Pages tagged "Work and Wages"
A 2016 federal rule would have raised the salary threshold below which workers are automatically eligible for overtime
pay—from $23,660 to $47,476 per year—restoring some of the coverage to inflation. Under the Fair Labor Standards Act, workers eligible for overtime must be paid "time-and-a-half" or 1.5 times their regular pay rate for each hour of work per week over 40 hours. Currently, hourly workers in most service and blue-collar jobs are guaranteed the right to overtime pay.
For salaried workers, the right to overtime is determined by their pay and nature of work. Currently, salaried workers who earn below $455/week ($23,660/year) are eligible for overtime, but workers who earn more than $455/week can be exempted from overtime if their occupations are considered professional, administrative, or executive.
The current salary threshold has not kept pace with inflation or the changing economy. In 1975, the overtime salary threshold covered about 62 percent of all salaried workers, compared to just 8 percent today. Had the threshold kept pace with inflation since 1975, it would be about $52,000 today. The 2016 rule would have largely restored its lost value.Read more
- 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.
- 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 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.
“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.
Some lawmakers are claiming West Virginia’s prevailing wage overpays construction workers and inflates the costs of public construction projects, but the evidence does not support these claims. Ending the state’s prevailing wage is likely to have no impact on public construction costs but could hurt the living standards of construction workers and the competitiveness of local construction firms. Read Fast Facts PDF.
Fact #1: Prevailing wage has not been shown to increase construction costs in West Virginia
No empirical study or evidence has shown that the state’s prevailing wage law inflates its public construction costs. In fact, research consistently finds no statistical relationship between prevailing wage laws and public construction costs.
Not only have studies confirmed that West Virginia’s prevailing wage law does not increase construction costs, the state’s construction costs are lower than those in neighboring Ohio and Virginia, as well as North Carolina, all states without prevailing wage laws.
Fact #2: Bureau of Labor Statistics data are unsuitable for determining prevailing wage rates.
West Virginia’s prevailing wage law requires that the wages paid on state construction projects be no less than the “prevailing hourly rate of wages for work of a similar character in the locality in this state in which the construction is performed.” However, BLS surveys do not distinguish between different locations and types of construction projects.
BLS does not collect data separately for residential and non-residential construction. The skills and pay rates in these areas can vary significantly, with non-residential construction requiring greater skills and costs than residential construction. Since the BLS does not differentiate between these types of work, it cannot determine an accurate wage rate for public construction projects.
BLS also surveys establishments, not projects. For the building and construction industry, where the work is performed does not always correspond with the BLS definition of an establishment. For the BLS, an establishment refers primarily to the location for managerial activity, not necessarily where the construction work is being done. The wages of workers reported to the BLS from an establishment may not be reported from the localities where they were actually working, as required by state law.
Of the 32 states with prevailing wage laws, only one uses the BLS survey to determine prevailing wage rates.
Fact #3: West Virginia’s Prevailing Wage Survey Is More Robust and Accurate than BLS Survey
In addition to the shortfalls of the BLS data mentioned above, a local survey better represents the wage rates of West Virginia’s construction workers due to the nature of the construction industry. Unlike most jobs, work for construction workers is very seasonal, with irregular periods of employment. Construction workers usually work around 1,500 hours per year, compared to 2,080 for a typical full-time employee. And when they aren’t working, they aren’t getting paid, as construction workers most often lack vacation and paid sick time.
While a local survey can accurately reflect construction workers’ actual hourly rates by determining what they are paid while they are working, federal statistics often don’t adjust for the industry’s irregular nature. Instead, they assume construction workers work year round, making the estimated hourly wage rates inaccurate.
Finally, the local survey used to determine West Virginia’s prevailing wage rates is more robust than the national BLS survey. The BLS survey samples only about 16 percent of establishments and is done over a three-year cycle, meaning that three-year-old data are included in determining the current year’s wages. In contrast, the local survey used to determine West Virginia’s prevailing wage rates is completed annually, and covers over half of the non-residential construction market.
