It's Not Quite Business as Usual

Quarter 3, 1998
by Jane Katz

Stand on the rocky coast of Maine, or on a mountaintop in Vermont or New Hampshire, and the spectacular beauty of New England's rural landscape stretches as far as the eye can see — miles and miles of coast, field, or forest, unspoiled by dense urban living patterns.

But scattered throughout the countryside are the homes of more than two and one-half million New Englanders. All told, about 20 percent of the region's people live outside its major metropolitan areas, and the share is much higher in Vermont (77 percent), Maine (64 percent), and New Hampshire (44 percent).

For some, rural New England is simply a place to retire; for others, it's a great spot for a second home, a country getaway for weekends and holidays. But the rest must earn a living far removed from economic opportunities provided by urban centers. In the past, this meant working in the natural resource sectors of agriculture, fishing, or forestry. But agricultural employment has been declining for more than a century, and it now accounts for less than 2 percent of all New England's jobs. Recent environmental problems have reduced local fishing fleets. And, in the face of severe global competition, regional employment in paper and lumber production has been declining for thirty years. The shuttering of manufacturing plants that once produced shoes, textiles, and furniture has only amplified the distress. And jobs in these traditional sectors are probably never coming back.

Thus, the familiar story of rural decline: income growth stagnates; lack of opportunity results in a long-term exodus to larger metropolitan communities, especially of younger and more educated residents. Rural communities, weakened by out-migration and job loss, slowly wither on the vine.

Once started, the process tends to perpetuate itself. Unable to collect sufficient tax revenue, rural communities may find they cannot make the desired level of investment in local services, infrastructure, and schools. So when firms seek skilled workers and town amenities, they decide to locate elsewhere, taking jobs and tax dollars with them. This cycle has been particularly acute in the more remote areas — the far northern corners of Maine, Vermont, and New Hampshire.

But, for many New Englanders, the attractions of living off the beaten path are considerable. Close-knit communities, easy access to outdoor activities, and the lure of open space all weave their spell; as in the children's tale, the country mouse is just as attached to rural life as his relatives are to the big city.

But, if there are to be jobs for the country mouse, businesses in traditional rural industries must change their tactics, and new firms that are connected to growing sectors of the national economy will need to sprout and flourish. At a time when the premium paid to educated workers is high, unless rural firms can create skilled jobs with chances for advancement, the gap in opportunities between metro and nonmetro areas will grow.

THE RURAL DIFFERENCE

Much of the appeal of living in rural communities comes from the fact that they are small, sparsely settled, and isolated. But these same qualities can make it difficult to run a successful business. Many large operations require access to an extensive work force or one with specialized skills. Isolation from suppliers and customers can make it difficult to transmit information and merchandise. In many industries, especially in high tech, it is precisely the clustering of similar companies — along with suppliers and other supporting firms — that provides the diffusion of information and networks of specialized workers and products that the industry needs to flourish.

Rural winters create additional obstacles. Most building construction can only proceed at considerable extra expense. And when there's a problem with utilities, "You're at the end of the line." After last winter's ice storm, Maine firms in some isolated areas lost power for three weeks.

Thus, much business activity in nonmetro New England focuses on providing goods and services to local residents. The largest employers are health providers, such as hospitals, nursing facilities, doctors' clinics, and home health care, at 12 percent of business employment. Other firms that provide the basics — grocery stores, car dealers, department stores, and commercial banks — are also significant. Notably lower on the list are certain higher-paying businesses such as life insurance, engineering and architectural firms, and management and public relations, all of which rank high in metro New England.

Manufacturing jobs, particularly in paper, lumber and wood products, and shipbuilding, are still important. But manufacturing employment has been declining for decades, down from 200,000 nonmetro jobs in 1977 to 160,000 in 1995. Although other sectors, especially wholesale and retail trade and services, have taken up the slack, rural employment growth has been sluggish overall. And many of the new jobs offer low pay and part-time or seasonal work.

