METRO BUSINESSES OUTPERFORMING RURAL COUNTERPARTS

JEFFERSON CITY, Mo. -- Small rural businesses in Missouri haven't been doing as well as they could have been.

"Many small companies tell me they're having a hard time right now," said J.D. Faulkner, owner of McCaul Tire and Appliance in Kennett, Mo. "There are a great number of obstacles facing all of us."

Those obstacles range from farm customers having a tough time economically to the growth of superstores that don't have to worry about extending credit to customers to finding and keeping employees, Faulkner said.

He isn't alone in his concern.

A survey by the Center for the Study of Rural America in Kansas City reports that not only has small businesses' performance lagged behind their metropolitan counterparts, job growth for small rural firms has been mainly in lower-paying industries.

In Missouri, where small businesses are characterized as having 20 employees or fewer, new job growth over the past decade reached a record-setting 49 percent. Job growth in industries with 500 or more employees reached only 23.5 percent.

But a significant part of new job growth occurred in minimum-wage job slots -- fast-food workers, waitresses and customer-service workers at supermarkets. These positions have created what amounted to a worker shortage in both rural and urban areas, where older, more experienced employees were promoted to higher-level jobs.

During the 1990s, small metropolitan firms generally performed better than small rural firms. The number of small outstate businesses was virtually unchanged from 1990 to 1998, with their employment rising only 2.8 percent. In metro areas nationwide, more than half a million small firms were established from 1990 to 1998, and their employment surged by 11.3 percent.

Another difference is salaries. In 1998 the average salary for urban workers was $29,000, nearly 50 percent higher than the average in small rural businesses.

Offer more than jobs

The presence of small firms in high-growth rural regions and industries offers these communities more than jobs -- they can be a valuable resource for community leaders and policymakers. Surveys have shown that small firms relocate less often than larger firms do. They offer workers a wider range of job responsibilities, and they typically fill leadership roles in the community. Small firms are also a key source of the creativity and ingenuity that leads to future high-growth industries.

The Center for the Study of Rural America has launched a series of conferences and roundtables to determine how community leaders and policymakers can encourage small business in rural Missouri. Participants at these conferences have identified three major challenges -- infrastructure, labor and capital.

Improving infrastructure, such as roads and schools, while boosting human capital and expanding the menu of capital providers are three ways rural areas could foster small business expansion in many communities around the state.

The center warns that much of the rural infrastructure is lacking or deteriorating, tying many small businesses to traditional products and shrinking local markets. The study recommends focusing on small-business problems to expand job rolls and enhance worker skills, thereby boosting local tax receipts.