The promise and potential of rural America

There is no single definition of “rural America.” It comprises agricultural hubs, manufacturing centers, and fast-growing regions—each a regional archetype with its own distinct challenges and opportunities. In this episode of The McKinsey Podcast, Senior Partner Nora Gardner joins Global Editorial Director Lucia Rahilly to discuss these archetypes and new research that can help leaders better understand rural communities.

In our second segment, McKinsey Partner Sarah Tucker-Ray speaks with Editorial Director Roberta Fusaro about how rural K–12 education can equip students with the skills needed for advanced manufacturing—and why partnerships with industry matter for the future of rural America.

The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.

The following transcript has been edited for clarity and length.

What is ‘rural America’?

Lucia Rahilly: Many folks use both urban and rural very broadly—as placeholders for certain characteristics or stereotypes. But in fact, rural America is huge, and it’s super heterogeneous. So, let’s start with some context. Tell us, why are you interested in rural America?

Nora Gardner: It’s very personal for me. I was born in Lewis County, Tennessee. It’s a combination of farmland, rolling hills, and wooded areas. Just gorgeous natural beauty, four seasons of the year. It makes you want to be outside all the time. I grew up in rural North Carolina. And while I live in a city now, in Washington, DC, just being able to shine a light on and understand rural in a better way was part of my motivation.

Lucia Rahilly: What do we mean by rural America when we talk about it in this research?

Nora Gardner: Rural America is America. There are rural places in all 50 states, in all territories of the US. One in seven Americans, almost 50 million people, live in rural America. And from a geographic point of view, it’s over 70 percent of the area of America and contributes to about 10 percent of the economy, more than $2 trillion. It’s large, important, and dynamic, any way you slice it.

Lucia Rahilly: And what’s the racial and ethnic breakdown of rural America?

Nora Gardner: It’s diverse, and it’s gradually becoming more diverse over time. Currently, about 77 percent of the people living in rural America are White. That’s down from 80 percent ten-plus years ago. During the same period, we see small increases in the Hispanic population, now 9 percent, up from 7 percent, and in the other and mixed-race category, now 5 percent, up from 4 percent. But the proportion of Black Americans in rural America has stayed steady at around 8 percent, and Asians make up 1 percent.

Lucia Rahilly: Nora, talk to us about the industries that drive rural America’s economy.

Nora Gardner: You may identify rural with agriculture and farming. Of course, that is an important driver of the economy, but in terms of employment, it’s only 7 percent in rural America. The top three industries are the same as those in the broader economy.

The number-one industry is government at 18 percent, then manufacturing at 13 percent, and healthcare is a major employer at 11 percent. We also see retail and hospitality being very important in terms of employment. The thing that distinguishes industries and employment in rural America versus urban America is that rural tends to be a little more specialized.

These economies tend to rely on and specialize in so-called tradable sectors. This means sectors making goods and services that can be sold to others, so think agriculture, manufacturing, mining, et cetera. A lot of the growth in nonrural urban America over the past few decades has been in high-growth sectors like information technology and professional services, which are less prominent in rural economies.

Six types of ‘rural’

Lucia Rahilly: The research talks about six community archetypes. Do you want to walk us through those archetypes and what they mean here?

Nora Gardner: Three of them are defined by the primary industry they have in common. The first archetype represents agricultural powerhouses. These are places where agriculture makes up more than 20 percent of the GDP. An example we highlight in the report is Osceola County in Iowa. It has more than 6,000 people with high labor force participation. Think of soybean, corn, and livestock production.

The second represents manufacturing workshops. These are counties where manufacturing is more than 30 percent of the GDP. Within manufacturing workshops, there are two subtypes. Think of the traditional Rust Belt—these are what we call deindustrializing areas and counties. Then there are what we call reshoring communities and counties, largely in the South. Think Battery Belt. And we profile and highlight places like Coffee County, Alabama, which makes a lot of parts for the auto industry.

The third refers to resource-rich regions. These are places where more than 25 percent of the GDP is related to resource extraction. This can be mining, quarrying, oil and gas. In the report, we highlight Leslie County, Kentucky, which is a coal town in eastern Kentucky, in Appalachia.

Then we’ve got another set of archetypes that are defined by migration patterns. We define a set of counties as migration magnets. These are places where there’s been consistent in-migration for years, places that are driven by hospitality or tourism. Sometimes, they have the advantage of seeing growth based on being not too far from fast-growing areas.

On the flip side of the migration coin, we also see regions that have consistently seen out-migration. Many of these are in the archetype we call remote regions. The median household income here is $35,000 a year, and labor force participation is below 50 percent.

