Coal Industry Providing West Virginia With Less Jobs, Less Wages

The coal industry is often spoken of as if it is synonymous with West Virginia’s economy. While coal companies certainly remain a significant employer of West Virginians — over 22,000 jobs in 2008 — data show that the industry has provided fewer and fewer jobs and wages over time compared to the state economy as a whole. 
 
The following graph shows the number of jobs provided by the coal industry as a percentage of the total number of jobs in the state. Direct coal employment has clearly experienced a significant decline over the last 40 years. The particular decrease that begins in the early 1980s is the result of breakthroughs in mining technology that minimized the need for human labor.
 
 
Looking at the ten-year averages of West Virginia’s reliance on coal for employment presents an even crisper picture:

 
 
Another way to measure the economic importance of an industry is to examine the amount of wages its jobs as a share total wages.   The next graph shows steady dips in wages from coal due to industrialization in the early part of the twentieth century, followed by the technological innovations in the 1980s.
 
 
Again, the ten-year averages for wages provided by coal in West Virginia show a clear trend:
 

The implications of these data are obvious. The conventional wisdom is that West Virginia’s economy and the coal industry are one in the same. Ironically though, the state is becoming less and less dependent on coal — an industry that is, in turn, clearly dependent on the prevalence of a finite resource.

Failing to diversify the labor market by investing in alternative energy industries — like solar and wind farms — that can provide jobs simply because coal played a much larger role in the state’s economy in the past would be shortsighted and self-defeating.
 
Notes: 
  • The Bureau of Economic Analysis (BEA) defines “salary disbursements” as commissions, tips, bonuses, voluntary employee contributions to deferred compensation plans (e.g. a 401(k) plan), employee gains from stock options, and receipts-in-kind that represent income. In short, the graphs above capture the earnings that coal industry jobs provide to West Virginia’s workforce.
  • When calculating employment (number of jobs), the BEA can count some workers twice. For example, if a person works two part-time jobs, the BEA will count both of them toward the final employment count. This pertains to both the number of coal industry jobs and the number of total jobs above.

Revenue Projections Are Often Political

AP has an article this morning showing that the state is running a $24 million surplus in the first month of FY 2011. Mark Muchow, Deputy Secretary of Revenue (and the guy who calculated the revenue projections for FY 2011), said it was “mostly due to…early lottery fund transfer and one-time liquor license renewal payments.” The WV State Budget Office has not posted the July FY 2011 revenue report, so it’s hard to know exactly know how this all shapes out. If Muchow is correct, then this isn’t much of a story because sales and income tax collection are the best measures of economic performance; not one time transfers.

The real story in this article is here:

“The state missed last year’s estimate by more than $29 million, as the
Great Recession weakened the economy more than projected. But $119
million in midyear spending cuts plus an estimated $12 million left over
in state agency accounts more than offset the revenue shortfall, Muchow
and state Budget Director Mike McKown said.

They pegged the surplus Monday at $102 million above what the state
actually committed in its budget for the prior year. Half that amount
will boost the state’s emergency reserves, already among the nation’s
strongest when measured as a percentage of state spending. The rest
should help West Virginia balance its budget for the year that begins
July 1, 2011.

“If we hold everybody at current levels and all current programs
continue, we’re still looking at a $200 million deficit,” McKown said.
“Having these surpluses is surely something of a luxury. It’s nice to
have these.
And it didn’t come by accident. We’ve been planning for
this.”

I wonder how many legislators – not to mention the public – understand that the FY 2010 mid-year cuts were not about a projected $119 million revenue shortfall – as the Governor said in this letter – but about funding the FY 2012 projected revenue shortfall. This isn’t a terrible strategy, but the mid-years cuts sure were not sold with that intent.

I also wonder if AP understands that revenue projections are political.  They can be used to fit the political agenda of the Governor. This is because the legislature has to live within the projection unless they want to raise revenue from an additional tax or fee to fund their legislation. By underestimating revenue projections, the Executive branch can, in essence, control the Legislative branch to some extent.

When revenue projections are underestimated, half of the surplus flows into the Rainy Day Fund and the other half funds the  Governor’s supplemental appropriation bills  (he makes recommendations in the Executive Budget that are usually followed).

Let’s hope Legislators and the press take note.


Prominent Conservatives Against Extending Bush Tax Cuts

David Stockman, former OMB director under Reagan, warned in the NYT on Saturday that extending Bush’s tax cuts would amount to “filing for bankruptcy.” Stockman goes on to say, “debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.”

As many may recall, Stockman was the one who blew the lid off of supply-side (a.k.a trickle-down) economics in the early 1980s. Talking to Washington Post writer Bill Greider, Stockman said: “It’s kind of hard to sell ‘trickle down,’ so the supple-side formula was the only way to get a tax policy that was really ‘trickle down…Kemp-Roth (the supply-side tax bill) was always a Trojan horse to bring down the top rate.” Stockman was saying this at the same time the Reagan administration was denying that the 1981 tax cuts favored the rich. Sounds familiar, doesn’t it?

In an interview on Meet the Press, Alan Greenspan, former Fed Chair and Ayn Rand apostle, said extending Bush’s tax cuts would be “disastrous.” Greenspan further stated that despite rhetoric from conservatives, tax cuts do not pay for themselves and that they need to be offset with spending cuts: “I’m very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money.”

Bush’s tax cuts are set to expire at the end of the year. If this happens, the federal deficit could be cut in half. The ten-year cots of the 2001 and 2003 tax cuts is between three and four trillion dollars, which is about half of the deficit at the end of that period.