Some rural residents survive by patching together several jobs. Others depend on self-employment. The difficulties are particularly evident in the most rural parts of the most rural states. For example, median family income in nonmetro Vermont was only about 75 percent of that in metro Burlington, according to the 1990 Census. But in far north Essex County, the ratio was even lower, at 60 percent. In Maine, where the state unemployment rate averaged 5.4 percent in 1997, rates in rural Somerset and Franklin Counties averaged above 9 percent. And, although New Hampshire's rural areas have been growing relatively quickly, in Coos County, 11.7 percent of the people lived in poverty in 1993; the statewide figure was 8.6 percent.

Some of this reflects differences in education. For example, only 16 percent of people in nonmetro Maine have a college degree or higher, as compared to 24 percent in metro Maine. But studies suggest that workers earn more in cities, even after accounting for higher education levels. Thus, especially for young, single people, the lure of the city can be tough to ignore. Yet, the future of rural New England depends on creating jobs that encourage them to stay and attract others might wish to migrate from more crowded territory.

SHRINKING DISTANCE

Today, even the far corners of New England are less isolated than they used to be. Decades of road and airport development allow goods and people to move cheaply and easily. Telephone lines and computers have reduced the effective distance of rural areas from everywhere else. And Federal Express is available throughout most of the region. Land and old buildings can often be had at bargain prices, as compared with metro areas. Together with modern communications and reasonable labor costs, inexpensive rural space has proved advantageous for setting up catalog distribution and call centers, and telemarketing centers for financial services and other companies.

Garnet Hill, in Franconia, New Hampshire, employs 206 workers in its upscale linens and towels catalog business (230 in peak season). DM Management, although headquartered in Hingham, Massachusetts, is consolidating operations for its women's clothing catalogs — J. Jill and Nicole Summers — in a 450,000 square foot facility in Tilton, New Hampshire. In rural Maine, financial services companies, including MBNA in Camden and Belfast, ICT Group in Oxford and Pittsfield, and Sitel Corporation in Limestone, have hired about 3,500 people to sell credit cards over the phone. University of Southern Maine economist Charles Colgan likens these operations to the factories and mills that used to dot New England's rural landscape. "They are taking the place of traditional manufacturing firms, providing low- to medium-skilled jobs in the smaller rural towns where shoes and textiles left."

Some, like Envisionet, in Winthrop, Maine, are becoming more sophisticated in what they offer to customers and in the skills they require from staff.

But whether such companies will be able to offer the opportunities available in cities is unclear. So far, there are only scattered examples of cutting-edge firms in rural areas: a manufacturer of carbon fiber bicycles in Van Buren, Maine; a fifteen-person design software firm in Southwest Harbor. A few explicitly play down their location, worried that it will scare off customers. And Colgan doesn't think that rural areas will ever have the scale to support a genuine high-tech business cluster. "To have sufficient scale would fundamentally alter the character of the landscape and area," Colgan says. It would remake the rural area into a metro area.

Others speculate that if skilled jobs won't come to rural areas, perhaps rural workers can get to skilled jobs — through telecommuting and local telecenters. They hope that sufficient bandwidth and phone lines will allow writers, designers, stockbrokers, maybe even business managers, to live in rural areas but maintain connections to a livelihood elsewhere. But studies suggest that telecommuting is still more common in metro areas, where there are bigger payoffs in reduced travel time and pollution. So whether telecommuting can fundamentally alter rural opportunities remains to be seen. Colgan is dubious. "One guy living in the woods with a computer does not transform the economy."

SELLING RURAL NEW ENGLAND

Another source of job growth is the enduring appeal of rural New England's distinctive character and history. Enterprising local businesses, especially in the natural resources sectors, have retooled their activities to serve this market. Many of their wares — log homes, environmentally certified hardwood floors, bottled water, gourmet foods — are aimed at high-end consumers and marketed using rural New England as a selling point.

