Pages tagged "Economic Development"
- Poverty is a persistent problem in West Virginia, where tens of thousands of West Virginians live in poverty because their jobs do not pay a living wage. Read the full report. This 10th annual State of Working West Virginia focuses on low-wage work, including demographics of those who do the work; the industries that employ them; geographic factors; the role of public programs supporting low-wage workers; and policy recommendations to improve economic well-being. The report reveals the shifting role of low-wage work in the state’s economy, now its main source of job growth, and a path no longer confined to young workers entering the workforce. The complete picture of West Virginia’s economy shows growth in low-wage industries, while non-low wage industries decline, and wages stagnate for both. "Low-wage work has a profound impact on West Virginia's economy, from the capabilities of workers to provide for their families, to their health and well-being, all the way to the sate budget," said Sean O'Leary, Interim Executive Director for the West Virginia Center on Budget and Policy. "As low-wage jobs become more prevalent in the state's economy, we must consider public policies that support these workers and their families, recognizing their importance to the state." Key Findings
- Twenty-three percent of the state’s workforce is employed in low-wage jobs.
- Forty-four percent of West Virginia’s workers with less than a high school diploma earn low wages, while the rate of low-wage workers who possess a high school degree or some college is 28 percent.
- Compared to the rest of the economy, employment in low-wage industries is growing very rapidly, by 14.5 percent since 2001. In comparison, employment in non-low wage industries declined by 2.8 percent, and overall employment has only grown by 0.1 percent.
- Overall, real average wages in West Virginia have grown by 9.7 percent since 2001, and 11.8 percent in non-low wage industries. In contrast, average wages in the state’s low-wage industries have only grown by 7.4 percent.
- More than one-quarter of workers in low-wage jobs in West Virginia (25.3 percent) live in poverty, compared to just two percent of non-low wage workers.
- Fifty-five percent of children live in a house with a low-wage worker.
- Over half - 57.6 percent - of low-wage workers in West Virginia earn at or below the minimum wage.
- A majority - 75.8 percent - of the state’s low-wage workers (123,970 workers) would benefit directly from an increase in the state’s minimum wage.
- The vast majority - 77 percent - of the state’s low-wage workers live in a county where housing is unaffordable for them.
- No longer a stepping stone, low-wage jobs are becoming lifelong employment, while industries that provide low-wage jobs have become the state’s dominant source of job growth.
- A living wage for low-wage workers would strengthen West Virginia’s economy, boost demand for goods and services provided by local businesses, and help increase the state’s chronically low workforce participation rate.
This West Virginia Center on Budget and Policy report, West Virginia Economy Would Suffer Under Proposed Health Care Plans, breaks down the economic gains the state has experienced since the passage of the Affordable Care Act and the devastating impacts its repeal could have in West Virginia, specifically in rural areas with higher concentrations of health-care jobs.
Over the last decade, the growth in the health-care industry has been one of the few bright spots in the state’s otherwise struggling economy. Repealing the ACA would undo much of the state’s economic progress spurred by ACA and health-care industry. According to the American Hospital Association, West Virginia’s hospitals have a $9.8 billion impact on the state’s economy.
- Since 2008, total private sector jobs in West Virginia have declined by 4.1 percent, while health-care jobs have increased by 9 percent.
- Nearly one out-of-every five private sector jobs in West Virginia are in the health-care sector. In West Virginia’s rural counties, one out-of-every six private sector jobs are in health care.
- A total of $3.7 billion was spent on Medicaid services in West Virginia in 2016, including Medicaid expansion, while approximately 30,000 West Virginians received $135.7 million in premium tax credits. -
- The health-care industry accounts for over 10 percent of the state’s Gross Domestic Product (GDP), and has grown five times faster than the rest of the economy since 2014.
- Currently, six of the state’s top 10 private employers are hospitals and health-care providers.
