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West Virginia has had several recent economic development announcements in the last few years with large companies moving to the state. Those projects require construction workers and a variety of full-time employees once the work is done.
Couple this with recent federal infrastructure programs that demand workers and offer solid salaries, it raises the question, do we have enough people for the jobs?
In this new radio series, “Help Wanted: Understanding West Virginia’s Labor Force,” WVPB reporters focus on the state’s workforce. To begin, News Director Eric Douglas sat down with Heather Stephens, director of the Regional Research Institute at West Virginia University (WVU), to understand how things stack up in the Mountain State.West Virginia Public Broadcasting is producing a radio series focusing on the West Virginia workforce.
This interview has been lightly edited for clarity.
Douglas: Explain to me the quick and dirty definition of what labor force participation is, and why it’s different from unemployment rates.
Stephens: Labor force participation is the number of people that are in the labor force. And this is people 16 and older. The difference here is that the people in the labor force are the people that are working or are looking for a job. When you talk about the unemployment rate, you’re basically looking at the number of people that are in the labor force that can’t find a job. The numerator of the fraction basically, is people working or looking for a job. So unemployed people, and people working, the denominator, are the sort of big number is the population 16 and older.
When we look at unemployment rates, it is simply looking at the percentage of people who are unemployed that are in the labor force. And so when we have a low unemployment rate, it just means that the people that are trying to work. Many of them have jobs. When we have a low labor force participation, it means that of the people 16 and older, there’s a lot of people that aren’t working or trying to find a job. That’s why we say it’s labor force participation. They’re not working, they’re not in a job. They’re off the grid in terms of our labor force.
Douglas: How does that reflect if somebody’s on disability or something like that?
Stephens: In that case, they would be considered out of the labor force and having a higher level of disability would affect our labor force participation. That is one of the drivers of lower labor force participation in West Virginia, but it does not fully explain why we have the lowest labor force participation.
All states have some percentage of their population that’s disabled, West Virginia does have a slightly higher percentage than some states. But that does not explain the disparity between the labor force participation rate and the national labor force participation.
Douglas: We’re usually about 10 points lower than the national average, something like that.
Stephens: I looked last week, we were almost 55 percent. So we’re actually about 7 percent below the national average. If we look at our population 16 and older, and right now we have about 780,000 people in our labor force. That’s at the roughly 55 percent of our population. And if we went to 62 percent, we would almost have another 100,000 people in the labor force.
Douglas: That’s an awful lot of tax revenue and everything else, if we had those people working.
Stephens: Even if we assume there’s some underlying reasons that we would never get up to 62 percent, and I can provide some other reasons, partially due to the aging of our population. So it’s probably unrealistic. West Virginia is not gonna get to 62 percent. But let’s say we just got half that, right? You’re talking about another 50,000 potential workers.
Douglas: That’s human beings who are already here. We’re talking about human beings who are sitting here in West Virginia, who could potentially be working, and they’re just not.
Stephens: One of the criticisms of the standard labor force participation rate is that it’s people 16 and older. The older part of that population, that part in retirement age, they may just be collecting Social Security or living off of some retirement savings. And so they may not have a reason to want to go back into the labor force. I looked at the demographic numbers for the state of West Virginia, and since 2010, West Virginia has lost about 77,000 people from its population. And at the same time, the share of our population that is over 65 and older, has increased from 16 percent to 20 percent. We have a smaller population, and of that smaller population, more of them are over 65 or older.
So part of our current labor force participation rate, obviously, is being driven by that denominator, that population, more of them are over 65. Now, that doesn’t explain the long-term trends that you mentioned. The other thing I noted was during that same time period, it looks like we actually lost about 100,000 people between ages 18 and 64.
Douglas: In the primary workforce, we lost 100,000 people?
Stephens: Yes, more than 100,000 people. Our population overall is down. And it’s down more in the working age population.
In some recent research that I did, that I published with one of my former graduate students and another faculty member at WVU, we actually found that one driver nationally, of losing working age population, can be when there’s a spike in opioid overdoses. And so it could be, on a population weighted basis, we are still, statewide, at the top, or one of the top places in terms of those opioid overdoses.
Our research shows it could be a tipping point. People in that working age population, maybe there aren’t a lot of opportunities. And then this is sort of like the last straw, “my community is just not where I want to live anymore.” I don’t know if that’s the reason. But that’s one potential reason that we’re seeing that out-migration.