Tourism has been another avenue for growth. Hotels account for almost 3 percent of nonmetro business employment. Vermont logs the third-largest number of annual "skier days" after Colorado and California. And "heritage tourism," in which visitors come for a taste of local culture and history, has desirable demographics, and is growing at a fast clip.

So firms have become increasingly sophisticated at selling the virtues of their particular neck of the woods. Berlin, New Hampshire tries to capitalize on its forestry heritage and the fact that it is home to the last Russian Orthodox Church built by the Tsar. Balsams Grand Resort owner Steve Barba and others created the Great North Woods Association in a deliberate attempt to forge an identity separate from the White Mountains. Says Barba, "We want to attract people who like to do what we do: hunting, fishing, snowmobiling. We are just trying to sell ourselves."

And there are links between tourism and other industries, says Ross Gittell, of the University of New Hampshire. The restaurants and amenities that make an area attractive to tourists also make it attractive to business; MBNA chose Camden partly because its president had summertime ties to the area. Yet, Gittell worries that tourism's sensitivity to cyclical and seasonal forces makes for a precarious economic foundation. This past summer, for example, the low value of the Canadian dollar hammered tourism in northern New Hampshire by enticing Americans into Canada and discouraging Canadians from traveling south.

But Gittell also sees a natural pairing of the region's hospitality industry and call centers. Both are customer service jobs and require similar skills. So workers might combine a hotel or restaurant job in summer with a catalog center or telemarketing job in winter, for year-round employment. And perhaps some of these companies might offer the chance for advancement.

REVIVAL ON THE HORIZON?

Population analysts are projecting increased migration into nonmetro areas. Much of this is simply continued urban sprawl into farther-out suburbs. Some comes from a modest influx of retirees (especially in Waldo and Lincoln Counties in Maine). And some is the favorable effects of the recent economic expansion reaching — at long last — into rural areas. So, is New England undergoing a genuine rural renaissance? It is just too soon to tell.While traditional problems of isolation and low educational attainment remain, advances in electronics and telecommunications will continue to reduce rural communities' effective distance. And firms that are able to improve workers' skills (New England Electric Wire; Envisionet) or put together several businesses (Loon Country's Greg Cyr) are most likely to survive.

Metro areas will always have the edge in sheer numbers. They offer a multiplicity of employers — a form of insurance against unemployment and an important factor for two-career couples. And city mice will always prefer the diversity of people and activities which make up urban life. But for country mice who prefer the country life, a thriving rural community will always make the best home.

TOTALLY WIRED
High-tech methods for high-tech training

New England Electric Wire, in Lisbon, New Hampshire, has been manufacturing products for high-tech since 1898. The firm first supplied silk- and cotton-wrapped copper wire to Western Electric for use in telephones. Over the years, it expanded its capabilities to include braiding, wire drawing, stranding, and plastic extrusion. And, at a time when the region has lost manufacturing jobs, New England Electric Wire has managed slow but steady growth by constantly adapting to the changing needs of its 1,200 customers.

Today, the company specializes in making flexible, single, and multiconductor cables used in robotics, transformers, and medical electronics. It produces thousands of items, almost all of which are manufactured specifically for the user. And it has partnered with engineering faculty at the University of New Hampshire to automate some of its manufacturing.

Worker education remains a key concern. So, together with Bell Atlantic, the firm has wired the local high school to create a "distance learning center," where employees and community members can take math and science courses via interactive TV. But company president Wendell Jesseman worries about more advanced training. "I would like our engineers to be able to take MBAor graduate-level technical courses, but with the university an hour away, it's a long drive."

THE NATURAL RESOURCES SECTORS RETOOL
New ways to sell traditional New England products

You can't get much more out of the way than Portage, Maine, about 150 miles north of Bangor. But this is where Greg Cyr grew up, son of a logger; and when he returned after college in 1973, he became a logger too. Cyr's business depended on contracts with large landowners to cut their trees, do basic processing, and then deliver the wood to the next company in the production chain — softwoods to paper mills (or, if higher-quality, to mills that made housing construction materials), birch to dowel mills for popsicle sticks and clothespins, and maple to sawmills for furniture. But over the years, margins in the business dropped, making it a less and less profitable way to earn a living and threatening the livelihood of the 24 workers he employed.

