PUT ANOTHER NOTCH IN YOUR BELT, PLEASE - State's Economic Forecast

(07/19/2004)

By Bob Weaver

If you thought West Virginia's economy is bad and your belt is already tight, get ready to tighten it some more.

If you are disturbed about cuts to state programs and services, stick around.

Certainly not all is gloom and doom, but there are glaring problems.

A WVU study projects the state's economy during the next ten years will grow at a snail's pace, at least half the growth economists are predicting for the rest of the nation.

The other bad news is, there is already bad news.

Most of West Virginia's counties have had some of the worst economic indicators for a half a century, left behind when America has been booming.

Most of them are still on the Appalachian Regional Commission's most distressed counties.

Jokes about West Virginians being unaffected by recessions and depressions abound, since citizens have been use to adapting around poor economic conditions and a lack of basic infrastructure.

Back-to-work programs, while training people for better jobs, have mostly trained people for jobs that do not exist in the state, until they exit to Ohio, North Carolina and all points north and south.

George Hammond, director of the West Virginia Economic Outlook Program at WVU’s Bureau of Economic Research, says the state will continue to lose mining and manufacturing jobs and replace them with service industry positions. Service industry positions generally means low cost wages paid by retailers, fast food outlets and small businesses.

The study, which is done every two years, says the state economy will grow at a rate of 0.6 percent a year.

“It’s a constant refrain, at least it has been over the last five years or so, that we are likely to continue growing and improving, but our growth rate is just not fast enough to keep up with the national average,” said Hammond.

The service jobs, with some of the better paying ones in health care, are expected to add 3,600 jobs.

The state will continue to lose jobs in the high-paying sectors and have trouble replacing them with other high-paying jobs, Hammond said.

“We are doing a little bit of that,” he said. The biometrics and medical research industries are growing, but they are a relatively small part of the state economy.

The state lost 15,000 jobs from March 2001, the beginning of the national recession, to March 2004, although other reports indicate as many as 35,000 jobs have left the state in the past seven to eight years, most of them going to foreign countries.

In the next decade West Virginia’s per capita income is expected to grow at a rate of about 2 percent per year compared to the national rate of 2.5 percent per year, according to the report.

“When your job growth and income growth is lower than the national average, we have trouble attracting people,” said Hammond.

“We are the only state in the nation with a "negative natural increase," which means more deaths than births each year. "We essentially get no population growth."

The US Census predicts little or no population increases for rural counties like Calhoun during the next 25 years, all of which will be against the wall to provide basic services.

Hammond said state policy-makers are challenged to improve West Virginia’s public and higher education systems, road network and tax structure.

West Virginia, not unlike several other states, is having a cash problem, with state government facing what many are calling a melt-down.

Part of the problem is the state's declining population. In other words, we have fewer people supporting state spending that hasn't decreased.

The political system has been reluctant to blame the shifting of jobs to foreign countries, but with 35,000 fewer tax paying workers, thousands more making stagnant wages and a basic lack of new jobs - taxable revenue is just not there.

West Virginia collected $81 in state taxes for every $1,000 of personal income, the third highest per capita tax rate in the United States, according to the Census Bureau.

West Virginia is one of few states, if not the only one, that taxes poverty income of $10,000 or less.

"West Virginia is taxing both its citizens and its commerce about as much as it can," commented Marshall University economist Mark Burton.

The tax burden on businesses operating in the state has been counter-productive for years.

Clearly, there are hard times ahead for the Mountain State.

- WVU Bureau of Business and Economic Research is available at www.bber.wvu.edu.


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