THE STATE OF MY STATE – THE ECONOMIC NON-IMPACT OF COAL & NATURAL GAS IN WEST VIRGINIA

From a Post by Sean O’Leary, The State of My State (WV Blog), January 9, 2015

They are assumptions bordering on articles of faith in West Virginia. “As coal goes so goes West Virginia’s economy.” And “West Virginia’s best hope for future economic growth is its natural gas industry.”

Those who make these claims regularly brush off objections that neither industry employs more than about 3% of West Virginia workers by suggesting that those meager figures fail to take into account the full impact coal and natural gas have on West Virginia’s economy. They argue that coal indirectly creates tens of thousands of additional jobs in supplier industries and induces tens of thousands more in the broader economy.

Coal mine operator Robert Murray of Murray Energy says that for every coal mining job eleven others are created, which, if true, would mean that more than 40% of all private sector jobs in West Virginia would be attributable to the coal industry alone.

That being the case, one would expect that significant growth in employment in coal and natural gas would have a powerful knock-on effect in the form of increased employment in the rest of West Virginia’s economy. That’s why it will probably come as a surprise to many that, according to Workforce West Virginia, even as employment in the coal and natural gas industries has expanded by more than 22% in the last seven years, all other private sector employment in West Virginia has actually declined by two percent.

In fact, going back to the year 2006 at the dawn of West Virginia’s natural gas boom, there appears to be almost no correlation between employment change in the coal and natural gas industries and private sector employment in West Virginia’s broader economy. Some may suggest that the absence of any visible correlation is attributable to declines in coal jobs offsetting gains in natural gas.

But, when employment data for the two industries is unbundled, we see that employment in coal, although decreasing now, has none the less increased overall since 2006.

Even in 2008, when coal mining employment grew by 10% and natural gas employment by more than 13%, the rest of West Virginia’s private sector actually lost jobs. This disconnect between coal and natural gas job growth and overall private sector employment could mean that the coal and natural gas industries don’t generate the numbers of indirect and induced jobs that many people presume.

On the other hand, it could be the case that the indirect and induced jobs are being generated, but that the gains are being offset by job losses in the rest of the economy. The latter explanation would be particularly disappointing since, in an effort to spur private sector job growth, the state has implemented a steady diet of corporate tax cuts during this time period.

Consequently, boosters of the coal and natural gas industries who are also proponents of cutting of corporate taxes (a group that includes the leadership of both political parties) face the unhappy prospect of having to acknowledge that either the coal and natural gas industries aren’t nearly as important to West Virginia’s economy as they have long insisted or the corporate tax cuts they enacted and which have plunged West Virginia into a series of budget deficits have utterly failed to produce the results they predicted and hoped for.

Of course, it’s also possible (and I would say likely) that both of these are true.

Percentage Change in Employment