Nancy Raye, of Eastport, Maine, faced a similar dilemma. A family business started around 1900 by her grandfather had prospered by making stone ground mustard, which it stored in large barrels and sold to sardine companies who packed their fish in it. But over the years, the number of sardine companies in the area dropped from more than 20 to 2; and, by the time her dad retired in 1991, Raye's Mustard Mill, one of only two companies in the world to produce mustard this way, looked doomed.

Today, both Greg Cyr and Raye's Mustard have refocused their efforts. They both sell niche consumer products with a New England flair, and both are still in business.

Cyr and his business partners have become Aroostook County's most energetic economic development force. In 1994, after noticing that kids at the movie theater were paying a dollar for designer water, Cyr and a friend started Loon Country to bottle and sell local spring water. Loon Country is already on the shelves of Shaws Supermarket and Cyr is negotiating with Star Market. In a second new venture, Cyr is partnering with Seven Islands Land Corporation, owner of one million acres of land, to build a sawmill and manufacturing facility that will make "environmentally certified" hardwood flooring. When it opens, the sawmill expects to employ 40 people per shift, the floor processing plant another 60 or 70.

Raye revived her family's mustard company by offering specialty mustards, such as spicy horseradish mustard and brown ginger mustard ($2.75 for a four-ounce jar). She set up a shop on the premises — which carries other Maine products along with mustard — an online ordering site with a link that helps international customers convert currency, and a museum where you can tour the facility. An attractive, full-color brochure, in both French and English, is designed to reach customers from Canada.

Like many modern rural entrepreneurs, both Cyr and Raye have experience outside their local areas: They each did a stint away at college, and Raye worked in California and Florida as a business consultant before returning to run the mustard mill. But both lament their lack of marketing experience (and of local marketing talent) and worry that it will hold back their growth. "Loggers know about making things, so setting up Loon Country's bottling facility was easy," said Cyr. "But what did I know about shelf space? I had to wing it." And Raye has considered opening a store in a more populous spot as a way to expand business. Eastport is a two-hour drive from Bar Harbor: "Most tourists just don't get up that far."

INFORMATION, PLEASE?
Moving beyond customer service

You are having trouble with your Prodigy CD-ROM. Frustrated, you dial the 800 help line. But instead of reaching White Plains, New York, your call is quickly routed through state-of-the-art communications equipment to Winthrop, Maine. And the person who answers the phone is employed not by Prodigy, but by Envisionet Technical Support Partners.

Envisionet is the creation of Brunswick-born Heather Blease. Trained as an electrical engineer, Blease started out in design engineering at Digital Equipment Corp., first in Tewksbury, Massachusetts, then in Augusta, Maine. Eventually she became manager of tech support, and successfully bid against outsiders to keep work in-house. So when DEC decided to sell the Augusta facility in 1994, Blease banked on her experience. She sold her house, moved her young family into an apartment, and started Envisionet. Her first contract was with old employer, Digital.

Today, Envisionet employs 200 people providing tech support to software companies and Internet service providers. Entry-level positions start at $10 an hour with benefits, and many of its employees have been retrained through programs at the local technical college. Blease believes that Envisionet's rural location has provided a loyal work force. "Tech support is a service business and attrition is a big problem in maintaining good service," she notes. While the industry attrition rate is 30 to 40 percent, turnover at Envisionet has been less than 8 percent a year.

But Blease is looking to expand Envisionet beyond a call center and into a more sophisticated information company. Her goal is to take the intelligence the firm gleans from callers and feed it back to clients, so they can use the data to improve their products, plan upgrades, and retain customers. She is also planning a new 400-seat facility and would like to open up operations in Europe and on the West Coast: "We want to compete with the big guys."

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