- The American Health Care Act (AHCA) and the Better Care Reconciliation Act (BCRA) could cause West Virginia to lose more than 10,000 jobs and over $1 billion in lost GDP.
- The AHCA and the BCRA are estimated to cause 195,000 West Virginians to lose their health coverage, nearly half of the state’s Medicaid population.
- West Virginia has historically been one of the poorest states in the country, with consistently low income and high levels of poverty, and this trend has continued to present day.
- In years since the Great Recession, West Virginia has experienced little job growth and elevated levels of unemployment.
- In recent years, West Virginia has replaced high-wage jobs with low-wage jobs, contributing to decades of stagnant wage growth.
- West Virginia’s laborforce participation rate fell to its lowest level since the late 1980s in 2015, and remains the lowest in the country.
- In order to increase incomes in the state, West Virginia will need to expand its stock of knowledge by increasing the amount of innovative research occurring here, and by substantially raising the educational levels of West Virginians.
- West Virginia has suffered from a resource curse, and studies show states with a heavier than average reliance on mining income are likely to have lower incomes.
- Improving the state’s labor force participation rate would make a big difference in the personal income of West Virginians.
- The trickle-down approach to state economic policy that emphasizes putting more money and power in the hands of the wealthy often fails to deliver stronger economic growth or a better quality of life.
- State policies focused on improving productivity and incomes for everyone can not only reduce negative outcomes for West Virginians but also boost economic growth over the long-run by building a stronger middle class.
- State policymakers need to focus on improving health, workforce participation, education, and job skills while also building top-notch infrastructure and encouraging innovation and entrepreneurship. This will require investments in physical and human capital, improving the state’s fiscal health with additional resources, rewarding hard work with higher pay and better benefits, diversifying its economy with clean energy jobs, and supporting technology-based economic growth.
This report card evaluates the current policies of Ohio, Pennsylvania, and West Virginia in a range of policy areas informed by the research of the Multi-State Shale Research Collaborative (MSSRC). It compares policies across the three states that address the social and economic issues that unconventional drilling delivers to the communities in which it occurs. The Scorecard thus informs policy-makers about the strengths and weaknesses of their respective policies. The three states can enhance their overall prosperity, and that of shale gas communities, by improving their grades – adopting policies that better mitigate the unanticipated negative impacts of unconventional gas drilling and that take better advantage of new economic activity and revenue generated by natural gas extraction. Read report.
This report card’s grading of state policies is limited to areas in which MSSRC has expertise. For example, we do not address environmental policies and, except for policies related to tracking health impacts, we do not address public health issues.
The table below shows the grades. In two of the nine policy areas, severance and property taxes, West Virginia earns an A: Ohio and Pennsylvania could score higher by emulating West Virginia policies. In four other areas at least one state receives a B. In three areas no state receives more than a C. All three states receive at least one F. These grades mean that all three states could achieve a solid report card if they adopted the policies of the state with the highest grade in each area. A report good enough to make the honor roll would require lifting grades in some areas above the current grade of any of the three states.
This handbook provides recommendations to county and local governments, human and social services, police and emergency services, and other local officials dealing with unconventional gas drilling. These recommendations are based on previous research conducted by the Multi-State Shale Research Collaborative (MSSRC) to document the human and social service impacts of increased drilling. Read PDF of report. The MSSRC brings together non-partisan, independent research and policy organizations from Pennsylvania, West Virginia, Ohio, New York and Virginia to monitor trends in employment, tax policy and community impacts from unconventional gas drilling. Prior research focused on the impact on jobs of drilling in six states; case studies of four counties in West Virginia, Ohio and Pennsylvania; and the human and social service impacts across these three states. Throughout this report, we pull from lessons learned from these studies, especially information we gathered from our case study counties — Tioga and Greene counties, Pennsylvania; Wetzel County, West Virginia; and Carroll County, Ohio.
