CHARLESTON — Whatever kind of tax relief West Virginia lawmakers consider, one of West Virginia University’s top economists says it won’t be enough to solve the problems of population decline and participation in the state labor market.
WVU held its annual economic outlook conference Wednesday at the Embassy Suites in Charleston. Attendees heard from a number of presenters, including John Deskins, director of the Office of Business and Economics Research at WVU’s John Chambers College of Business and Economics.
Governor Jim Justice and Republicans in the West Virginia Legislature are clashing over the best way to cut taxes: either by cutting personal income taxes by 10% and phasing them out; or eliminate some taxes on tangible personal property, such as machinery/equipment, inventory and vehicles.
Deskins declined to voice support for the governor’s personal income tax cut plan or the Senate’s plan to eliminate taxes on tangible personal property, although he has supported the elimination of taxes on machinery/equipment and inventory. Instead, Deskins focused on West Virginia’s long-term problems of population decline and a shortage of working-age residents in the state’s labor pool.
“I wish our biggest problem was that we have a very bad tax system,” said Deskins. “Wouldn’t that be a great problem to have?” Because if we had a bad tax system, we could just fix it. I’m not saying our tax system is perfect and I’m not saying I’m for this policy change or this policy change…but it’s a problem that even if we make the policy changes today that we need to bring, that it takes another five to 10 years to see any real differences in these statistics.
According to data from the Bureau of Business and Economic Research, population growth in West Virginia will continue to decline between 2022 and 2027, although the rate of decline will be slower than between 2011 and 2021.
Disaggregated by age, the state’s population is only projected to increase between 2022 and 2027 for those ages 65 and older, although this growth is expected to slow from 2011-2021 levels. The population growth of 0-17 year olds and 45-64 year olds between 2022-2027 will continue to decrease more rapidly than between 2011-2021, although the population growth rate of 18-44 year olds between 2022-2027 will slow to less than -0 percent after approaching -1 percent growth between 2011 and 2021.
West Virginia’s aging population and the flight of young adults to other states is a driving factor in West Virginia’s labor force participation rate, which remains one of the worst in the nation. But Deskins said there were other factors at play.
“You must have asked yourself: is this problem of labor market participation due to the fact that we have an older population? Obviously, if you have more people who have retired, it reduces participation in the labor market,” said Deskins. “Of course, the answer is ‘of course.’ Of course, having an older population is clearly a big factor in our low labor force participation rates…but it’s so much deeper than that.
According to the Federal Reserve Bank of St. Louis, West Virginia’s seasonally adjusted labor force participation rate for August was 55.2%, up slightly from 54.8%. The state’s seasonally adjusted unemployment rate is also up, from a record high of 3.5% in May to 3.9% in August.
Deskins pointed to 2021 US Census data showing the state’s labor force participation rate for residents aged 25 to 54 was 74.1%, trailing the US and behind the average. national 82.5%. According to data presented by Deskins, the lack of working-age adults in the state’s labor force is due to the state having the worst college graduation rate of all. 50 states, the highest death rate and the highest drug overdose rate.
According to Deskins, keys to improving labor force participation in West Virginia going forward include improving access to two-year community and technical education and learning programs for jobs. high-paying in-demand, improved health outcomes for West Virginians, and more resources for addiction treatment and rehabilitation.
Deskins also said the state needs more positive shocks in economic development, citing the example of North Carolina-based green steel maker Nucor, which is building an electric arc furnace in Mason County. . When complete, the plant will provide well-paying jobs for West Virginians, but it will also need workers to relocate to West Virginia, which will spur population growth and other economic opportunities.
“Nucor is so big and has so much potential that we don’t have the people in West Virginia to run this plant,” said Deskins. “It will encourage people to come from other states. It’s the perfect example of the type of positive shock we designed to create positive momentum instead of negative momentum.
Deskins said state economic development officials should focus their business recruiting efforts on industries such as chemicals, plastics, aerospace, rare earth minerals and carbon-based products. , industrial diversification and entrepreneurship, as well as recreation and outdoor tourism.