Fact #4: Ending Prevailing Wage Could Weaken Our Economy
Prevailing wage laws help attract and retain workers with more skills and experience. Workers who earn the prevailing wage are more productive and valuable to their employers. As a result, companies are more willing to invest in apprenticeship programs for their workers in states with prevailing wage laws, creating a more skilled workforce. And more skilled workers means fewer accidents. Workers in prevailing wage states are less likely to be injured at work, resulting in lower workers’ compensation costs. A recent analysis by economist Michael Kelsay finds that repealing the state prevailing wage law would cost West Virginia families between $51 and $77 million annually in lost income and between $4.5 and $6.7 million in lost annual tax collections.
Prevailing wage laws strengthen the economy, by helping ensure public construction projects are done by local workers at a fair wage. This helps grow the economy, as local workers spend their wages in their community, as well as helping grow the local tax base. Local labor and construction firms also benefit by making it easier for them to bid on public construction projects, knowing that they are competing on the quality and skill of their workers, not just who is the cheapest. Studies have also shown that prevailing wage laws increase the wages and benefits of all construction workers, not just those working on a prevailing wage project.
Fact #5: Public procurement does not operate in “free market”
Government is the single largest purchaser of construction services, comprising 20 to 30 percent of all construction expenditures. Therefore, the only way for government not to influence the private construction industry would be to stop building schools, roads, bridges and other government buildings. Since no one expects the government to get out of the procurement business, the real question becomes how government procurement policies should influence the construction industry in order to create a level playing field.
J Nooshin Mahalia, “Prevailing Wages and Government Contracting Costs - A review of the research,” (Economic Policy Institute, Briefing Paper 215, July 8, 2008).
Michael P. Kelsay, “The Adverse Economic Impact from Repeal of the Prevailing Wage Law in West Virginia,” (Prepared for the West Virginia Affiliated Construction Trades Foundation, January 22, 2015).
WV Code §21-5A-2.
U.S. Department of Labor.
Mark Price, “Maintaining Quality Work and Middle-Class Jobs in Construction An Analysis of The Public Policy Foundation’s Report: ‘An Economic Examination of West Virginia’s Prevailing Wage Law,’” (Keystone Research Center, March 2009).
Mark Price and Stephen Herzenberg, “The Benefits of State Prevailing Wage Laws,” (Keystone Research Center October 2011).
Hamid Azari-Rad, “Prevailing Wage Laws and Injury Rates in Construction,” in Azari-Rad et al., The Economics of Prevailing Wage Laws.
Michael Kelsay, “The Adverse Economic Impact from Repeal of the Prevailing Wage Law in West Virginia,” (Prepared for the Affiliation Construction Trades Foundation, January, 2015).
Construction workers hired for public projects in West Virginia must be paid a minimum “prevailing” wage and benefits level. This prevailing wage level must equal the market wage rates as determined by the West Virginia Division of Labor, and varies by geographical area within the state and by occupation. West Virginia’s prevailing wage law was first enacted in 1933, two years after the federal Davis-Bacon Act, which established a prevailing wage for federal construction projects. Read PDF of report.
Thirty-two states, including West Virginia, have prevailing wage laws for state-funded construction projects, while there is also a federal prevailing wage law for federally funded construction projects. These prevailing wage laws help ensure that government-funded construction projects are done with highly skilled workers from the community, increasing productivity and strengthening the economy with good-paying local jobs.
Recently, lawmakers indicated that they intend to weaken or fully repeal West Virginia’s prevailing wage law this legislative session. This issue brief examines the impact of prevailing wage laws on public construction costs and addresses claims made about the West Virginia law by its opponents. It also considers the impact of prevailing wage laws on other aspects of the construction industry beyond costs, such as training, safety, health and pension benefits, and impacts on the economy as a whole.