A new report from the Center on Budget and Policy Priorities analyzes data about which businesses actually create jobs and where they create them. The conclusions from the analysis contain useful information for states, like West Virginia, looking to create jobs and grow their economy.
While West Virginia recently underwent a significant tax reform, and is looking to do the same again, this failed to significantly create any new jobs in the state. But, as this new report shows, that shouldn't have been surprising. While tax cuts and other tax incentives like those enacted in West Virginia are used to lure businesses from other states, the report finds that the vast majority of jobs are created by businesses that start up or are already present in a state. From 1995 to 2013, about 87 percent of private-sector job creation in a typical state was "home grown," coming from startups, the expansion of employment at existing establishments, and the creation of new in-state locations by businesses already headquartered in the state. In contrast, jobs that move into one state from another typically represent only 1 to 4 percent of total job creation each year.
The report also found that start-ups and young companies are responsible for most of the job creation when the economy is healthy. This means that economic development strategies that focus on tax cuts and tax incentives are likely to fail. Tax cuts are poorly suited to helping startups and other rapidly growing firms, in part because these businesses often have little income in their early years, after spending heavily on new equipment, product development, and marketing.
Instead of creating jobs, tax cuts end up hurting state investments in education and other services that entrepreneurs need. In a survey highlighted in the report, the most commonly cited reason among entrepreneurs for starting their companies where they did was that it was where they lived at the time, with 31% of entrepreneurs citing access to talent as a factor determining where they launch their business. In contrast, only 5% of entrepreneurs cited low tax rates as a factor in deciding where to launch their company.
All of this suggests that West Virginia should look beyond doubling down on the failed tax cuts of the past as an economic development strategy, and instead invest in schools and colleges, improving workers' skills, and maintaining communities that are attractive to residents who want to start a business. Successful entrepreneurs report these factors were key to where they founded their companies. More tax cuts and subsidies will only waste state resources that would be better utilized building a skilled workforce and improving the quality of life for local residents, investments that support real economic progress.
The West Virginia Legislature is poised to enact a so-called right-to-work (RTW) law this week. The House of Delegates is taking up an amended version of the "WV Workplace Freedom Act" this afternoon. The law would prohibit unions and employers from negotiating a contract that requires employees who benefit from union representation to pay for their fair share toward those costs.
So far, 25 states have enacted RTW laws, predominantly in the South and Southwest. While right-to-work laws have nothing to do with guaranteeing jobs for workers, some in the business community view it as a strategy for attracting new businesses to locate in West Virginia, despite its downside risks of lowering wages and hurting unions that helped build the middle class in our country.
Here are five important things you need to know:
1. It's about lowering wages and eroding workplace protections. As an economic development tool, the professed aim of RTW is to reduce the power of unions by depriving them of resources (dues), which ultimately weakens the union and strengthens the employers' hand in bargaining for lower pay and benefits. By decreasing the likelihood that businesses will have to negotiate with their workers, this will lower labor costs, reduce the cost of doing business, and will supposedly incentivize out-of-state manufacturers and other businesses to locate in West Virginia. If RTW didn't lower wages and weaken workplace protections across the board, there would be no incentive for companies to move to West Virginia. This, in a nutshell, is the hope of RTW supporters such as the West Virginia Chamber of Commerce.
2. Academic research is unanimous that RTW reduces unionization. While there is no strong evidence that RTW laws help or harm a state's economy, there is a broad academic consensus that it weakens labor unions. If this happens, it could mean even worse economic and social outcomes in the state. This is because unionization is strongly associated with higher economic mobility, less income inequality, higher wages, safer workers conditions, better benefits and larger voter turnout.
