Revitalizing Appalachia's Economy Following the Decline of the Coal Industry

Policy Memorandum

Subject: Revitalizing Appalachia’s Economy Following the Decline of the Coal Industry

Date:  October 16, 2019

This memorandum will address the economic decline and high occurrence of joblessness in the Appalachian Region due to the deterioration of the coal industry. As Federal Co-Chair of the Appalachian Regional Commission, I urge you to tackle this pressing issue.

The Economic Aftermath of the Appalachian Coal Industry’s Decline

At its peak in the 1920s, the U.S. coal industry employed more than 880,000 people and supplied a little under three-quarters of the entire country’s electricity consumption.[1] Since 2008, the industry has been in steady decline. Now, 100 years after its heyday, only around 53,000 people are currently employed by the approximately 350 coal mines that are left, which now produce only 30 percent of the United States’ total electricity.[2] From clean energy policies and competition within the natural gas industry to the mechanization of the mining process and slow growth in the demand for energy within the United States, the need for a robust coal mining industry has been rapidly shrinking, putting thousands of workers out of jobs and leaving entire communities in economic decline.[3]

The issue is contentious. A look at any major news outlet in the Appalachian region will reveal constant coverage of the “war on coal” and the Obama administration’s purported attempts to dismantle a seemingly prosperous industry. Political hopefuls from Kentucky, West Virginia, Virginia, and Pennsylvania run on platforms to bring back the coal industry to revitalize dying communities. President Trump makes regular stops to the region—colloquially dubbed “Trump Country”—to reinforce promises to make displaced miners and their families whole again.[4] However, research shows that contrary to the president’s claims, the U.S. coal industry is not on the fast track to revitalization.[5] Instead, the industry would not only be unable to provide enough jobs for those affected but would also have detrimental effects on the health of workers, the environment, and those living in the region. 

Coal Brought Jobs—It Brought Health and Environmental Issues, Too

Between 2011 and 2017, the Appalachian region has lost more than 33,000 coal mining jobs—and only 1,300 new coal jobs have been created since President Trump took office.[6] Many of the existing jobs within the industry are reserved for managing the automation process—a job that requires formal training. Without formal training, those seeking to enter or re-enter the coal industry would be unable to fulfill what few jobs are left.

In 2014, a coal cleaning plant in Charleston, West Virginia polluted the drinking water of thousands of nearby residents when it failed to follow Environmental Protection Agency regulations on the safekeeping and disposal of hazardous wastes. For months, those affected were unable to use their home water systems for drinking, brushing their teeth, or even cooking and were forced to queue in line for hours at grocery stores in hopes of acquiring a few gallons of distilled water to last them for an uncertain amount of time.[7]

The American Lung Association estimates that coal pollution kills approximately 7,500 Americans every year. A survey of 11 black lung clinics[8] in Virginia, West Virginia, Pennsylvania, and Ohio found more than 1,000 cases of black lung among coal miners since 2016, with more added every day. These miners are being diagnosed much younger and with more severe cases than ever before.[9]

Miners Want Jobs, but They Also Want the Region to Flourish

Nevertheless, many residents of America's eastern coal-producing region remain steadfast in their hopes that the industry will return. With little economic diversity in the area, opportunities for well-paying jobs that provide decent benefits are few and far between for anyone with a four-year college education, much less the region's predominantly high-school educated populace.[10]

For regional outsiders, the answer to the dying and environmentally unfriendly coal industry may seem simple: let it die and shift workers to another sector. However, for those directly affected, the solution is not that simple. Some states have federal grant programs in place to allow displaced workers, and sometimes even their spouses, to retrain into another industry. However, retraining is often synonymous with leaving the region once the training is finished.[11] If the opportunity in the new industry is not present at home, workers would be required to move to a more economically prosperous location where jobs are present. A max exodus of workers would likely be the final nail in the coffin for their struggling home towns.[12] Moreover, in many states, the state legislature is controlled by individuals with financial and familial ties to the coal industry who have fought to prevent alternative industries from creating competition, effectively preventing the creation of new jobs.[13]

As the Senators who represent this region, it is of the utmost importance that you work on behalf of your constituency to address these pervasive problems. This region and these displaced people need a multi-faceted, multi-level policy approach that will provide jobs within the region, revitalize the communities affected, avoid further damaging the environment, and will be less harmful to the health and welfare of the workers, their families, and the community-at-large. I hope you will help.

