West Virginia Needs to Diversify its Economy
The state needs a diverse mix of industries to support its population. Over-concentration, especially in an industry that's declining, puts workers and their families at financial risk.
Oct 19, 2020Updated 6 months ago
West Virginia has long been dependent on one industry: coal. Generations of West Virginians have worked in the coal industry and lived in communities that relied almost completely on coal mining. The rise—and fall—of West Virginia's economy correlates directly to the coal industry's boom and subsequent bust.
West Virginia has historically been coal country. While some residents are looking toward green energy, others are still clinging to this disappearing industry.
Since the 19th century, West Virginia has been coal country. The industry came to dominate many of the state's counties and was responsible for much of the state's early development in related industries, such as transportation and construction.
Entire communities sprouted up around coal mines; in fact, because most mines were far from towns, coal companies often started their own towns - complete with inexpensive homes, company stores, and churches. This led to "a unique way of life" for miners and their families, who relied on their employers for everything from an income to the very place they called home to where they bought basic goods.
In the 1940s and 1950s —often considered coal's "heyday"—more than 100,000 West Virginians were employed in coal mines. (Coal mining employment peaked in the 1940s, with more than 125,000 West Virginians employed by the industry.) Thousands more were employed in related industries, such as mechanics and transportation, or in industries made possible by the coal industry, like retail and hospitality.
For decades, coal in West Virginia has been "the most economically significant, politically powerful and socially influential industry in the state." Throughout the history of coal mining in West Virginia, about 81% of all its counties were home to regular coal-mining operations. Not only did coal provide jobs and energy for an entire country, it also helped fund public budgets at the state and local levels.
Like other Appalachian areas that developed around coal, West Virginia has been at the mercy of that industry. Since its 1950s heyday, the discovery of coal outside of Appalachia and the mechanization of coal mining work have caused the industry's decline in places like West Virginia.
As mines shuttered and companies declared bankruptcy, West Virginia's economy has, in turn, also taken a hit. In 2019, fewer than 14,000 West Virginians worked in the coal mines (representing a 40% job loss since 2008), and the state suffered a nearly $2.3 billion loss in export sales of coal between 2018 and 2019.
But economies can’t survive that way. States dependent on one major-yet-declining industry face substantial economic struggles as revenue, tax dollars, and related industries wane as well.
In states like West Virginia, Kentucky, and Wyoming, entire communities "have built their cultures and economies" around one industry: coal. While they're not the only states to suffer from a single-industry focus, they exemplify the ripple effect caused when that one industry falters.
The coal industry was already in decline before the coronavirus pandemic; between 2008 and 2016, coal production in West Virginia and Wyoming had dropped by half. However, the pandemic accelerated coal's demise in these states and highlighted what economic studies had already proved: that the decline of a single, dominant industry can lead to local governments' fiscal collapse.
In a state like West Virginia, where about 81% of all counties have been home to coal production, entire communities in which a now-shuttered coal mine served as the main employer face ruin. It's not just the miners who suffer; workers across supporting industries, like transportation and construction, also face threats to their employment. As unemployed laborers leave to seek opportunities elsewhere or severely restrict their spending, industries that relied on the residents' ability to spend money, like retail, suffer.
In 2019, for instance, following the closure of a major coal mine, the only major grocery store in one West Virginia county closed. Now, that county's mostly poor and elderly residents must drive long distances for groceries. Industries necessary to support once-active coal mining communities, like education, county government, and medicine, are experiencing wage stagnation and layoffs because of decreased revenue, fewer tax dollars, and diminishing or increasingly impoverished populations.
Evidence of the danger of basing an economy around one industry—especially fossil fuels, which are experiencing a decline overall—exists beyond experts' speculation. The economies of countries like Venezuela and Nigeria, which were, for years, based almost completely on petroleum, have been experiencing near-complete economic collapses.
