WV Center on Budget and Policy > Publications > Economic Development > Work and Wages > State of Working West Virginia 2014: Economic Recovery and Transition in the Mountain State

State of Working West Virginia 2014: Economic Recovery and Transition in the Mountain State

September 30, 2014 by and

SWWV 2014 coverThis report is the seventh in an annual series that examines the state of West Virginia’s economy as it impacts working people. Each year, we examine the latest available data on employment, income, productivity and job quality as well as the immediate economic challenges and opportunities. Read PDF of report

The themes have varied from year to year with changes in the economy but the basic goal remains the same: to look at what can sometimes seem to be dreary numbers and indicators from the point of view of those who actually do the work.

It is very common to find reports in the media or comments from political leaders about the state’s business climate; it is all too seldom that the discussion turns to the climate for working people and their families. It is our belief that the economy exists for people and not people for the economy, and that a strong economy requires a growing middle class..

In this report, as in those of the past, we will attempt to identify short- and long-term trends and to find the story behind the numbers. Each year, we also recommend policy changes to improve conditions for working people, some of which have actually come to pass.

To use a nautical metaphor for a landlocked state, West Virginia’s economy can at times resemble a sailboat or a motorboat. In the former case, it is driven by external factors, such as the national and global economy. But, like a motorboat, our economy can also be driven by internal factors, such as its historic dependence on natural resource extraction.

In addition to external or internal market factors, the decisions of policymakers can have a huge impact on the economy and the quality of life for working families. Fortunately, in a democracy, this is something which ordinary working people can influence—and indeed have recently done so with some success.

Specifically, this report will explore three aspects of our current reality:

The lingering effects of the Great Recession.

What turned out to be the worst economic downturn since the Great Depression was scarcely noticed by most people when it began late in 2007. And although it was officially declared by the National Bureau of Economic Research to have ended in June 2009,[1] this news would have brought little comfort to the millions of Americans who lost homes, jobs or income since that summer.

The Great Recession is an example of the sailboat effect.The crisis was caused by under-regulated speculation on Wall Street and a housing bubble far from West Virginia, but its effects on the Mountain State were severe and long lasting. At its lowest point, in the fall of 2010, nearly 70,000 West Virginians were officially unemployed.[2] While the federal government recently reported that consumer spending had returned to pre-recession levels by 2012,[3] the current unemployment rate at six percent is one-third higher than the 2007 level. Further, the recovery has been unbalanced, with a net loss of jobs that paid high- or mid-level wages and a net increase of low-paying jobs.

The decline of coal employment in southern West Virginia and the challenges of transition.

The dynamics of energy extraction in West Virginia is an example of the motorboat effect. We are in the strange situation of simultaneously facing an energy boom in central and northern West Virginia and a coal bust in the south. West Virginia’s overall economy as measured by Gross Domestic Product (GDP) grew at a healthy rate of 5.1 percent in 2013. This growth in economic activity may have been driven in part by developing Marcellus Shale natural gas resources. However, job growth did not mirror GDP growth, due in part to a rapid decline of coal jobs in southern West Virginia.

Around 5,000 coal mining jobs were eliminated between 2011 and early 2014, most in the southern coalfields. State coal production declined by over 35 percent between 1997 and 2013, and by 28 percent between 2008 and 2013. Again, this drop in production was regional. Mining in northern West Virginia has been much more stable. One mark of the shift from south to north can be found in the fact that the leading coal-producing county is now Marshall rather than Boone.

Although many people blame this decline on the Environmental Protection Agency and the Obama administration’s alleged “war on coal,” much of these changes have been market driven by such factors as competition from cheaper and easier-to-mine coal elsewhere and the natural gas boom. However the blame gets assigned, the state faces the challenge of an economic transition.

The impact of recent policy changes on working families.

For good or ill, the policy changes made by our political leaders can have a major impact on working people, their families and communities. One dramatic example is the impact of cuts in state taxes enacted since 2006. These will cost the state $360 million in 2014 alone and an estimated $425 million in fiscal year 2015. Far from paying for themselves, they have forced cuts to the state budget the past two years and resulted in several bruising controversies regarding funding for key programs. In fact, it would have actually been cheaper to provide in-state tuition for all West Virginia college students.[4]

Other recently enacted policies are having or will have a more positive effect. This is most clearly the case with Governor Tomblin’s decision to expand Medicaid coverage to working adults earning up to 138 percent of the federal poverty level. At this point, over 147,000 West Virginians, the vast majority of whom were previously uninsured, have gained coverage since January 1, 2014. This coverage has already reduced costs associated with uncompensated care and promises to create thousands of jobs.

More promising policy results are on the horizon, including some we have advocated here. Medicaid expansion, along with reforms in the criminal justice system, could help address the related problems of substance abuse and the overcrowding of state correctional institutions. An increase in the state minimum wage will take place January 1, 2015 and reach around 125,000 working West Virginians, most of whom are adults. Further expansions of early childhood education and improvements in child nutrition and well-being bode well for the future. Finally, in 2014 the West Virginia legislature created the Future Fund, long advocated here, which could be a means of creating a permanent source of wealth for the people of West Virginia.

Finally, after examining these trends, we will make policy recommendations that may further promote the well-being of working families and their communities. With any luck, and with help from the readers of this report, some of these might be enacted as well.

[1[ National Bureau of Economic Research, US Business Cycle Expansions and Contractions, http://www.nber.org/cycles.html

[2] WORKFORCE West Virginia, Seasonally Adjusted Employment and Unemployment Data, http://www.workforcewv.org/lmi/EandE/sa_nf10.html

[3] Bloomberg Business Week News, “W.Va. consumer spending higher than pre-recession, “ August 8, 2014, http://www.businessweek.com/ap/2014-08-08/w-dot-va-dot-consumer-spending-higher-than-pre-recession.

[4] WV Center on Budget and Policy, Evidence Counts, “Which is More Expensive-Tax Cuts or Free Tuition?” http://www.wvpolicy.org/which-is-more-expensive-tax-cuts-or-free-tuition.