3. The WVU report on RTW is fundamentally flawed. While a recent study by John Deskins at West Virginia University concluded that RTW would boost jobs in West Virginia, the study is fraught with basic design problems. For example, the WVU study misidentifies that Texas and Utah adopted RTW in the 1990s, when both states adopted RTW before 1960. The WVU study also failed to adopt a standard academic practice that accounts for unobserved differences between states, such as the advent of air-conditioning in the South, access to oversees markets, and other important state characteristics. When researchers at the Economic Policy Institute accounted for these problems and replicated WVU's findings, they found no relationship between RTW status and employment growth. Tim Bartik, an economist with the Upjohn Institute and one of the country's leading economic development experts, recently reviewed the WVU study and concluded that it "does not provide any convincing evidence that a state that adopts RTW laws will, as a result, experience faster job growth." The flaws with the WVU study highlight why state policymakers should not rely on its conclusions to adopt RTW.
4. RTW is not about "workplace freedom." While RTW proponents define ‘workplace freedom" as letting workers opt out of paying a representation fee to pay for the benefits they are receiving under any negotiated union contract, most would define workplace freedom as being treated with dignity and respect on the job. That means getting paid an honest wage for an honest day's work, and having access to benefits such as paid sick days, paid family leave, health care, and a retirement plan. The only freedom workers would receive if RTW were enacted is the ability to get something for nothing.
5. Low workforce skills are the central reason for West Virginia's economic woes, not lack of RTW. A recent in-depth study by the Center for Business and Economic Research at the University of Kentucky that explored why the state is so poor found that the shortage of skilled workers - not RTW – was the central reason for the state's relative poor economic performance. Since West Virginia faces many of the same social and economic problems as Kentucky, policymakers would be well advised to promote polices that improve the skills of the state's workforce instead of RTW that could reduce workforce training.
While we are all worried about our economic future and want to build a strong economy in our state with good-paying jobs, enacting right to work is not going to get us there. Instead it may hurt working families by redistributing income from workers to employers and from middle-class taxpayers to the wealthy. I hope the legislature in West Virginia will see that we can't build West Virginia by tearing down working families and unions. Instead we need to focus on the policies that we know work, such investing in early childhood education, research and development, higher education, workforce training, and effective ways to help more people get out of poverty.
This report is the eighth in an annual series that examines the state of West Virginia’s economy. While previous editions examined data on employment, income, productivity, job quality and other aspects of the economy as they impact working people, this issue is an in-depth look at one specific economic measure - West Virginia’s labor force participation rate. Read PDF.
The labor force participation rate (LFPR) is the measure of people 16 years or older either working or seeking work, expressed as a share of the adult population. Labor force participation is a complementary measure of labor market conditions to the conventional unemployment rate. The LFPR captures the share of the total adult population that is available to work, whereas the unemployment rate captures the share of the labor force that is unable to obtain employment at a given point in time. Labor force participation varies across demographic characteristics such as age, gender, and race, and can be affected by numerous economic characteristics and public policies. A healthy LFPR is a key driver of a society’s economic output per capita and overall standard of living in the long run.
Nationally, labor force participation peaked in the early 2000s at 67 percent, and has been falling since. The nation’s current rate of 62.9 percent is its lowest since 1977. Historically, West Virginia has had the lowest labor force participation rate in the United States. West Virginia has ranked last among the 50 states every year since 1976, and the state’s labor force participation rate has never lagged the nation by fewer than nine percentage points over this period. In 2014, West Virginia’s labor force participation rate stood at 53 percent, compared to the national rate of 63 percent.
West Virginia shares its low labor force participation rate with much of the Appalachian region. For the 2008-2012 time period, the prime-age (ages 25-54) labor force participation rate in the Appalachian region was 74 percent, compared to the national rate of 78 percent. Only 35 of the 420 Appalachian-region counties had a prime age labor force participation rate above the national rate, while 46 counties had a prime-age rate below 60 percent. Labor force participation rates in the Appalachian region are lowest in rural areas and in Central Appalachia, which contains much of West Virginia.
