Many millennials, it seems, are content to pay sky-high rents while working low-level jobs in places like New York City just so they can eat their avocado toast, meet their friends for bottomless mimosas, and enjoy other compelling cultural attractions (like the nearly limitless dating pool).
But as young people struggle with an aggregate $1.4 trillion in student debt – not to mention tepid wages, high rents and a range of other factors that are forcing them to put off family formation and home ownership – rural areas are offering to help newcomers pay down their debts and buy a home. In exchange, the recipients need to settle in midwestern towns where jobs are plentiful, but workers are rare.
Indeed, the demand for college-educated workers in some parts of the midwest is so acute, many towns and civic organizations have started offering “reverse scholarships” to entice young people to relocate there.
In a recent story, the Wall Street Journal profiled several young people – many of them couples – who’ve used money from these grants to pay the down payment on a house or to finance their relocation back to the towns where they grew up.
The “reverse scholarships” vary in size and scope based on location. Some are specifically intended to pay off student loan debt. Others can be used to help buy a home. The sizes range from around $5,000 to as much as $15,000. What’s more, these grants are typically being offered in towns where labor shortages have been driving up wages.
One economist who spoke with WSJ compared the payments to “a modern day Homestead Act.”
Mike Allgrunn, an economist at the University of South Dakota, calls the financial incentives “a modern-day Homestead Act,” referring to the 1862 law offering public land to settlers willing to move West. A similar deal now stands in Marne, Iowa, where free parcels are available to people who move there.
Some of the relocation programs show promise, but it is a tall order. The pull of opportunity and amenities in large cities is hard to resist.
“The mere fact that they’re doing what they’re doing highlights the headwinds they are facing,” said Enrico Moretti, an economist at the University of California, Berkeley. “There is no one in San Francisco trying to pay people to move here.”
But even after the abysmal March jobs report, the official unemployment rate still stands at 4.1%, and the Fed believes that number will drop to 3.6% by next year.
For many of these towns, attracting a reliable supply of workers is vital to their long-term economic survival. Small businesses rank labor shortages as their No. 1 business concern, according to the National Federation of Independent Business.
The fear is that if local employers can’t find workers, they could move to a more hospitable environment.
But if nothing else, the fact that these grants exist shows just how many sacrifices some young people will make to live in hip urban centers like New York. For many towns, this tendency has turned low unemployment into a burden.
“Low unemployment rates, everyone thinks of that as a good thing and it is, but there’s a downside,” Mr. Allgrunn said. “Eventually you run out of people to do the work.”
In Hamilton, where state statistics who more than 5,000 jobs remain unfilled, workers with degrees in the engineering, technology, science or arts can receive a $5,000 grant to pay down their student loans if they agree to stay in the area for two years.
While that might not seem like much, for many young workers, it makes all the difference.
So far, a dozen people have applied for the grants, though they all live and work in the region. Kathryn Keefe, 24, works part time as an environmental educator for the city of Fairfield, Ohio, and part time at the Cincinnati Zoo. She pays $200 a month for student loans.
“For us, it’s a financial thing,” said Ms. Keefe, of Forest Park, Ohio, about a 20-minute drive from Hamilton. “It really does depend on the scholarship or not because there are other places in the area that are cheaper to live.”
So far, Hamilton’s grants have mostly been awarded to young people who grew up in the area, and are now returning home to start a family. But for the program to ultimately be successful, it must eventually draw in more outsiders, the vice president of one community organization said.
Katie Braswell, the vice president of the Hamilton Community Foundation, said the scholarships should bring more local residents to downtown but acknowledged it would eventually need to draw more out-of-towners. “I’m not real sure yet how this is going to work out,” she said.
To be sure, small businesses aren’t the only employers in need of workers. Barclays opened a customer service branch in Hamilton a few years ago that is growing rapidly.
This only serves to emphasize the fact that local businesses must help contribute to making the town more hospitable to young people – perhaps by supporting the development of a more-vibrant down town.
Barclays opened a customer service center in Hamilton that has grown from 48 employees when it opened in 2016 to more than 500. They need more, starting at $15 an hour. The company has opened part-time slots to help alleviate the worker shortage, said spokesman Matt Fields. He hopes the scholarship program extends the city a “halo effect from a hiring perspective.”
Unless Hamilton can attract new blood, Mr. Lippert said, its future is grim. Since 2010, local employers have added more than 1,300 jobs, but Hamilton’s prime working-age population has fallen by 2,800.
Grant County Indiana is another area that is experimenting with grants to young workers. The county’s economic development office is offering $5,000 toward a home for people moving to the area – though they must have a job or college degree. However, the money must be repaid if the recipient leaves town within 5 years. So far, about 100 people have used the money to buy houses.
And the county’s Chamber of Commerce is looking to expand on the program by offering a $9,000 to help repay student loans.
Still, some towns are finding that the grants aren’t enough. North Platte, Nebraska launched a program last year through the Chamber of Commerce, but so far, only two people have taken the money.
For many, that should come as a surprise. After all, seven million working-age men are mysteriously missing from the US workforce.
But perhaps what this really shows is that maybe financial enticements aren’t the answer. After all, with the midwest still in the grip of a deadly opioid epidemic, some companies have had more success with another strategy: Eliminating drug tests.
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