Growing Working Class Economic Insecurity at the Heart of West Virginia Woes
Over the last four decades, West Virginia’s economy has shifted from producing less goods (e.g. steel, chemicals, etc.) to providing more services. While the rest of the country also underwent this economic shift – often referred to as deindustrialization – it was especially problematic in the Mountain State. While the state has made strides to diversify its economy, it has been unable to catch up to the rest of the country and transition to the “new economy” where income is largely determined by your educational attainment. This has meant that income support programs, like food stamps (SNAP) and the Earned Income Tax Credit (EITC), have been waging an uphill battle in the state to fight the growing economic insecurity of the working and middle class.
In the late 1970s and early 1980s, jobs in the state paid at – and sometimes above – the national average (see chart below) and blue-collar workers in the state also enjoyed relatively good pay with benefits. This was possible because the state had a lot of jobs in the manufacturing and mining industries that paid well and didn’t require a post-secondary degree. However, since the 1980s to today, jobs in these industries have declined dramatically and we’ve been unable to transition to a more knowledge-based economy.
For example, in 1979, more than one out of three jobs in the state were in the goods-producing sector that generally paid an above average wage with benefits. Today, only one out six jobs is in the goods-producing sector, with the rest now in the low-paying service sector. A good way to think about this is that in the late 1970s Weirton Steel Corporation was the the state’s largest employer. Today the honor goes to Wal-Mart, whose low wages with little benefits have to be augmented with federal and state income supports.
As the above chart demonstrates, there has been a growing gap in average earnings per job between West Virginia and other states. Today, the average job in West Virginia pays about 83 percent of the national average. But back in the late 1970s and early 1980s, this wasn’t true. The average wage job in West Virginia was actually above the national average. As we demonstrated in our annual State of Working West Virginia, the same was also true of median wages.
Largely because of the decline in good-paying jobs, more West Virginia workers and families have become eligible for federal income maintenance benefits (IMB) like SNAP and federal tax credits like the EITC. As the chart below shows, per person federal income support is higher in West Virginia than nationally, however in the late 1970s and early 1980s this wasn’t true. As the previous chart showed, this was roughly the same time the state had above-average earnings. As the coal and manufacturing employment bust surfaced in the early 1980s and the state faltered to transition economically (mostly because of its less formally educated workforce), more families in the state needed federal income supports to make up this difference.
While “average” wages grew more slowly in West Virginia than the national average over the last 30 years, middle class (median) wages have stagnated or declined over the last three decades for workers all across the country and in West Virginia. The hollowing out of the middle class has now become a permanent feature of our national economic landscape and is why so many families rely more heavily on federal income supports to make ends meet.
While low- and middle-income workers saw large wage increases during the “golden era” of the post-war years (1945-1973) when wages and productivity grew together, the last 30 years have been marked by growing working-class insecurity with economic growth decoupled from middle-income growth. For example, if median income grew at the same rate as it did in the post-war years the four-person median family income in West Virginia would be around $91,000 instead of $59,000. This decoupling explains, in large part, the massive uphill battle that anti-poverty programs and income supports have had to play just to keep working families afloat. This is especially true since the beginning of the Great Recession. Without crucial programs like SNAP and the EITC, there would have been millions more families in poverty over the last couple of years.
Growing income inequality and the decline of the middle class is one of the biggest problems in our country and is even a bigger problem in West Virginia. To lift more working families out of poverty in West Virginia we need strong leadership and action at both the federal and state level. This could include raising the minimum wage, making it easier to join a union, fair taxation, a robust transitional jobs program, more investments in education and infrastructure, and better safety-net programs. Without these efforts, there is a good chance that West Virginia will never get back to where it was before the 1980s, when our state’s working families were prospering.