looking at places with very low educational attainment and my experience of small town America the people with degrees are often it's teachers , it's people like that . It's not knowledge you call it knowledge economy workers is understood . So that does heavily limit the ability of these communities to create I call it knowledge economy businesses .

Like high tech . There are some niche industries . We found a very cool app company in Marietta , ohio that makes software for iPads that helps people who are either nonverbal or autistic or have aphasia , who can't speak . It's a communications interface with them and that's very cool .

So there is some I don't want to poo poo it and there's definitely some high tech in these big cities . Pittsburgh has definitely got high educational attainment , but definitely we're looking at places that have very , very low educational attainment in most places and I don't think that there's been any material change in that in a while .

I know my county and a number of counties in our area have recently issued , or are considering issuing , moratoriums on sub-urbanized lots , so you can't have a lot with more than two houses on an acre because we're really afraid of both the land changing and costs going up . It's kind of a two pronged fear of cost as well as a real love of rural land .

You mentioned some things like maybe taxing non-homestead houses or things like that . What are your views on that concern ?

I do think you know one of the things I note is that in these places that have not seen much population growth and maybe even population decline , and they're not that large in terms of population , it doesn't take much incremental inflow of people with money to dramatically swing the real estate market .

This happened in Maine , you know , which had been sort of moribund for a long time . You know pandemic people move out there and you know prices in some towns went up 60% and it's a huge issue . And you also see that a lot of these places don't really have a home-building industry .

You know they haven't built any houses in forever , and so this idea , like I want to start building some houses . Like you see , this it's a big problem in a lot of rural America that there's just not a construction infrastructure to build things , and so that's a big , that's a challenge .

I think you can't just ramp , even if you said , okay , we're going to allow it . There are no developers who could develop like a big subdivision there .

I do think what I look at is , you know , what I see out in the West is a lot of times you had a lot of rich guys come in and buy up massive quantities of land and essentially just fence it off and said no trespassing , unless you , you're part of one of my private hunts that I charge billions of dollars for , you know .

Other ones are , you know , airbnbs . We're going to buy up these houses , we're going to turn all these things into airbnbs . Or I'm just going to have a vacation home here , I'm just going to have a vacation .

And what I would do is if I were going to look at policies , and this would have to be carefully thought through in terms of what it would be I'm not saying that this is exactly what to do but look at policies that limit out of town land ownership , short term occupancy , vacation homes , those things that don't apply to people who live there .

If somebody's living in a house or somebody's renting a house is where they live . That's one thing .

So , like one thing like the state of Michigan does and a very common I think it plays with a lot of vacation homes is just like a 50% homestead tax credit , which basically means property taxes are essentially double on people who aren't living in their houses , and so that's like something that's designed to make these out of town buyers pay a lot more .

And yeah , I do worry about this because Appalachia has been known for out of town land ownership .

Much of Central Appalachia was completely owned by all these out of town corporations like coal mining companies and things like that , or they controlled mineral rights under things like the Broad Form Deed in Kentucky , which we don't need to go into , which means that they really own the property , even if they didn't own the property .

And you see out West billionaires buying up all the land . I mean it's easy for me to imagine some of these billionaires just coming in and buying up tens of thousands of acres in Appalachia and just switching from corporate ownership to like billionaire ownership . That would not necessarily be good for the region .

Without a advanced infrastructure for health care , which of course involves the ability to build things right as well as having the knowledge workers in the health care industry to be there how is that going to happen ?

What are the things that really need to be put in place that can upgrade the infrastructure of areas of Appalachia that make it attractive to full time , long term residents ?

You know , one of the things that I did was I put together a map of essentially suburban , ex-urban areas of Appalachia that I thought would be the addressable geographic market for hybrid work people who had to commute to a big city , and it was all the counties that were sort of suburban or ex-urban counties in a metropolitan area of half a million or more .

Most of South Appalachia is in that zone , so you're within a couple counties probably of being able to get to a hospital if you need one . Whereas you get into West Virginia , you get into Eastern Kentucky parts of Virginia , you're very remote from a major city and so things like that become a little bit challenging . You go into Eastern Kentucky .

Nobody has cracked the code on how to get people to move into the frost belt in the Eastern US , and so the focus should be on the residents that you already have to some extent . Yes , you could try to do things for the people like very speculative things . To me it's sort of like the rural version of the creative class .

We're going to build all these art galleries to attract all these young millennials . I'm going to build all this healthcare to attract all these retirees . I think would fall into that kind of category .

I would be looking at rural healthcare as something that would certainly upgrade quality of life for the people who lived there , as well as potentially attracted others , but that was specifically infrastructure for retirees was not something that I looked at in the report .

I mean , by the way , maybe Southern Appalachia or slightly Southern Appalachia , but it gets cold there in the wintertime .

If you go to their downtown it's very nice , it's very lively , there are a lot of businesses , there are a lot of people there . I don't think there's a single real office building in Asheville and I was there during the week walking around , I didn't see a single person that looked like an office worker type .