A number of factors have contributed to the general decline in labor force participation nationally. Consider long-term demographic trends: Aaronson (2012) estimates that just under half of the decline in labor force participation since 1999 is due to shifting demographics, particularly the overall aging population and the retirement of the baby-boom generation. These trends are projected to persist beyond the next decade as the baby-boom generation continues to retire. Men and women over the age of 65 are much less likely to work compared to men and women aged 25-64, and naturally labor force participation declines as the population ages.
The 2007-2009 recession and weak recovery have also contributed to the falling labor force participation rate. An ongoing weak job market can discourage unemployed men and women who cannot find work, driving them to quit looking for work altogether and thereby exit the labor force – termed the discouraged worker phenomenon. The labor force participation rate for prime-age workers fell by 1.5 percentage points between 2007 and 2012, which has been attributed primarily to this phenomenon.
A weak economy can also affect labor force participation by preventing workers from ever joining the labor force. Nichols and Linder (2013) estimate that the drop in labor force participation during and after the recent recession has also been driven by a decline in labor force entry rates.
Returning specifically to West Virginia, a few studies have focused on uncovering the reasons for West Virginia’s, and its Appalachian neighbor’s, low levels of labor force participation. In examining Kentucky data, Berger (1989) found that the primary contributor to Kentucky experiencing employment-to-population ratios – which are related to labor force participation rates - below the national average was relatively low levels of educational attainment in Kentucky in comparison to other states. Other factors included differences in industry structure and an overall weak economy.
A similar analysis yielded different results for West Virginia. Dorsey (1991) concluded that West Virginia’s low rate of labor force participation cannot be attributed to economic or demographic factors, and instead is probably explained by its Appalachian culture, a preference for working informally outside of traditional markets, and high levels of federal disability benefits. Using more sophistical econometric methods compared to Dorsey, Isserman and Rephann (1993) found no statistical evidence of an Appalachian cultural effect. They further concluded that the county-level labor force participation rates in Appalachia were no different from the U.S. average when controlling for demographic and economic conditions.
This study has three components. Section One compares of trends in labor force participation in West Virginia and in the nation and examines how labor force participation in West Virginia varies by demographic, socioeconomic, and health factors. Section Two provides a more in-depth evaluation of the determinants of labor force participation and their contribution to the deviation of West Virginia’s LFPR rate from the national average. Section Three provides various policy solutions to improve labor force participation.
- Labor force participation in West Virginia, and in the nation, rose substantially over the latter half of the 20th century, but has declined since 2000.
- Despite broad movements in labor force participation over the last six decades, labor force participation in West Virginia has lagged the nation by a consistent margin.
- Labor force participation varies widely across West Virginia’s 55 counties and tends to be lowest in the southern part of the state.
- Labor force participation in West Virginia lags the nation across all age groups. Labor force participation among prime-age workers (ages 25-54) in West Virginia is also the lowest among the 50 states, indicating that the fact that West Virginia has an older population cannot solely explain the state’s labor force participation deficit.
- Of the 700,000 West Virginians who are not in the labor force, only 39 percent are age 65 or older. In contrast, 15 percent of labor force non-participants are between 15 and 24 and 27 percent are of prime working age. Policies that target men of women in these age groups have the most potential to improve labor force participation.
- Data suggest that labor force participation increases rapidly with higher levels of education. This finding, coupled with low rates of educational attainment in the state, suggests that effective efforts to improve high school completion and the attainment of a college education would likely be fruitful in enhancing labor force participation.
- Data for both the nation and West Virginia suggest that health is an important determinant of labor force participation. This finding, coupled with the fact that West Virginia suffers from poor health outcomes, suggests that effective policies to improve access to health care and encourage a healthy lifestyle would improve labor force participation.
- Men and women with a disability that limits or prevents them from working comprise 44 percent of those not in the labor force (prime age). This suggests that effective efforts to improve disability outcomes and to promote efforts to match the disabled with more physically-appropriate work might substantially improve labor force participation.
