A Hint of Promise in West Virginia’s Grim Economic State?

A Hint of Promise in West Virginia’s Grim Economic State?
A pedestrian stands on a street corner as a message is displayed in a storefront window along the business district, Wednesday, Oct. 7, 2015, in Welch, W.Va. West Virginia is the only state in the country where more than half of adults are not working, according to the Census Bureau. It is tied with Kentucky for the highest percentage of residents collecting disability payments from Social Security, according to the Kaiser Family Foundation. And the death rate among working-age adults is highest in the nation, 55 percent higher the national average, according to the Centers for Disease Control and Prevention. (AP Photo/David Goldman)

Two recent economic reports paint a discouraging picture of the economic and wage condition of many West Virginians – it’s tough news that West Virginians are sadly accustomed to hearing. But each report includes some off-the-headlines data that may offer promise.

First the hard facts: According to the recently released U.S. Census Bureau’s American Community Survey, West Virginians remain older, poorer, less diverse and less connected than average Americans.

With a median age of 42.3 years, West Virginians are nearly five years older than the national median. West Virginia is not replenishing its population as fast as other states because of its fertility rate, already in the bottom half of U.S. states, and its amazingly low number of foreign-born residents – only 1.5 percent of the entire state population, compared to the national percentage of 13.5 percent. More than half of foreign-born residents in the U.S. come from Mexico and other Latin American countries, which have higher birthrates than the U.S.

An aging, declining West Virginian population creates all sorts of long-term problems, from a lack of working-age residents to the strain on the social safety net to further loss of political representation in Congress.

One piece of data that jumped out from the Census survey, in a bad way, was home value.

Home value is the most important tool of wealth creation and ascent up the U.S. economic ladder for most people. West Virginians have low home values, and they drag on their economic aspirations in two ways.

First, lack of mobility. We live in an increasingly mobile economy and workers must travel to where the better job is. Let’s say a West Virginia energy worker scores a good job in the energy-boom state of North Dakota. Let’s say he or she wants to move their family with them. First thing is to sell their house. In West Virginia, the median home value is $117,900, so let’s say they sell it for that much. Now, they’re home-shopping in North Dakota, where the median home value is $184,100. It’s going to be hard for them to find an affordable home there, which means they might not be able to take the job.

But low home value is an anchor in another way. Home values typically increase at rates faster than wages. If you buy a house for $200,000 and sell it 10 years later for $275,000, you get a one-time chunk of money larger than the average worker is ever likely to receive, shy of winning the lottery. That money can be used to buy a bigger, more valuable house, which can be resold at a higher price, and so on. Or it can be used for a child’s education, or to invest. Either way, up the ladder.

But with a median home value of little more than half the national median of $205,000, even the most valuable asset in most West Virginians’ lives is not much of a boost up the home-equity ladder.

The wage picture in West Virginia is little better.

West Virginia’s median household income of $43,385 is almost one wager-earner below the national median of $57,617. Consequently, 17.9 percent of West Virginians live below poverty, compared to 14 percent of the rest of Americans.

This has a lot to do with the high number of low-wage jobs in the state.

According to the recent West Virginia Center on Budget & Policy’s 2017 State of Working West Virginia report, 23 percent of the state’s workers have low-wage jobs, which the survey defines as $24,108 per year. By comparison, the national median income is $44,148, per the Labor Bureau.

As you’d expect, these low-wage jobs are concentrated among the youngest and oldest state workers and they are pegged to education level – 44 percent of state workers lacking a high school diploma work in low-wage jobs.

By sector, the largest number of low-wage workers – nearly 8 percent – have jobs in the food and beverage industry: waiters, cooks, fast-food and so on. And these jobs are among the lowest-paying, averaging only $7.22 per hour.

But not all of this is as dire as it may seem. For instance, 17 percent of West Virginia households have a low-wage worker, which sounds high. But if that low-wage worker is a 16-year-old son or daughter, he or she is contributing to the household income or at least making their own cash. Thus, they are improving the family’s spending power, not dragging it down, which the study notes.

There is some promising data inside the Census survey.

West Virginians’ education level is not as poor as the stereotype. Eighty-six percent of state residents have a high-school diploma, which is very near the national median of 87.5 percent and higher than in Kentucky, Louisiana, Mississippi, New Mexico, Alabama and several other states. This means West Virginia workers can be competitive for higher-wage manufacturing jobs, such as those at an auto assembly or semiconductor plant.

In this Oct. 5, 2015 photo, Danny Ferguson, 41, right, and Jason Warrix, 22, rear, learn solar panel installation from instructor Kelly Larson on the roof of the Coalfield Development Corporation during a class in Huntington, W.Va. (AP Photo/David Goldman)

It also means the West Virginia workforce has the education to acquire new skills through certification programs and retraining to step up the wage ladder to middle-skill jobs, which will be the most in-demand in the coming decades. No, not everyone has to learn how to code – and, in fact, computer coding will be a blue-collar job in the future – but West Virginians can acquire the education and skills required to operate high-tech manufacturing equipment, for instance. That will require additional funds from the state and federal governments – the private sector is by its nature not set up to manage a truly effective state-wide jobs retraining program.

Money must also be spent on getting all West Virginians connected. Through subsidies, the state government should increase access to high-speed internet because online education is a key component to job retraining. Only 74.2 percent of West Virginians have high-speed internet in their homes, lower than the national median of 81.4 percent and well behind national leaders such as Massachusetts, where 90 percent of homes enjoy broadband.

And money must be spent on subsidies for things as seemingly off-point as childcare. Why? A mother cannot learn the skills needed to get a better job if she is taking care of children and cannot afford a babysitter.

At the same time, it is probably best to resist the short-term satisfaction of raising the state’s minimum wage, which the left-leaning West Virginia Center on Budget & Policy’s report recommends. At $8.75 per hour, the state’s minimum wage is already above the national minimum of $7.25 per hour.

In some U.S. cities, there “Fight for $15” movement, a push to more than double the national minimum wage to $15. But this is problematic. No one needs an economics degree to understand that if you force employers to double their workers’ wages they will not be able to employ as many people for as long, causing layoffs and reducing worker hours. Also, they will be pressured to raise prices, harming consumers.

Steep hikes in the minimum wage hit small businesses especially hard. Some 96 percent of all West Virginia employers are small businesses. They account for half of all the state’s employees.

Starting in April 2015, Seattle began stepping up its minimum wage up from $9.47 per hour to $13 per hour by January 2016, on the way to $15 per hour. A University of Washington study released in June showed that the wage hike did indeed increase wages for the lowest-paid workers by about 3 percent. However, it also caused a 9 percent reduction in hours worked, because employers could not afford to pay the higher wage for the same number of hours. The study estimated that without the city- required minimum wage hike, employers could have afforded to add 5,000 more jobs during the same period.

It will take political will and spending at the state and federal level to improve West Virginians’ economic future through subsidies and retraining efforts. And it will take hard work by West Virginians, who have endured plenty, to improve their lot by taking advantage of such programs. It won’t be easy on either end. But with smart, long-range policy, and a resistance to short-term panaceas, it is possible. There is nothing peculiar to West Virginia or West Virginians that prevents them from taking part in the ongoing economic revolution.

Frank Ahrens, a West Virginia native, is a public relations executive in Washington D.C. He was a Washington Post journalist for 18 years and is the author of “Seoul Man: A Memoir of Cars, Culture, Crisis, and Unexpected Hilarity Inside a Korean Corporate Titan.”

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