The coal industry is particularly unstable and moving toward obsolescence. As an energy source, its demand is not stable like it was in the past. Other forms of energy have become more attractive, causing coal to become a questionable resource in the long term.
It was already struggling before COVID-19. Coal has been declining for years. And renewable energy sources are only taking a bigger share of the market.
The coal industry was struggling long before this year's coronavirus epidemic began to sweep the United States. The pandemic may have hastened the race to the bottom, but it didn't cause it.
Coal has declined by a third in the last 15 years. In that same period, renewables doubled, according to The Hill.
This decline came even after Donald Trump repeatedly made campaign promises to bring back coal jobs.
Trump started to roll back anti-coal regulations once in office, but it was already too late. The Energy Information Agency (EIA) predicted in 2018 that reliance on coal was falling and would only continue to fall.
The existing regulations, especially put in place by former President Barack Obama, are not entirely responsible. Shifting market forces were already pushing the energy industry in a different direction.
The coal jobs and coal industry revenues were already unlikely to come back by the time Trump entered office.
As The Hill put it: "The war on coal, in short, is over. And coal lost."
Now with the COVID-19 pandemic, it's declined steeply. As electricity use is down across the country due to businesses being closed, all energy industries are seeing losses. But coal especially has taken a beating.
The coronavirus pandemic has taken its toll on American businesses, both big and small. As manufacturers shut down plants because of social distancing and smaller businesses shutter indefinitely, electricity use in general has declined steeply.
That drop in energy use has hit coal especially hard. One coal analyst said there was a drop of 35-40% between this year and last year.
Another analyst who has been studying coal trends for years said this decline was one of the worst he'd ever seen. “It doesn’t compare — we have seen some relatively severe downturns. But nothing this sudden and this severe,” Andrew Blumenfeld of IHS Markit told NPR.
Many coal mines have had to shut down or lay off workers. Others are facing bankruptcy.
Stockpiles of coal are piling up. Some have compared it to an oil glut.
Meanwhile, solar and wind power overtook coal in April, powering more electricity than coal for the first time in U.S. history.
And experts say a revival is practically impossible. Trump and others have repeatedly promised to bring back coal jobs. But experts say that such an outcome is highly unlikely.
Trump is hardly the first political leader to make the promise of bringing coal jobs back. Other governors and local legislators, especially in coal-reliant communities, have made the same ill-fated promise.
But the flaw in making any coal-related campaign promise is that the decline of coal is not due to public policies alone.
"The decline of the U.S. coal industry is the result of market forces, not a policy 'war on coal,'" read one analysis.
There is also more public support, especially from younger generations not entering the coal-related job market, to push for renewable energy use and policies to make that cheaper and easier to access.
Coal plants and even airlines are facing increasing pressure to limit greenhouse gas emissions through policies and the use of carbon markets, which make it more financially viable to switch to more efficient fuel and move operations to more "green" methods.
Communities that rely on coal risk financial despair. The demise of coal would do more than cause huge job losses on every rung of the industry ladder. It could also trigger widespread economic fallout in communities that have come to rely on coal.
Massive layoffs and corruption have decimated the industry. The future of coal is in question as 2020 brings on its biggest decline in 60 years. That means increasingly tenuous employment for coal workers.
Approximately 53,000 Americans are employed by the coal industry, and some 26 counties nationwide are considered "coal-reliant," according to a report published by the Center on Global Energy Policy (CGEP) at Columbia University SIPA in 2019.
More than 6,000 coal mining jobs were lost in March and April of this year due to a combination of lower energy consumption because offices, stores, and large buildings closed during the initial months of the COVID-19 lockdown and other market factors, like the dropping price of photovoltaic panels to use for solar power.
There are more job losses and more mines closed than at any time in U.S. history since the administration of President Dwight D. Eisenhower in the 1950s.
Many of these job losses and closures took place in Appalachia, in towns originally built around the coal mines and/or were heavily dependent on them for survival. As the Brookings Institute summarized: "Estimates of the direct linkages between the coal industry and county budgets will almost certainly understate the risks because lost economic activity and jobs will have ripple effects across the economy."