Our final archetype is Middle America. These are less specialized, more diverse, medium-size economies that are largely doing well and thriving. We call out Livingston County, in central Illinois. It is home to two large employers: Caterpillar, which makes parts for tractors but also for data centers; and Interlake Mecalux, which does warehouse and logistics automation. You start to get a sense of the diversity of the economy, the tech-enabled growth and momentum going on in some of these places.

Lucia Rahilly: You talked about, for example, the Battery Belt. I’m now thinking of manufacturing—given the changing dynamics of tariffs and trade, tell us a little bit more about what you think might be poised to happen in these areas and how they might change.

Nora Gardner: We see investments being announced in advanced manufacturing, so what you want to think about are semiconductors, as well as cleantech and biotechnology in places like the Battery Belt. There have been over $1 trillion in announced projects, and 63 percent of those trillion dollars’ worth of projects are within 15 miles of rural communities and counties. So there are interesting opportunities for public–private partnerships and for building new facilities. These are not your father or grandfather or grandmother’s factories; they are tech-enabled and have clean environments.

We also need workers who are ready quickly to work in those factories. We released a companion report on K–12 and manufacturing, and how there’s a real opportunity in rural areas to get workers ready for high-paying, fantastic jobs right in their backyard.

Shaping the future of rural communities

Lucia Rahilly:  Yes, we’ll hear from Sarah Tucker-Ray about that very thing after our chat. So help us bring to life what makes a rural area a migration magnet.

Nora Gardner: One thing we looked at in the report was, “How are they providing a great place for residents?” But we also looked at things like economic mobility, and we defined that as the capacity for an individual to do better economically than their parents.

What was interesting is that agricultural powerhouses led on nearly all the measures of well-being among our rural archetypes. They had lower rates of poverty, higher average incomes, lower unemployment, and they reported high mental well-being as well.

On the flip side, remote regions consistently ranked near the bottom. They face several challenges, including higher rates of poverty, at around 20 percent, higher unemployment, and lower labor force participation. They have a life expectancy of only near 75 years and poor health outcomes, both physical and mental.

Manufacturing workshops demonstrated the highest level of upward mobility, and all our archetypes in rural areas, for middle income, experienced greater economic mobility relative to the entire US or their urban counterparts.

Lucia Rahilly: That is surprising.

Nora Gardner: Yes, you hear a lot about inequality and see low-income levels, but rural America is a place where upward mobility for middle income is still possible. And that’s because these are great places to live and thrive. They can have a lower cost of living, and you’re outside a lot, so you can have nice mental well-being.

Lucia Rahilly: We talked a little bit about education and talent development in areas where there will be increased manufacturing investment, for example. What more needs to happen to maximize the opportunities to unlock rural America’s potential?

Nora Gardner: In the research, we put forward six strategies. They focus on three areas of investment: the first being businesses and anchor institutions, the second being workers themselves, and the third being more basic needs.

These intersect with the archetypes in the sense that if there is an industry specialization, investing in those anchor institutions, businesses, or certifications for workers in those areas is a real winning strategy to help unlock additional growth and investment.

In some of those archetypes where outcomes are less positive—in particular, where there are greater gaps, say, in healthcare, for example—that’s where strategies around trying to fulfill those basic needs are important.

Lucia Rahilly: Any thoughts on how AI and the disruption it represents to the labor force will affect rural communities?

Nora Gardner: That’s a good question. Our colleagues at the McKinsey Global Institute looked at the automation potential of jobs, and we see AI as an accelerant of that automation. What’s unique about AI and gen AI is that disruptions are often more profound for white-collar work, desk work, information work, et cetera.

When I was talking about the distinction between where rural specializes versus where urban specializes, rural has been more specialized in slower-growth tradable sectors. Those are, in general, being less disrupted, at least early on, by AI.

You still need an engineer. You still need the real work to be done. In rural areas, we’re seeing more tech enablement and new tech-forward manufacturing, and less wholesale replacement or disruption of roles and jobs. Again, I think it’s a segment where we’d point to opportunity in rural America.

Lucia Rahilly: I find this such an interesting topic in so many ways, because it’s so at the fore of the media, and it’s so much a part of the political discourse right now on both sides.

Nora Gardner: What’s so interesting is that on the one hand, obviously, these dynamics and demographics have been important in the political sphere. On the other hand, helping these communities be better and thrive completely transcends politics. It’s another place where I think we tend to oversimplify as Black and White, and red and blue.