Douglas: The numbers aren’t great enough for overdose deaths themselves, but just people saying, “Alright, I’ve had enough of my community, I’m leaving here for someplace better.”
Stephens: There is some evidence from our research, not specific to West Virginia, but nationally, our research shows that, that can be sort of a tipping point for out-migration of primarily working age people. The other thing that I noted in a meeting a couple weeks ago with some folks at the Federal Bureau of Economic Analysis, is that while some measures they were touting was that West Virginia doesn’t have a lot of income inequality. They were ranking states by income inequality. And I said the problem with that is that part of the reason we don’t have high income inequality is that our incomes are highly compressed downward.
So if you even go to the Workforce West Virginia website, and you look at the average annual wage for West Virginia, it is $17,000 below the national average. And that is pretty significant. It relates back to this discussion of labor force participation in economics. In labor economics, we have this theory called your “reservation wage,” which is, I need to make a certain level of wages in order for it to be worth it for me to go to work.
If wages are compressed downward, it might be that part of our persistent labor force participation rate is that there’s enough people that can’t justify taking a job because of the commuting cost, or those who have young children, the cost of of childcare, that it’s not worth it to work and live in. Salaries can prevent some portion of the population from entering the labor force. I am not saying it’s the only reason, but it is one potential reason.
Douglas: Do we have enough people to support some of this economic development? Do we have enough people who can work the tourism jobs? What does it take to get people off the sidelines?
Stephens: One thing is making sure they can make enough money, making sure that there’s access to childcare for those in the working age population. The reason that U.S. labor force participation rates went way up starting around the mid ’70s, is that women entered the labor force at really high rates compared to the past. If you keep women out of the labor force because of lack of access to childcare you’re always going to have some sort of compression of your labor force participation rate. I think it’s important to be thinking about access, and especially that there are some issues with lack of childcare access in the state, and especially in places that make it convenient for you to get to your job and take your kid to childcare. That’s one potential thing that, but again, salaries overall are highly compressed downward.
You mentioned some of the big sectors like education and health care. We’re not paying in the state the same kinds of salaries that other states are paying. If you’re a teacher, for example, you can go to Pennsylvania and make a lot more. You can go to Virginia and make a lot more. So that can be a problem when it comes to recruiting educators. Tourism jobs, historically, everywhere, are not the highest paid jobs and they’re highly seasonal. Before we got started, we were talking a bit about bringing in international workers to help out in the high tourism seasons. You see this a lot in national parks, where the lodges at national parks are almost all staffed by international workers. The seasonal nature of that work, where if I’m someone living in that community, I need a job that’s year-round, not one that pays me for six months a year, because I’m supporting a family and I’m trying to live there full-time.
These are all some of the things that might bring people back into the labor force. More support in terms of childcare and higher wages. Trying to figure out how to balance this seasonal nature. Tourism work isn’t going to solve everything. The aging of our population means that we’re going to have a persistently lower labor force participation rate. Another reason that we may have lower labor force participation is that we have a significantly lower level of higher education graduates in our state compared to the nation.
If you look at the share of the population with a bachelor’s degree or higher, nationally, it’s 33.7 percent. And we have only 21.8 percent of our population with a bachelor’s degree or higher. I may work at a university, but I’m not ever advocating that everyone needs a bachelor’s degree. But we have a very high, high school graduation rate in this state. We graduate a lot of our students. But the thing that I’m not sure we are doing as good of a job at is getting those high school graduates into some sort of post-high school training that makes them more marketable for jobs that exist.
This could be a two-week certificate program that gets them some kind of training in programming, and then they can get hired and get additional training by their employer. But I think we’re stagnating out at that high school graduation. And so our workforce isn’t as trained, that makes them less marketable, it makes it harder for them to find jobs, and probably makes people discouraged and could be contributing to the slower labor force participation.
Douglas: There’s no easy answer to this, is there?
Stephens: I think that we need to chip away at thinking about what can be done. I think that things like improving access to childcare is one really big one that would bring some people back into the labor force. I think identifying training opportunities that would make people who maybe are out of the labor force get the skills they need to be prepared for jobs that do exist. I’ve been talking to some folks in the New River Gorge area who are putting together a working group to bring together various educational institutions, and think about these training programs to get people ready for jobs.
This story is part of the series, “Help Wanted: Understanding West Virginia’s Labor Force.”