It's all essentially tourism and other things of that nature , and so it's not like there are all these tech companies or things there . So I would say there's some manufacturing , there is some industry there . I'm not saying there's no business , but it's a city where it is kind of like a lifestyle destination much more .

It's sort of like what Joel , I think , would have referred to as a productive resort .

There's some interesting transportation museum downtown I enjoyed visiting and it's much less expensive . It's right about the same time but it's got the mountains , it's got the Blue Ridge Parkway , it's got all that stuff .

And I'm like well , roanoke people always ask me Aaron , what's a town that's like nobody knows about , nobody's discovered and could be the next great destination . And I said Roanoke Virginia might actually be one . Now , that doesn't mean that I'm predicting it's going to get hot , that I'm speculating in real estate there .

I don't own any real estate there but I'm like , wow , this is like a quality small city that's not too expensive . Has it been , you know , asheville ? Real estate prices have just gone to the roof . It's kind of crazy there .

But something that East Tennessee has done really well , that Asheville has done that Aaron is talking about , is tourism , and I know Tennessee's tourism continues to bring in so much of the state's revenue from Dollywood , gatlinburg . All of that and almost commercialization of the Appalachian identity , and I don't think that that's a bad thing .

I think Dollywood is peddling a pretty authentic version of Appalachia that has brought in a lot of revenue and a lot of jobs , and for some reason West Virginia and Eastern Kentucky , and even like Johnson City , haven't really done the same thing .

So it does seem like there's an opportunity to both preserve these towns and preserve the Appalachian identity and also turn that into some sort of touristic expedition . I think you mentioned a couple of examples , aaron , of endeavors to bring in more anything whitewater rafting money , for instance . There's a lot of opportunities for that .

One if things are getting hotter , the fact that the Appalachia is further has a higher elevation might make it more pleasant place to retire , rather to retire to Appalachia in Tennessee than to retire in central Florida if you're worried about the heat and other issues .

The other part , of course , is that , depending on how we deal with climate change , it would seem to me that it would be a great opportunity for the natural gas industry if , as it was the case before , people saw natural gas as a winner in terms of green energy .

Now that the policy is against it , you could conceivably see the destruction of the American natural gas industry . That would have a big impact . How do you think the , particularly assuming that the current regime is reelected and these climate policies continue to happen ? Is there any impact ? That may be some good , some bad for Appalachia .

If you look at a Midwestern state , all of the top outmigration destinations are Florida , arizona . Some places are more Arizona , some places are more Florida . Some of these places in the upper South or the Mid-South are actually drawing from Florida .

I don't know if it's the weather or it's the price or it's the culture in Florida , but there's already a significant established flow of people moving North out of places like Florida into that . I could definitely see climate playing into that . When it comes to the green agenda , we'll just have to see what happens with regards to natural gas .

I have no predictions there .

I'm not an energy expert by any means and don't pretend to be . As far as migrating to those places , I think that Tennessee and the rest of Appalachia is a pretty wonderful place . It's not near the coasts where you see natural disasters . Pretty minimal wildfire issues To extent that any of those things are real threats are just now becoming cultural fears .

I think that places that are insulated from natural disasters that are potentially climate linked are going to become more and more popular .

When people talk about remote work , they often talk about attracting like Facebook remote employee or these hybrid workers who are working from home it's somebody who's not in your community already . There's another type of remote work , which is about connecting people who are already in your community to higher wage remote work opportunities .

There were a couple of companies in Appalachia . One was called Central App , another was called Octana . I feature them . They basically set themselves up as brokers where they find people in Appalachia who are talented but have been overlooked . They kind of vet them and identify them and they train them in market relevant skills Salesforce technology in both cases .

Then they sort of use them as a staffing for sort of an IT staffing scenario . It's been extremely beneficial to those people Life changing results for some of this . One guy got hired by his client at a six-figure job in Hazard Kentucky . How many six-figure jobs are there in Hazard Kentucky ? Not very many .

One of the people who worked for Octana had been a former coal miner who had previously been homeless . A lot of the people who worked for Central App are stay-at-home moms who want a part-time job and things like that .

These are sort of small scale at present , but I really think this concept of creating these entities that can serve as brokers to connect local existing residents to high-value economic opportunity outside is something I would be looking to develop .

I think one of my favorite lifelong things that happened when I was young that continues to exist today is free community college in Tennessee and technical training .

I think that that is still seeing the implications in Tennessee , but if Kentucky or West Virginia or North Carolina did something similar , the reason to leave for getting education would go great down and the amount of people who want to stay in Appalachia and bring their skills to Appalachia would go up .

I think that the more people who stay in Appalachia in the first place would limit the ongoing brain drain in the region and help the people who are born there continue to use their gifts and skills and talents to contribute to Abolachian region .

That , combined with this remote work opportunity within the region as well , I think would be a real recipe for Abolachian community .