As governments attempted to grapple with the fallout of the 2008 financial crisis, austerity politics was a common approach to try and balance the books after a prolonged period of extensive spending to prop up the financial system. While this has been widely spoken about in terms of the impact on society, a new paper from Cardiff University highlights the specific impact austerity has had on rural areas.
The researchers highlight how the historic problems of rural poverty have been compounded by austerity, with local government services heavily reduced. This was further exacerbated by changes in local government, which typically resulted in significantly reduced budgets.
Rural poverty
These form part of a compendium of hardship experienced by rural areas. For instance, the authors cite how people seeking unemployment support were more likely to face sanctions than their urban-dwelling peers. What’s more, the sanctions they did receive were more likely to be severe.
“It is well documented that austerity has hit the most deprived urban areas the hardest, but the impact on rural poverty is often overlooked given difficulties in measurement and idyllic representations of countryside,” the researchers say. “Beyond the image of ‘leafy shire counties’ and ‘idyllic chocolate box villages’, the last decade has seen a steady dismantling of the social infrastructures—bus routes, libraries, youth centers—which many people in rural areas rely on.”
The research joins a growing body of work highlighting how government policies are affecting rural communities. For instance, recent research from UCL and the University of Oslo explores how tax incentives can provide economic stimulus for rural areas, thus boosting employment and prosperity.
The researchers explored how tax reforms that harmonized payroll taxes across Norway affected economic activity. Historically, the government had applied different payroll taxes to different parts of the country, with 0% applied in the northernmost regions, up to 14.1% in more central areas. The aim was to stimulate business activity and avoid any depopulation of more remote areas.
This differentiation was abolished in 2004 to comply with EU trade regulations. The analysis revealed that in the aftermath of the tax reform, the regions that had previous enjoyed tax benefits suffered a significant decline in employment.
“Our findings suggest that in countries or states where wages cannot adjust so easily, due for instance to centralised wage bargaining, place-based payroll tax incentives can indeed be an effective tool in stimulating local employment in underdeveloped regions,” the researchers say. “Ultimately, the effectiveness of place-based payroll tax incentives in stimulating local employment depends on how flexibly wages can adjust to a given tax change. In settings where rising labour costs for firms are easily shifted on to worker wages, we would expect no changes in employment levels in response to payroll tax hikes. However, in Norway, where trade unions have strong influence over wage bargaining, we see that it is employment levels that are most affected.”
If rural communities are to thrive, then governments need to take a more nuanced approach to policymaking so that the unique needs and challenges of rural areas are taken into account.