Policy Alternatives for Addressing Appalachia’s Joblessness

This section outlines two policy alternatives that you, as policymakers at the federal level, and your counterparts at the state level could take to address the high occurrence of joblessness in your home states. Both of these alternatives will be evaluated based on three criteria, which are defined below.

To evaluate these alternatives, I make the following assumptions: dislocated workers[14] are physically able to and are looking for work; dislocated workers prefer not to relocate; new business would provide new employment opportunities, and policymakers with financial ties to the coal industry do not want alternative sectors to compete.

Evaluation Criteria

The policy alternatives will be measured against three criteria of varying weights. The first criterion, cost, is weighted at 25% and assesses how much the alternative would cost to implement and from where funding would come. The second criterion, political popularity, is weighted at 35% and analyzes whether the alternative would be politically favorable to policymakers or their constituents. The final criterion, feasibility, is weighted at 40% and measures how easily the alternative could be achieved within the existing policy structure. Cumulatively, each of these criteria is important for measuring the potential effectiveness of each policy proposal. As both of these policy options rely on elected officials to implement, I selected the criteria for their relevance to the policy decision-making process for federal and state legislators.

Alternative 1: Creation of Opportunity Zones

Policymakers could utilize “Opportunity Zones”[15] created under the 2017 Tax Cuts and Jobs Act to incentivize new industry to the areas most affected by the declining coal.[16] If implemented correctly, Opportunity Zones have the potential to benefit unemployed residents of deeply impoverished areas, as well as investors and the affected community as a whole.[17]

In June of this year, we at the Appalachian Regional Commission released our annual report documenting the economic status of various counties throughout the region. A significant portion of Kentucky, West Virginia, Virginia, and Ohio are economically distressed or at-risk of becoming distressed.[18] As many as 80% of neighborhoods in West Virginia alone are eligible for selection as Opportunity Zones.[19] Targeting these specific counties as Opportunity Zones has the potential to breathe new life into the region as a whole.

Projected outcome and analysis

Opportunity Zones are funded through direct investment from private companies and individuals in exchange for tax incentives such as tax reductions on capital gains.[20] Because they do not involve direct monetary investment from the government, they will be favorable to those looking to minimize cost.  Opportunity Zones could increase long-term economic outcomes for distressed communities and create jobs for workers and are therefore likely to be politically popular with voters and policymakers alike. However, to ensure that new industry comes to the region, policymakers should consider ballot measures to implement conflict of interest legislation preventing state policymakers who gain financially from the coal industry from shuttering new industry competition.[21] Such legislation would be hard to pass at the state level as it would require policymakers to regulate against their self-interest. Without active measures to fight cronyism, efforts to bring in new industries will be difficult to bring to fruition, making this option rank lower in terms of feasibility.

Alternative 2: Expansion of Retraining Programs

The second policy alternative builds on existing infrastructure by continuing to fund retraining programs while expanding programs to states where they do not exist. This policy alternative would include full funding for technical skills training or in-state higher education. It would be limited to a core selection of industries with available employment in the region. Stipends for childcare, transportation, and health care should be built into the cost of the retraining programs to mitigate barriers to completion.[22]  [23]

To fund retraining programs, the federal government and states could implement a carbon tax and rollback existing tax cuts on the coal industry. A carbon tax at $25 per ton of CO2-equivalent emissions with two percent above inflation increases each year could amount to $90 billion in the first year and $1.2 trillion over a decade.[24] Currently, under the Black Lung Benefits Act of 1977, coal companies pay a $1.10 per ton excise tax on underground production and $.55 per ton on surface mining to the benefit of the Black Lung Program.[25] Congress could extend the legislation and increase the amount to include funding for retraining programs for current and former miners looking to retrain into another industry. 

