As the US population has become increasingly concentrated in urban centers, rural communities have, at times, been an afterthought. This dynamic has allowed a number of myths to take hold, such as that rural America is “facing an irreversible decline.”1 However, this narrative bears little resemblance to reality: Areas outside of urban centers are actually growing2 and benefiting from both more diverse populations and economies.
Rural American communities are important contributors to the broader economy. In all, rural areas account for one-seventh of the total US population and approximately $2.7 trillion of US GDP (close to 10 percent).3 A better understanding of rural America could help create opportunities for people living in these communities and further unlock impact for the country overall.
McKinsey and its Institute for Black Economic Mobility are doubling down on their commitment to accelerate action on economic mobility. Building on this initial success and recognizing the important needs in other communities, we are expanding on our efforts. In recent years, we’ve supported research on Latino and rural populations—amplifying the realities of millions of Americans who face significant barriers to economic mobility. We are increasing our resources and capacity to more aggressively support economic mobility for these groups while further investing to accelerate our efforts on Black economic mobility. Today, we are honored to announce the expansion of our economic mobility agenda with the establishment of the McKinsey Institute for Economic Mobility, which will continue its focus on Black populations while advancing our efforts on Latino and rural populations in the United States.
Our inaugural flagship report on rural economic mobility will be published in the coming months. Meanwhile, this advance look at our research reinforces the too-often overlooked potential of rural America.
Nailing down the right definition of ‘rural’
One of the first hurdles we encountered in our research was the lack of a widely accepted definition of “rural America.” Settling on the right one was a critical first step.
Across the US federal government, five agencies use five distinct definitions for “rural” communities (see sidebar, “Definitions of ‘rural areas’ by US government agencies”). This lack of clarity has had a profound and lasting impact on rural communities and the individuals who live there. The debate is not academic; government stakeholders’ use of different definitions can lead to inconsistent policies, obstacles to interagency coordination, and greater difficulty in effectively allocating and distributing resources.
For example, the variance among federal agencies’ definitions results in a population range of 45 million to 50 million for rural America, a 10 percent difference that nonetheless represents a substantial portion of the US population. The US Department of Agriculture (USDA), the US Census Bureau, and the Office of Management and Budget classify 1,570 counties (about 49 percent of all counties across US states and territories) as rural. However, up to 846 counties (26 percent) may be categorized as rural or urban depending on a specific agency’s criteria, a fluctuation especially common in certain eastern US regions. That leaves county leaders to determine their eligibility under different definitions and navigate processes for multiple agencies. They could even be unaware of available resources and programs from relevant agencies.
For this research, we selected the USDA’s definition of rural. Its rural-urban continuum codes comprehensively segment rural counties, assessing them based on population size, degree of urbanization, and proximity to metropolitan statistical areas (MSAs). According to this classification, 61 percent of US counties (1,981) are considered rural, while 39 percent (1,252) are classified as urban. In 2023, an estimated 46.3 million Americans resided in these rural counties (Exhibit 1).
A standardized rural definition would likely enable more-effective federal resource allocation. Without it, eligibility and distribution of funds vary, often leading to disparities in access. Brookings reports that the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act (CHIPS), and the Inflation Reduction Act (IRA) collectively offer more than $464 billion in appropriations that could benefit rural communities.4 However, the lack of a standardized definition for “rural” complicates the distribution of these funds because eligibility criteria vary across programs, which also makes it more challenging to measure the impact. This inconsistency can prevent rural areas from fully benefiting from federal investments aimed at infrastructure, clean energy, and economic development—and it can hinder public understanding of the magnitude of investments and potential benefits of funding meant to support rural communities.
A more accurate picture of rural America
Using USDA’s definition, we set out to further explore the attributes of US rural communities along a number of metrics. The figures paint a diverse picture of rural America, offering fact-based context and insights:
Rural America is America
All 50 states and all US territories (including tribal lands, American Samoa, Guam, Puerto Rico, and the US Virgin Islands) have “rural” communities. In all, rural communities make up approximately 71 percent of the geographic area of the United States (Exhibit 2).
Rural America is diverse—and becoming more so
Over the past decade, rural communities have experienced a gradual increase in racial diversity. A decrease in the White population (from 80 percent to 77 percent) has been accompanied by a corresponding increase in populations from Hispanic and other racial groups (Exhibit 3).
Urban populations show significantly higher educational attainment, with 34 percent holding a bachelor’s degree or higher, compared with only 20 percent in rural areas (Exhibit 4). In contrast, rural communities have a larger share of individuals whose highest level of education is a high school diploma. This gap could reflect demographic shifts in urban and rural populations as well as the impact of labor mobility.
Rural America is a key economic engine
Over the past decade, rural counties have demonstrated steady growth in productivity and income, closely mirroring national and urban growth trends (Exhibit 5). From 2010 to 2022, GDP in rural counties increased 15 percent, and median household income grew 43 percent to reach an all-time high of nearly $60,000 a year. Real GDP growth has been slower, and absolute levels of some metrics remain lower, but rural areas have shown consistent progress, reinforcing their critical role in the broader economy. However, decreased labor force participation and lower levels of relative growth highlight opportunities to further unlock rural America’s economic potential.
Rural America’s economy is varied and dynamic
Rural America has a reputation as America’s agricultural heartland. However, farming accounts for only 7 percent of employment in rural communities (compared with just 2 percent in urban counties). The top industries by share of employment in rural areas are government, manufacturing, and healthcare (Exhibit 6).
Rural America is more connected than we think
While rural America faces greater infrastructure challenges compared with urban areas because of differences in geographic footprint and density, efforts are underway to improve access to broadband, transportation, and healthcare services in these areas. For instance, the Bipartisan Infrastructure Act added billions to support the expansion of rural infrastructure, including $65 billion to improve broadband and $110 billion for infrastructure projects (such as roads and bridges).5 For broadband, the goal is for all Americans with an internet subscription to have access to broadband; current levels vary substantially depending on population (Exhibit 7).
Looking ahead to opportunity in rural America
Where people reside, across both rural and urban areas, has a significant impact on their economic outcomes. Economic mobility in rural America is uneven and in need of acceleration, with many rural areas seeing declines in household income from one generation to the next. The percentage change in the household income for children born to middle-income parents in 1978 and 1992 shows substantial variability across North American counties (Exhibit 8). This change elucidates patterns of economic mobility and the determinants of intergenerational income shifts. The data reveal divergent trajectories, with some counties experiencing income growth while others face declines. Key drivers of these changes include local economic conditions, labor market dynamics, access to quality education, cost-of-living variations, government programs, demographic shifts, and technological advancements.
With a clearer picture of the contours of rural America, we embarked on a detailed analysis of the economic drivers and obstacles that must be overcome to further accelerate economic opportunities in these communities. Our forthcoming publication identifies and analyzes new archetypes—ranging from manufacturing regions to resource-rich regions—highlighting the range of economic realities and challenges faced by rural areas. We hope these findings will not only shed light on the unique characteristics of each archetype but also provide a framework for targeted economic development strategies that promote deeper understanding and an action-oriented approach to rural America’s economic fabric.