While relatively higher salaries for the region will keep some of the recently laid off miners afloat, health insurance, and future housing and living costs are a real concern.
Add the pressures of navigating life in a pandemic when so many workers cannot perform their jobs remotely, and it is a recipe for economic turmoil in the region that may spread.
Even West Virginia, where coal has garnered steadfast support, saw its share of industry trouble when Longview Power filed for bankruptcy in April 2020. It followed several bankrupt coal companies across the country in the last few years. All of these have caused worker uncertainty.
Corrupt coal executives are only making it harder for workers. Bribery, putting workers at risk, and taking money intended for small businesses are just some of the issues. Coal executives often hold a community's economic fate in their hands.
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Coal executives are often powerful figures, particularly in "coal-reliant" states and communities. Not only do they employ many of the residents, but may own or lease land from the local or state government, contribute to local businesses and schools, and can wield an enormous amount of political clout with mayors, governors, members of Congress, and even the president of the United States.
But that great power is accompanied by the ability to abuse it. For example, in the early stages of the COVID-19 pandemic, the federal government put forward the Paycheck Protection Program (PPP). This program was intended to help small businesses (with fewer than 500 employees) survive the lock down.
PPP quickly went through its $350 billion fund and several family-owned businesses were left in the lurch for months without help.
However, Hallador Energy, a coal company with nearly 900 employees and $575 million in annual revenue, were able to secure a $10 million PPP loan. This was in addition to being awarded millions of dollars from a federal government stimulus bill which gave out $2 trillion to large businesses during the pandemic.
They were able to pull this off in part because their executives hired Scott Pruitt, who once led the Environmental Protection Agency, to lobby in Washington on their behalf and because the company’s former government relations director now works at the Energy Department.
But it goes beyond that to something even worse: knowingly putting miners' lives at risk. For example, Robert Murray, head of Murray Energy, has donated hundreds of thousands of dollars to President Donald Trump's campaign. In 2018, Murray wrote a letter to Vice President Mike Pence asking for a number of things, including environmental regulations to be rolled back and to loosen mine safety regulations.
The memo even asked the Department of Labor's office on mine safety be revamped. This was all while Murray posed for pictures with the president and 10 of his miners by his side.
Poverty and health problems are common among coal workers. With increasing living and healthcare costs, workers are better off being employed in another industry. However, in coal-reliant communities, well-paying employment can be difficult to find.
In Gillette, Wyoming, many residents relied on jobs from the coal mines. Despite promises to miners not to close, many mines closed or filed for bankruptcy—and thousands of people were suddenly left with no work and few prospects.
Working in coal mines, even with increased safety provisions in recent decades, has long been known to put miners' health at risk, particularly for a host of lung diseases from chronic obstructive pulmonary disease (COPD) to black lung disease.
But injuries due to accidents are also not uncommon. "Since 1900, when the federal government first began compiling statistics on coal mining deaths, over 105,000 coal miners have been crushed, gassed, electrocuted or incinerated underground, and well over 15 times as many have been seriously injured," according to TIME.
All these problems require reliable and low-cost health insurance, something many workers are losing as companies shutter or cut back as the COVID-19 pandemic lock down drags on.
The federal government has a fund which disburses monthly payments to miners who have been disabled by black lung disease in particular, but as recently as March, the National Mining Association asked lawmakers to reduce payments the industry must make to the fund. This is one of many attempts over decades by politicians and the mining industry to dip into and diminish the fund.
Companies like Peabody Energy are also cutting off health insurance for its retirees, which it previously guaranteed for the rest of those miners' lives. Many can rely on Medicare, but with severe lung problems and injuries from mining accidents, the costs of supplemental insurance will be incredibly high - especially for those who cannot work or anyone who lives in an area with limited opportunities, as is the case in so many "coal-reliant" communities.