Projected outcome and analysis

A well-trained workforce is necessary for economic sustainability.[26] Retraining programs play a vital role in preparing the available workforce for market fluctuations and industry shifts. In 2016, the National Dislocated Worker Grants program provided employment and training services to more than 21,000 individuals across the United States. Of the 68 types of grants awarded through this program, totaling $160 million, six were specifically coal-related, and 47 were for employment recovery.

Last year, more than 460,000 individuals participated in dislocated worker programs across the United States. Approximately 35,000 participants were from the states you represent. This data shows that your constituents need retraining programs. 

Upon completion of a retraining program, unemployed workers would have more opportunities for employment through increased skills and abilities. However, this policy alternative may result in a mass exodus of talent from the region to parts of the country with more job opportunities. 

Of the two options presented, expanding retraining programs would have a higher monetary cost. However, because the infrastructure already exists and implementation requires expansion rather than creation-from-scratch, this policy alternative ranks higher on feasibility. In terms of political popularity, this alternative could go either way. Fiscally conservative policymakers and voters may see increased funding for education as an unnecessary expenditure, while those who support a robust social safety net would likely support it. Furthermore, since funding through this model would require more regulation, policymakers who oppose government intervention may not support implementation.

Policy Analysis Conclusion

In sum, the first alternative meets the criteria for political popularity and cost but not necessarily feasibility. Because a successful Opportunity Zone would require some form of legislation to keep policymakers from preventing alternative businesses from coming to the region, it will be challenging to implement fully. Due to the complications of implementation, this policy alternative may not be effective in reducing joblessness in the region. The second alternative, expanding retraining programs, while costly, is both feasible and has the potential to be politically popular. Based on the previous success of retraining programs in other states, this policy alternative has a high potential for effectively lowering joblessness.

Stakeholder Analysis

            As mentioned earlier, addressing the high occurrence of joblessness in the Appalachian region will require a multi-faceted, multi-level approach to provide jobs to the region. This will not be possible without buy-in from a variety of stakeholders, big and small. In the following sections, I will outline the potentially relevant stakeholders, analyze their stakes and levels of influence in addressing the issue, and discuss how we might bring them to the table. Please bear in mind that the list of stakeholders analyzed is not exhaustive. For more information on other potential stakeholders, refer to Chart 1 in the Appendix.

Stakeholders with High Stakes, High Influence

 Appalachian policymakers at the state and federal level will be vital in addressing joblessness. As the representatives of these constituencies, stakes are high. Successfully lowering unemployment in the region will be key to maintaining a robust voter base and improving the quality of life for constituents. Because both policy alternatives require legislative action, the influence of policymakers in the state legislatures and U.S. Congress is strong. This strong influence could be either beneficial or detrimental to mitigating joblessness. As mentioned earlier, state legislatures in coal country are rife with members who gain financially from the coal industry. These members can obstruct any legislation that would bring competition into the state, effectively nullifying the suggested policy proposals. It will be imperative to show these legislators that it is in their best interest to do what is in the best interest of their constituents.  

Stakeholders with High Stakes, Low Influence

            At the center of the economic decline of the coal industry are the thousands of dislocated coal workers across the Appalachian region and their families. In recent years, most of the counties in the Appalachian coal region have suffered high unemployment rates, indicating a severe need for employment opportunity.[27] As such, these dislocated workers have significant stakes in the outcome of the proposed policy solutions. However, due to a general lack of resources (financial, educational, legislative, etc.), dislocated workers have minimal influence on addressing the economic decline of their communities. Garnering buy-in from dislocated workers will be easy and should not require a specific plan of action. 

Stakeholders with Low Stakes, High Influence

            Under both policy proposals, large private sector companies have a significant role in eliminating joblessness, making them rank highly in terms of their influence. As of 2017, Walmart was the largest employer in 23 out of 50 states, including West Virginia, Virginia, Ohio, and Kentucky.[28] Companies like Amazon or Tesla that utilize large-scale operations have the potential for creating thousands of jobs of varying skill levels.[29] Due to their significant revenues and global presence, as well as the low corporate tax rates in many Appalachian states, large companies have low stakes in expanding their presence in the region. Creating a business and innovation-friendly environment in struggling states will be critical to bringing this stakeholder to the table.