But there’s so much more nuance when you look one level deeper. At the end of the day, these are communities, they’re bound to one another, and they’re trying to make their communities as good as they can be together. These are wonderful places, and rural America is America. It’s been interesting to me how the reality is quite positive, constructive, and really nonpolitical.

Lucia Rahilly: It also feels possible that the talent landscape is in such an upheaval and organizations need talent, and all of us need our capabilities to be developed in these new and emerging areas. Is there a possibility that, for example, hyperscale investment in rural communities to advance capabilities in AI and so forth could help these communities leapfrog a bit in certain areas?

Nora Gardner: I do think it’s possible, and it is a place where we will see real human development and skill development. This is where we’re going to figure out how to work together with the agents and the bots to make things happen. And yes, we may see some leapfrog opportunities, but it’ll go to places that help support skill development and get to practical jobs that work quickly.

The upheaval point and the sort of scrambling of talent market is the challenge. I feel like those who are being educated now will be channeled in a good direction. Those of us who’ve been in the workforce for some time and have some new tricks to learn may need support to think about what that is and what it will be.

The thing that’s hard, particularly in larger areas, is that workforce development is a very local game. In large, diverse economies with many skill providers and many employers, and a so-called competition for talent, you get both collective action problems and competitive dynamics that aren’t particularly helpful. It’s hard to think about how to solve it in a nationwide sense because the incentives aren’t aligned across every industry and every skill and need, et cetera. Which is why I think in rural communities that are anchored in a particular industry, what may have been a risk or vulnerability in the past is now a strength, and it shows the way forward on some of this workforce development because there’s a real need.

It’s clearer which skills are needed. It’s clearer where the jobs are going to be. When you’re looking at that on a national patchwork or even in just a large urban-suburban economy, it’s hard to make that market work.

Strategies to unlock rural growth

Lucia Rahilly: OK, suppose I’m a business leader or a nonprofit leader in a civic or educational organization. You’re making a compelling case for rural, but what do I do next? How should I think about approaching and acting on this opportunity?

Nora Gardner: We put forward the six strategies. When this works well, all stakeholders are moving in the same direction. There are so many parts to play here. There’s skilling and upskilling. There’s a provision for basic needs. There’s giving fuel for entrepreneurs. There’s seed funding. There’s making large investments and accelerating those. There’s room for philanthropy, community organizations, et cetera. When this works best, there’s an intersection of the archetype and strategies.

Let’s take, for example, how to stimulate business activity and businesses. For those archetypes, say, an agricultural powerhouse or a manufacturing workshop, you want to think about how to invest in local institutions and how to unleash local business communities. In the report, we highlight the example of the Center on Rural Innovation and their efforts in Independence, Oregon. The small town in Oregon is very tech forward. They put together a tech innovation strategy, but it wasn’t tech for tech’s sake. It was centered around agriculture, which drives the economy in Independence. What they did was a whole host of actions—create coworking spaces, organize agtech [agriculture technology] meetups, grant opportunities, provide seed funding for companies, form public–private partnerships, and attract community partners. You then start to get real momentum. The key to that is a center focused on a strategy but also matching it up with a special sauce, which in Independence is the agriculture community.

Lucia Rahilly: That’s a great example, Nora. Last question: What do you see as a realistic vision for the future of rural America, assuming some of these tailored strategies and partnerships are successfully implemented, and on what timeline?

Nora Gardner: The opportunity in rural communities is now. In some ways, the stars are aligning, and the dollars are there. We’ve got to focus and make the most of this opportunity. Our perspective—and why we wanted to highlight rural—is that there’s immense strength, promise, and opportunity present in rural communities.

We hope to focus, unleash, and lift up even more of that. We see these archetypes and specializations as a way to help unlock what works. Things are hard these days, but making good on what’s right in front of you and making your corner great is always a good use of time.

Working with the people who are right there collaborating with you, in the place where you are, is a way through and a way forward. I see this as a way to enable many more people to make their corners fantastic, or even more fantastic. And by extension, that can make every part of our country stronger; we can do that for everyone. And the time for that is now.

Educating future workers in advanced manufacturing

Roberta Fusaro: Can you tell us why now is the time to prepare K–12 students in rural areas for careers in advanced manufacturing?

Sarah Tucker-Ray: Over the past five years, billions of dollars in capital investments have flowed into advanced manufacturing in the US, with leading global companies making large commitments. Our analysis found that almost two-thirds of the trillion dollars in announced advanced manufacturing projects are anticipated to go to facilities within 15 miles of rural communities.

