WV Center on Budget and Policy > Blog > Family Economic Security > Unemployment Benefits Helped West Virginia Lead the Nation

Unemployment Benefits Helped West Virginia Lead the Nation

A recent US Bureau of Economic Analysis report on State Personal Income reveals the extent to which the West Virginia relied on Transfer Payments to support total Personal Income between 2008 and 2009, a time when the Great Recession was wrecking havoc on state budgets and employment outlook was particularly bleak. Transfer Payments, primarily Unemployment Insurance benefits, but also the Supplemental Nutrition Assistance Program (food stamps), Temporary Assistance for Needy Families (TANF), and other social safety net programs was instrumental in leading the way to growing Personal Income between 2008 and 2009 despite contractions in Personal Income from all but three other states. This was especially important as West Virginia’s unemployment rates shot up to 8.5 percent, a significant uptick from the 4.1 percent that had existed on the eve of the Great Recession in December 2007.

You may recall from the previous blog that the three major components to calculating Personal Income include Earnings from Work, Dividend or Interest Income, and Transfer Payments from all government sources. A person either receives earnings from a place of employment, or income from capital investments such as dividends or interest payments from loans, or income from government programs.

2006-2007 Change in Personal Income

Prior to the Great Recession, West Virginia’s Personal Income increased 4.3% from 2006 to 2007, from $51.8 billion to $54.1 billion dollars lagging behind the 5.7% average increase for the US. During this pre-recessionary period, West Virginia experienced the 5th lowest increase in Personal Income among all 50 states and the District of Columbia.

2007-2008 Change in Personal Income

From 2007 to 2008, with the national economy cooling down the US average increase in Personal Income was 4% compared to the 5.7% change from the previous year. The West Virginia economy kept chugging along ahead of the US as Personal Income increased 5.7%, from $54.1 billion dollars to $57.2 billion dollars.

2008-2009 Change in Personal Income

And, here’s where it gets particularly interesting. From 2008-2009, as the full brunt of the Great Recession was bearing down on the states’ economies, Personal Income in West Virginia actually INCREASED 2.0% from $57.2 billion to $58.3 billion (see, Table 1 below). West Virginia’s increase in Personal Income was the highest among all fifty states and the District of Columbia between 2008 and 2009, as the US average change in Personal Income was a minus 1.7%. In fact, there were only three other states with a positive change in Personal Income from 2008 to 2009 as most states experienced negative changes in Personal Incomes, largely due to declining changes in earnings.

Why did this happen? This is the result of the state’s percent of income from Transfer Payments increasing by 10.2% compared to a -0.2% decline in Earnings by Work and from a -5.2% decline in Dividends and Interest Payments.

Table 1:  Percent Change in Composition of Per Capita Personal Income

 SA04 Income and Employment Summary

2007

2008

2009

2010

Per Capita Personal Income

4.3%

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5.4%

2.0%

3.6%

-Earnings By Work

2.6%

4.9%

-0.2%

3.1%

-Dividends and Interest

11.9%

5.8%

-5.2%

0.6%

-Transfer Payments

4.6%

6.5%

10.2%

5.6%

 

The increase in Transfer Payments by 10.2% from 2008 to 2009 was largely due to increases in benefits from the Unemployment Insurance Compensation program.  Table 2 shows that Unemployment Compensation Benefits increased 55% compared to 7.5% Retirement & Disability Benefits, 7.7% Medical Benefits.  Other significant increases in Transfer Payments were the result of a 17.1% increase in Income Maintenance Benefits such as Supplement Security Income (SSI), TANF, SNAP, and other General Assistance Programs.  Further Veterans Benefits increased by 12.3% while Education and Training Assistance increased by 20.3%. 

Table 2:  Percent Change in Composition of Transfer Payments

SA35 Personal Current Transfer Receipts

2009

All Transfer Payments

10.2%

     Retirement & Disability Benefits

7.5%

     Medical Benefits

7.7%

     Income Maintenance Benefits

17.1%

     Unemployment Insurance Compensation

55.0%

     Veterans Benefits

12.3%

     Education/Training Assistance

20.3%

 

2009-2010 Change in Personal Income

Personal Income increased an average 2.9% for the US between 2009 and 2010, a significant turnaround from the negative 1.7% from 2008 to 2009.  West Virginia’s change in Personal Income was still higher than the US average with an increase of 3.6% from $58.3 billion dollars to $60.4 billion dollars.  This time around, however, the increase of Personal Income in West Virginia was equally due to increases in Earnings by Work and from Transfer Payments, but Transfer Payments were still the leading cause of an increase in Personal Income in West Virginia from 2009 to 2010.  Table 1 above shows that Earnings by Work increased 3.1% and Transfer Payments increased 5.6%. 

The upshot of this analysis underscores the importance of ensuring the state’s Unemployment Insurance program is modernized in order to cover as many of our vulnerable unemployed as possible.  The state’s Unemployment Insurance program disqualifies too many of our current jobless worker population.  West Virginia should modify state policies that would allow the state to draw down the remaining $22 million in federal incentive payments while covering approximately 2,500 more West Virginians under the program. 

The next blog will look at the impact of ARRA funding, as a percent of total Transfer Payments, on the state’s Personal Income during the Great Recession. 

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