Final Conclusion

As the coal industry continues to decline, the pervasive issue of joblessness will only grow for the Appalachian region. While both proposed policy alternatives have merits on their own, I believe that the most effective outcome will come by implementing the policy solutions together. Retraining programs require jobs for the participants after completion, and the large-scale jobs required to mitigate joblessness in the region will require large companies with the capacity to create these jobs. Bringing these companies to the region will require an economic environment that is conducive to their business interests—something that Opportunity Zones can accomplish. As policymakers with the power to see these policies through to fruition, I urge you to consider the analysis and evidence I have laid out in this memo. I thank you for your time in reviewing my proposal and look forward to working with you further on the matter. 

[1] “U.S. Energy Information Administration - EIA - Independent Statistics and Analysis.” Table E1. Estimated Primary Energy Consumption in the United States, Selected Years, 1635-1945 (Quadrillion Btu), Sept. 2012, www.eia.gov/totalenergy/data/annual/showtext.php?t=ptb1601.

[2] Staff. “The Withering of the American Coal Industry.” The Week - All You Need to Know about Everything That Matters, The Week, 17 Sept. 2018, theweek.com/articles/795716/withering-American-coal-industry.

[3] Morris, Adele. “Coal Economy Workers Need Help-and a Carbon Tax Could Provide It.” Brookings.edu, The Brookings Institution, 20 Nov. 2017, www.brookings.edu/blog/planetpolicy/2016/04/26/coal-economy-workers-need-help-and-a-carbon-tax-could-provide-it/.

[4] Brugger, Kelsey. “Trump hasn’t saved coal in W.Va. They don’t care” E&E News, 19 Aug. 2019, https://www.eenews.net/stories/1060995953

[5] Sullivan, Kate. “Miners Union President: 'Coal's Not Back. Nobody Saved the Coal Industry.'.” CNN, Cable News Network, 5 Sept. 2019, www.cnn.com/2019/09/05/politics/coal-miners-union-president-coals-not-back/index.html.

[6] Volcovici, Valerie. "Awaiting Trump's Coal Comeback, Miners Reject Retraining." Reuters. 01 Nov. 2017, https://www.reuters.com/article/us-trump-effect-coal-retraining-insight/awaiting-trumps-coal-comeback-miners-reject-retraining-idUSKBN1D14G0

[7] Ghabra, Omar. “After the Spill: Life in West Virginia’s Coal Country.” The Atlantic, 09 Jan. 2015, https://www.theatlantic.com/national/archive/2015/01/life-in-west-virginias-coal-country/384316/

[8] Black lung clinics are government-funded health care clinics that provide medical, outreach, educational, and benefit counseling services to coal miners and their families for "black lung," a respiratory disease caused by long-term exposure to coal dust, also known as coal workers' pneumoconiosis.

[9] Fessenden, Marissa. “Study Uncovers Startling Number of Black Lung Cases in Coal Miners.” SmartNews, Smithsonian Magazine, 08 Feb. 2018, https://www.smithsonianmag.com/smart-news/largest-cluster-black-lung-cases-marks-worsening-miners-disease-180968105/

[10] Schwartz, Jeffrey. “Development and Progress of the Appalachian Higher Education Network.” Development and Progress of the Appalachian Higher Education Network - Executive Summary - Appalachian Regional Commission, www.arc.gov/publications/DevelopmentandProgressoftheAHENetworkES.asp.

[11] "Division of Coal Mine Workers' Compensation (DCMWC)." United States Department of Labor. https://www.dol.gov/owcp/dcmwc/powergrants.htm.

[12] Roberts, David. “New Study: It Would Be Cheap to Retrain Coal Workers for Solar Jobs.” Vox, Vox, 11 Aug. 2016, www.vox.com/2016/8/11/12420892/retrain-coal-workers-solar-jobs.