- A statistical analysis shows that the factors that play the most important role in explaining why West Virginia has a lower labor force participation rate than the U.S. average are that the state’s population is older, has completed less formal education and is in relatively poor health.
- Policies that could improve West Virginia’s low levels of labor force participation include enacting a state earned income tax credit, enhancing childcare access, and increasing access to higher education.
The development of the Marcellus Shale has led to a boom in West Virginia’s natural gas production. But aside from the increase in drilling activity and state and local tax revenue, the natural gas boom has not brought with it the jobs and economic growth that many predicted. While the state’s natural gas production has increased dramatically over the past several years, West Virginia has lagged behind the rest of the country in terms of job growth and fewer West Virginians are employed today than before the boom. Even in the counties where production has increased the most, job growth has been lackluster. PDF of report
The capital intensive nature of natural gas drilling can dampen its economic impact, creating fewer jobs than other more labor-intensive industries. However, there may be bigger economic and job opportunities related to chemical-based manufacturing that needs the raw materials found in natural gas liquids, abundant in the Marcellus Shale region.
West Virginia and countless other states have a long history of using tax incentives to boost economic development and jobs. But the impact of the incentives is unclear, including the case of West Virginia’s so-called “cracker bill,” which failed to encourage the development of an ethane cracker plant or other major downstream activity.
With no large-scale ethane cracker facility and associated chemical-based manufacturing from natural gas liquids produced in West Virginia, other states are profiting on the state’s natural resources. As West Virginia Secretary of Commerce Keith Burdette said, after Chesapeake Energy signed a contract to ship 75,000 barrels of ethane a day out of the Marcellus Shale region, “They’re shipping out gas that could support investment here.”
West Virginia can avoid these past failures while still using tax policy as a tool to encourage economic development. This brief proposes a modification of West Virginia’s severance tax that would increase state revenue and also help realize the economic potential of the state’s natural gas liquids.
Given that the Marcellus Shale region extends beyond West Virginia, and the overlap of West Virginia’s shale economy with those of Pennsylvania and Ohio, policymakers should encourage a three-state dialogue about common severance tax policies that encourage processing within the region.
- While natural gas production is booming in West Virginia, the boom has not led to greater economic development. Overall, West Virginia lost jobs during the boom, and growth has been disappointing in the counties that have seen the biggest increase in gas production.
- With little success, West Virginia has offered large tax incentives to encourage chemical-based manufacturing plants to locate in the state and use its natural gas liquids. Instead, companies pipe the liquids out of West Virginia to be used elsewhere, taking jobs and economic growth with them.
- A new severance tax incentive, based on a higher rate for natural gas liquids, with a credit to related in-state industries, may encourage ethane cracking and other chemical manufacturing to create in-state jobs while generating additional tax revenue for investment in infrastructure and human capital.
- If West Virginia increased its severance tax on natural gas liquids from five to ten percent, it would increase revenue by an estimated $168 million over the next five years.
“Right-to-Work” laws do not guarantee jobs for workers. Instead they prohibit unions and employers from including a provision in contracts that requires employees who benefit from union representation to pay for their fair share toward those costs. PDF of Fast Facts.
Some state lawmakers argue that if West Virginia adopted a so-called “right-to-work” (RTW) law it would boost job growth, workforce participation and manufacturing in the state. But that theory is built on relationships that do not exist and a misunderstanding of the evidence. The most rigorous analysis shows RTW laws have no significant impact on state economic growth but do lead to lower wages, less benefits, and a decrease in unionization.
Fact #1: Making faulty comparisons to assess the impact of RTW laws on economic growth are deceptive and fundamentally flawed.
Some proponents of RTW in West Virginia claim that it will boost economic growth because RTW states have better economic performance than non-RTW states. The WV Chamber of Commerce, for example, asserts that RTW means a faster-growing workforce because Virginia (a RTW state) “experienced a workforce increase from 2008 to 2011 even as our workforce declined.” Eric Fruits with the Cardinal Institute for West Virginia Policy argues in favor of making West Virginia a RTW state by pointing out that RTW states “saw employment grow by 43 percent” since 1980 while employment growth was slower (18 percent) in non-RTW states.