This type of investment could substantially increase demand for qualified manufacturing workers in the US. We’re potentially expecting a more than two-million-worker shortfall by 2030, and part of the promise of these jobs is that not all require a degree beyond high school. Not all require going to college or even community college. That puts the onus on K–12 to be the preparation step for these jobs of the future, making sure rural communities, rural families, and rural workers are prepared for future-oriented tech-enabled careers where there are real opportunities for wage gains versus what the jobs would’ve been otherwise.

Roberta Fusaro: How might employers benefit from kids being educated in advanced manufacturing?

Sarah Tucker-Ray: The excitement is we expect manufacturing companies that hire local and better prepared workers to reduce workforce attrition and increase productivity, potentially saving $20,000 to $30,000 a year per retained employee, which could be worth about $20 billion annually.

So, there’s a clear business case on the employer side for thinking smartly about partnerships with K–12, thinking about how they prepare workers for the jobs that will be created as their investments come to fruition.

Roberta Fusaro: What kinds of skills can K–12 programs provide?

Sarah Tucker-Ray: Industry seeks well-prepared, enthusiastic future employees, and K–12 schools aim to expose students to career opportunities, but there’s a lack of effective engagement between the two.

School leaders have quite a bit of interest in engaging with industry. We heard that core academic skills, including literacy, math, and critical thinking, are just as important for advanced manufacturing as they are for anything else.

We’re also hearing industry asking that schools adopt evidence-based models like career and technical-education courses, dual enrollment programs, and youth apprenticeships. Such models have shown proven results in various school districts across the country. Then it’s about aligning those skill development programs with local industry needs. This includes thinking about recruiting and hiring pipelines within K–12 schools and offering real-world experience through youth apprenticeship.

Roberta Fusaro: Can you share examples of what this looks like on the ground?

Sarah Tucker-Ray: Arizona’s Chandler Unified School District is launching a semiconductor-focused career and technical education, or CTE, high school program in 2025, partnering with the University of Arizona and industry leaders like Intel and Microchip. The program features hands-on learning and a semiconductor camp to prepare students for high-wage careers. This initiative aims to boost the local workforce pipeline in the growing semiconductor industry within the state.

In Texas, Roscoe Collegiate High School is using a P-Tech model to help students earn industry certifications and associate’s degrees, debt-free, through partnerships with the university’s colleges and with industry.

Its nonprofit collegiate education is scaling the model statewide, with 22 percent of students earning associate degrees and 44 percent gaining high-demand certifications before graduation.

A good example of this is in Ohio, where they’ve created a standardized framework through their competency model to identify and communicate the skill sets needed for manufacturing jobs.

Roberta Fusaro: Are there specific demographic groups—for instance, is it more male than female—that are taking part or expressing interest in these kinds of programs?

Sarah Tucker-Ray: We’re seeing broad interest in these opportunities, and I think part of that is that rural students, communities, and economies could see more than $30 billion a year in wage increases across jobs created directly and indirectly from this investment.

Excitement is created for students across the board due to the wage gain opportunity, the ability to learn on the job, and having a clear career ladder. Also, the nature of these jobs is rooted in technology and American competitiveness.

Roberta Fusaro: I’m thinking about how these partnerships develop. Are they as simple as an employer reaching out to a school system? How do partnerships best come together?

Sarah Tucker Ray: It’s best when industry creates touchpoints with students throughout their K–12 experience, offering apprenticeships, summer jobs, and scholarships for postsecondary degrees. It also helps to have the workforce at the scale that you’re looking for.  Building awareness and interest throughout someone’s time in K–12 helps build a future workforce at scale. Step one is to commit to regular interaction and engagement. And then I think the second step is collaborating on skill development programs so that you’re using the same language, and K–12 can build into the curriculum what industry is seeking.

Roberta Fusaro: Taking all of this into account, what’s your vision for the future of rural America if these educational and industrial partnerships are successfully implemented?

Sarah Tucker-Ray: I see a positive vision through better connection between K–12 education and the advanced manufacturing industry to create enhanced career advancement and social mobility in rural America. This means improved education and job opportunities, which will lead to a more dynamic rural community more broadly. That, in turn, will lead to revitalized communities. An influx of high-quality jobs and economic growth can make rural communities more attractive places to live and work and help reverse some of the brain drain that rural America has been experiencing for years. Families can say proudly that their kids are staying in the community and no longer feel like they must leave in search of new jobs. And finally, it’s a brighter future for youth and employers because it creates a steady supply of well-prepared workers for robust economic growth so that families can see the potential ahead and really live it with these wage gains.