- Multiple academic studies have shown that prevailing wage laws do not raise public construction costs; instead the impact of higher wages on costs is compensated by the positive effect on productivity.
- West Virginia’s school construction costs are lower than its surrounding states, including Virginia, which does not have a prevailing wage law and Ohio, which exempts school construction from its prevailing wage law.
- Claims by opponents about the costs of West Virginia’s prevailing wage law are implausible and based on hypothetical assumptions, ignoring actual experience, evidence and data.
- Construction workers in West Virginia work an average of 1,760 hours per year. Using wage rates from the Occupational and Employment Statistics data rather than the current prevailing wage rates would result in poverty-level incomes for many construction occupations.
- The repeal of prevailing wage laws leads to less workforce training, less experience in the workforce, higher injury rates, lower health and pension coverage, and lower wages.
This 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, 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. While the federal government recently reported that consumer spending had returned to pre-recession levels by 2012, 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.
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.
WORKFORCE West Virginia, Seasonally Adjusted Employment and Unemployment Data, http://www.workforcewv.org/lmi/EandE/sa_nf10.html
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.
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.
On April 14, 2013, the West Virginia House adopted HCR 107, expressing support for President Obama’s proposal to increase the minimum wage to $9.00 an hour and index it to inflation, in recognition of the decreasing value of the minimum wage and the idea that no one who works full-time should have to live in poverty. Read PDF of report.
Wages for West Virginia’s workers, and in particular low-wage workers, have eroded, not just in recent years, but over the past several decades. As fewer workers have enjoyed the fruits of a growing economy, problems like income inequality and poverty are growing problems in the state.
While there is no one quick fix, raising the minimum wage and adjusting it over time are key to reversing the long-term erosion of low-wage worker’s earnings and combating inequality and poverty.
This report calls for an increase the minimum wage by putting the current minimum wage in context to its historic value and other benchmarks. It also provides a demographic overview of who in West Virginia would benefit from an increase in the minimum wage. Finally it examines the evidence for the impact of the minimum wage on employment, and explores some of the reasons why the traditional arguments against raising the minimum wage are largely unsubstantiated.
- The real (inflation adjusted) value of the minimum wage has declined from its peak of $10.72 in 1968 to $7.25 today.
- Working full time on the minimum wage is not enough to keep a family of two out of poverty.
- Raising the minimum wage to $10.10 over the next three years would raise the wages of 191,000 workers in West Virginia, while raising it to $8.50 next year would benefit 122,145 workers.
- The majority of the beneficiaries of a minimum wage increase are adult, full-time workers who are supporting their families in moderate- to low-income households.
- Recent research shows that raising the minimum wage has little to no impact on employment and prices.
This edition of The State of Working West Virginia is the sixth of its kind. Each year since 2008 this report has examined the numbers and trends that tell the story of how the people who keep our state moving are faring. While each year’s report has a slightly different focus, one constant theme is the need to ask this simple question: what about the people who do the work? Read PDF of report
It is not hard to find stories in the media about the dire effects of West Virginia’s business or judicial climate but much rarer is consideration given to the climate for those who produce and provide the necessary goods and services that make modern life possible. Yet, as a song inspired by struggling West Virginia coal miners a century ago observes, “without our brain and muscle not a single wheel can turn.”
We hear much today about makers, takers and job creators, but this report examines the evidence and makes the case that the basis of a strong economy and a vibrant society is a healthy middle class. It also recommends policies intended to build the middle class. In this case, however, it may be helpful to look at the past as the state prepares to move forward.
The theme of this year’s report is Weirton Steel to Wal-Mart, signifying the vast economic transition that took place in recent decades as good jobs in manufacturing and mining gave way to lower wage, and lower- or no-benefit jobs in the service sector. The intent is neither to praise the one nor condemn the other. Rather, it is to examine the difficult road West Virginia workers have traveled and suggest ways of moving to a brighter future.