[13] Engel Bromwich, Jonah. “Candidate Ejected From West Virginia House Floor for Listing Lawmakers’ Oil and Gas Donors.” The New York Times, 12 Feb. 2018, https://www.nytimes.com/2018/02/12/us/lissa-lucas-house-floor.html

[14] A dislocated worker is an individual who has become unemployed, through no fault of their own, due to industry shifts such as coal mine closings or mass layoffs. Source: https://workforcewv.org/public-information/warn-notices/how-workforce-can-help-dislocated-workers

[15] Opportunity Zones are a policy instrument whereby business investors receive tax investments in exchange for investing long-term in underserved communities, ultimately providing job opportunities and economic vitality.

[16] “Opportunity Zones: A new national community investment program that connects private capital with low-income communities across America.” Economic Innovation Group. https://eig.org/opportunityzones

[17] Eastman, Scott. “Measuring Opportunity Zone Success.” Tax Foundation, 27 June 2019, https://taxfoundation.org/measuring-opportunity-zone-success/.

[18] “County Economic Status in Appalachia, FY 2020.” County Economic Status in Appalachia, FY 2020 - Appalachian Regional Commission, www.arc.gov/research/MapsofAppalachia.asp?MAP_ID=149.

[19] Looney, Adam. The Early Results of States' Opportunity Zones Are Promising, but There's Still Room for Improvement. The Brookings Institution, 18 June 2018, www.brookings.edu/research/the-early-results-of-states-opportunity-zones-are-promising-but-theres-still-room-for-improvement/.

[20] Reitz, Claire. “How to Invest in Opportunity Zones: Options to Get Started: Resources.” Fundrise, Fundrise, 12 Dec. 2018, https://fundrise.com/education/blog-posts/how-to-invest-in-opportunity-zones-options-to-get-started. 

[21] Staff. “Applying the Antitrust Laws to Anticompetitive State and Local Government Conduct.” The Antitrust Attorney Blog. 20 Feb. 2014. https://www.theantitrustattorney.com/applying-antitrust-laws-anticompetitive-state-local-government-conduct/

[22] Johnson, Melissa. “Pre-Employment Training and Affordable Childcare Key to Broadening the Apprenticeship Pipeline.” National Skills Coalition, 20 Aug. 2018, www.nationalskillscoalition.org/news/blog/pre-employment-training-and-affordable-childcare-key-to-broadening-the-apprenticeship-pipeline.

[23] Bergman, Ben. “For Job Retraining Programs To Work, People Need To Show Up.” NPR, NPR, 4 July 2017, www.npr.org/2017/07/04/535474992/for-job-retraining-programs-to-work-people-need-to-show-up. 

[24] Morris, Adele. “Coal Economy Workers Need Help-and a Carbon Tax Could Provide It.” Brookings.edu, The Brookings Institution, 20 Nov. 2017, www.brookings.edu/blog/planetpolicy/2016/04/26/coal-economy-workers-need-help-and-a-carbon-tax-could-provide-it/.

[25] “How it works: Coal excise tax.” U.S. Department of Interior. https://revenuedata.doi.gov/how-it-works/coal-excise-tax/

[26] LaLonde, Robert J., and Daniel G. Sullivan. “Retraining Displaced Workers.” Retraining Displaced Workers | The Hamilton Project, 23 Oct. 2019, www.hamiltonproject.org/papers/retraining_displaced_workers.

[27] “Unemployment Rates in Appalachia, 2017 (County Rates).” Unemployment Rates in Appalachia, 2017 - Appalachian Regional Commission, 2018, www.arc.gov/research/MapsofAppalachia.asp?MAP_ID=27.

[28] Gillett, Rachel. “The Largest Employers in Each US State.” Business Insider, Business Insider, 11 June 2017, www.businessinsider.com/largest-employers-each-us-state-2017-6.

[29] “Amazon Isn't Getting Enough Credit for Creating Jobs, Morgan Stanley Says (AMZN) | Markets Insider.” Business Insider, Business Insider, www.markets.businessinsider.com/news/stocks/amazon-job-creation-not-getting-credit-2018-12-1027800132.

[30] This chart demonstrates how either policy alternative measures against the selected evaluation criteria. The values given for rank are by descending order, with 3 being the highest value and 1 being the lowest. The policy alternative with the highest total score has the most favorable ranking among the three criteria.