Couple this with mining towns being decimated by decreased demand for coal as companies cut jobs, and miners often live in poverty and rely on what low-wage work they can find.
It's the result of a century's worth of land rights exploitation in places like Appalachia, keeping workers and those who once owned the land at the mercy of these multi-million-dollar companies.
Really, any state that relies on the coal industry will suffer. Between layoffs and shrinking public service budgets, coal-reliant states suffer. And their workers may be forced to choose between moving away or living in poverty.
Many people are forced to move away from "coal-reliant" communities. If a job search proves unfruitful, many former coal workers may be pushed to leave their hometowns. Those who can't are left with a decimated and impoverished community.
Many coal-workers in the past decade have found themselves out of a job. The number of coal jobs has nearly halved since 2012 alone, according to national statistics.
For laid-off coal workers who have only worked in one industry, it can be extremely difficult to find work. This is even more challenging in coal-reliant communities with precious few other industries to find work in.
The skills learned over years or decades in a coal plant often don't translate to other jobs. “Working in a power plant is pretty specialized, and those skills will be hard to transfer to another career. There are some options with other power plants, but they’d have to pick up and move to another state," explained Jim Griffin, president of the International Brotherhood of Electrical Workers Local 1900.
Some unemployed coal workers consider moving to other states to find work. Some have had to take a loss when selling their homes. George Adkins, for instance, was working at a West Virginia mine when it closed in 2019. He considered going to Tennessee or North Carolina, he told the Wall Street Journal. “Everywhere you looked it was coal trucks. It’s whittled down to almost nothing," he said.
Even moving to another state is uncertain, however. As coal jobs decline across the nation, relocating to another coal-reliant community is not a safe bet for long-term stability.
When coal companies cut jobs or shutter, mining families are left behind. Consequentially, the entire community takes a hit from this loss of tax revenue. Even residents working outside of the coal industry are affected.
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Both coal workers and the coal industry itself are important contributors to tax revenues in coal-reliant communities. And when the industry collapses, those tax dollars disappear.
In a case study, Brookings found that in three coal-reliant counties, coal-related revenue comprised more than a third of county budgets. That means that the entire community—even community members not employed in the coal industry—will feel the effects.
"Case studies show that the rapid decline of a dominant industry has led to downward spirals and eventual collapses of local governments’ fiscal conditions, including the inability to raise revenue, repay debt, and/ or provide basic public services," the report concluded.
Adams County, Ohio, for instance, was home to two huge coal-powered plants. When those shuttered in 2016, some 1,100 people lost their jobs, according to an Ohio University study. And those closures led to a staggering 32% drop in tax revenue in the county.
This means when coal suffers in a coal-reliant community, everyone suffers. In both the private and the public sectors, coal losses ripple through the entire community.
As a consequence, everything from public education, to infrastructure, to public health can suffer. Communities are left underfunded and decimated. The effect impacts generations to come.
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Given that coal companies and coal workers are often huge tax contributors to coal-reliant areas, when their tax dollars evaporate, the entire community suffers.
Several coal-reliant towns have taken such a hit that they even had to close their public schools, according to one report.
The collapse of coal puts at least 26 coal-mining dependent counties in 10 states at severe economic risk, according to a Columbia economist's report. "Mining dependent" is defined as when 8% or more of the community is employed by coal mines.
In these counties, coal accounts for at least one third of revenue. When that money disappears, the entire public sector suffers, from schools to basic infrastructure.
“It’s pretty hard to wrap your head around all the different ways coal-mining communities’ finances are dependent on the industry,” said Noah Kaufman, an economist at Columbia who co-authored the report.
And those effects can keep families—and entire communities—in poverty for generations to come.
Without diversification, West Virginia and its coal industry-reliant residents and communities will continue to suffer from the industry's decline. Diversification would give West Virginians the opportunity to find employment without having to relocate to another state, to protect the economic strength of their communities and public services, and to have more robust and diverse employment options.
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