Crude correlations between two variables do not mean one causes the other. In fact, these spurious correlations prove virtually nothing because false relationships are easy to find. For example, residents of RTW states live, on average, about a year less than residents of non-RTW states. Does this mean passage of RTW will shorten lives in West Virginia? It’s highly unlikely. This type of analysis does not control for other factors that influence economic growth such as the skills of the workforce, climate, energy prices, taxes, economic recessions, federal policy, proximity to markets and suppliers, public infrastructure, access to raw materials, and more.
Fact #2: Rigorous studies show RTW laws do not boost job growth.
While it is difficult to untangle the economic effect of RTW laws because there are many dynamics that affect a state’s economy (see above), the most rigorous studies that have isolated the numerous factors at play have found little to no evidence that RTW laws significantly boost economic growth.
The most rigorous study to date, which was co-authored Heidi Shierholz, who is currently chief economist at the U.S. Department of Labor, and Elisa Gould at the Economic Policy Institute, controlled for 42 variables and found that “the evidence is overwhelming” that “right-to-work laws have not succeeded in boosting employment growth in the states that have adopted them.”
While some studies have shown a positive impact of RTW laws on economic growth, especially manufacturing growth, they often failed to control for other important factors, and when other scholars included these other factors, the results often disappeared. For example, a 2009 study by Hofstra University economist Lonnie Stevans that controlled for a broad range of economic variables, found that being a “right-to-work” state “yields little or no gain in employment and real economic growth.” Stevans concluded that while “right-to-work states may be more attractive to business, this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little “trickle-down” from business owners to the non-unionized workers.”
A more recent study by Gordon Lafer and Sylvia Allegretto that examined the impact of RTW on Oklahoma – a state that became a RTW state in 2001 – found no impact at all on employment. The study found that employment growth in Oklahoma was better in the years preceding passage of RTW than it was after RTW was enacted, when compared to its neighboring states.
The one lesson that can be gleaned from the history of RTW studies is that the more scholars are able to “hold everything equal” and control for numerous factors, the less likelihood that RTW has a positive impact on a state’s job growth.
Fact #3: Low workforce skills are a cause of slow economic growth in neighboring Kentucky, not lack of RTW.
In 2008, the Center for Business and Economic Research at the University of Kentucky published an in-depth study exploring the root causes for why Kentucky was experiencing slower economic growth compared to its southern neighbors in Alabama, Georgia, Tennessee, and North Carolina. The study examined 18 state-level factors, including stock of knowledge, state infrastructure, size of government, demographic changes and business climate (RTW was one of four factors in this category). The study found that the most important factor in Kentucky’s plight was the shortage of skilled workers and that RTW laws had no statistically significant impact in explaining its relatively poor economic performance.
The authors’ interviews with site consultants and economic development officials supported the statistical findings of the report: “every economic development official in the competing states with whom we spoke indicated the single most important reason for their economic growth over the previous three to four decades was an emphasis on education and workforce development.” The site consultants also said that the lack of training and education in Kentucky, especially in the rural areas, was the primary reason the state was not chosen by businesses for location.
This study bears many lessons for policy makers that believe RTW laws will boost West Virginia’s economy. West Virginia faces many of the same economic and social problems as Kentucky and both are located in a similar region in the United States. Both are relatively poor and unhealthy, with highly undereducated workforces and low labor force participation rates, and much of their populations lives in rural areas.
Fact #4: RTW laws weaken labor unions.
While it is difficult to untangle the impact of RTW rules on a state’s economy, there is very broad agreement in the academic literature that RTW laws reduce private-sector unionism. According to the conservative Mackinac Center for Public Policy, “a large body of empirical research …offers a fairly clear conclusion that right-to-work legislation reduces measures of private-sector unionization and union-related activities such as organizing.” This was recently confirmed again by an econometric study that found the adoption of RTW in Idaho and Oklahoma lowered union coverage.
Declining rates of unionization in West Virginia could mean worse economic outcomes because unionization is associated with higher economic mobility, less income inequality, higher wages, safer working conditions and better benefits such as health insurance, pensions, and time off.
Fact #5: RTW could lower wages even more in West Virginia.
West Virginia is a low wage state. In 2014, its median wage was just $15.25 an hour, about $1.64 less than the national median. The median wage for the state’s union workers was $20.16 and $14.89 for non-union workers, a difference of $5.27 per hour. Wages have declined for decades, with median wages $1.73 lower in 2014 than in 1979, after adjusting for inflation.
By reducing union resources in West Virginia through RTW, it could get even worse. According to the above-mentioned Gould and Shierholz study, wages and benefits are lower in RTW states:
- A full-time, full-year worker in a RTW states makes about $1,500 less annually than a similar worker in a non-RTW state.
- The rate of employer-sponsored pensions and healthcare is also lower, 4.8 and 2.6 percentage points lower in RTW work states compared with non-RTW states.
Chris Dickerson, “State Chamber likes idea of right-to-work legislation,” West Virginia Record, February 8, 2012. Retrieved from http://wvrecord.com/stories/510602202-state-chamber-likes-idea-of-right-to-work-legislation.
Eric Fruits, “Right to work is right for West Virginia,” Charleston Daily Mail, February 19, 2015. Retrieved from http://www.charlestondailymail.com/article/20150219/DM04/150219277.
Bruce Thompson, “Will Right-to-Work Cause Sickness and Death?,” Urban Milwaukee, March 6, 2015. Retrieved from http://urbanmilwaukee.com/2015/03/06/data-wonk-will-right-to-work-cause-sickness-and-death/
Gordon Lafer and Sylvia Allegretto, “Does ‘Right-to-Work’ Create Jobs? Answers from Oklahoma,” Economic Policy Institute, February 28, 2011. Retrieved from http://www.epi.org/publication/bp300/.
Lonnie Stevans, “The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach,” Review of Law and Economics, Vol. 5, No.1, pp. 595-614, 2009. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1027987.
Gordon Lafer and Sylvia Allegretto, “Does ‘Right-to-Work’ Create Jobs? Answers from Oklahoma,” Economic Policy Institute, February 28, 2011. Retrieved from http://www.epi.org/publication/bp300/.
Christopher Jepsen, Kenneth Sanford, and Kenneth Troske, “Economic Growth in Kentucky: Why Does Kentucky Lag Behind the Rest of the South?” Center for Business and Economic Research, Gatton College of Business and Economics, University of Kentucky, January 2008. Retrieved from http://cber.uky.edu/Downloads/CBER_Econ_Develop_Report_final_Jan2008.pdf.
Michael J. Hicks and Michael D. LaFaive,” Research on the Economic Effects of Right-to-Work,” Mackinac Center for Public Policy, August 27, 2013. Retrieved from https://www.mackinac.org/19059.
Ozkan Eren and I. Serkan Ozbeklik, “Right-to-Work Laws and State-Level Economic Outcomes: Evidence from the Case Studies of Idaho and Oklahoma Using Synthetic Control Method,” Working Papers from University of Nevada, Las Vegas, February 2011. Retrieved from http://econweb.umd.edu/~davis/eventpapers/OzbeklikRight.pdf.
See Lawrence Mishel, “Unions, inequality, and faltering middle-class wages,” Economic Policy Institute, August 29, 2012; David Madland and Nick Bunker, “Unions Boost Economic Mobility in the U.S. States,” Center for American Progress Action Fund, September 20, 2012.
Economic Policy Institute analysis of Current Population Survey data.