WVU economist discusses vulnerabilities that could hinder economic recovery in the state

Coronavirus

MORGANTOWN, W.Va. – As West Virginia and the nation continue the fight against coronavirus, a regional economist at West Virginia University sees vulnerabilities in the state’s industry structure and infrastructure that could make economic recovery difficult after the crisis passes.

Heather Stephens, assistant professor of resource economics and management in the Davis College of Agriculture, Natural Resources and Design, notes an industry structure reliant on tourism and oil and natural gas, and West Virginia’s lack of broadband access are key areas to watch.

“We have an industry structure that makes us more vulnerable in the current crisis. Right now, about 13 percent of jobs in West Virginia fall under what Brookings and Moody’s have classified as currently highly vulnerable. That includes leisure and hospitality jobs and oil and gas,” said Stephens.

Stephens said one of the issues affecting the state is the abundant supply of natural gas on the market.

“Oil and gas are vulnerable because of the low prices in both markets. There is already an excess of supply of natural gas. The oil market is being hit because Saudi Arabia and Russia are flooding the market with as much oil as they can. And, we’re facing a huge decline in the demand for both oil and gas,” said Stephens. “For natural gas, much of this is due to the closure of schools and businesses who would use natural gas for heat and use more electricity. Basic economics tells us when supply is going up and demand is going down, prices are plummeting. And we’re likely to see some of the players in these industries go bankrupt. If nothing else, they’re going to start laying people off. Those are higher paying jobs that, at least in the short run, are going to go away.”

Stephens touched on concerns related to small businesses, in particular ones reliant on travelers. She said the effects of the pandemic will hit these businesses for some time.

“The small businesses in our state, especially those in the hospitality industry, are also highly vulnerable during and after this crisis. I don’t really think that the day the ‘stay-at-home’ order goes away that people will immediately start traveling again,” said Stephens. “Yes, they might feel more comfortable talking to their neighbors close up, but they probably won’t go to places crowded with lots of people. I think it’s going to take a long time for that level of comfort to come back. Even with the current relief [federal stimulus package] coming through, if the economy takes a long time to recover, there’s going to be a point where small businesses can’t stay in business.”

As far as working from home is concerned, Stephens said West Virginia workers are ill-equipped on two fronts: many of them have lower-income jobs, which do not lend themselves to allowing employees to work from home, and many residents do not have access to broadband internet access, which is necessary for working from home.

“A large portion of our workforce that still has a job also cannot work from home. According to the Bureau of Labor and Statistics, for people in the top 25 percent of income, about 60 percent nationally can work from home. But at lower-income percentages, the ability to work from home goes away,” said Stephens. “And, West Virginia has a lot of those lower-income jobs, which makes it less likely that workers can work from home. Even if their employer allowed them to work from home, they might not have adequate internet access to do so. Currently, West Virginia ranks 45th in the United States in broadband access which includes both wired and wireless. In this remote world, that puts a lot of West Virginians at a disadvantage. Thus, even if workers have jobs that allow them to work from home, that doesn’t mean they’re able.”

Stephens suggests that in the long run, businesses will adapt how they operate to a type of new economy, and West Virginia needs to make sure it is capable of keeping up with these changes.

“Many economists and others believe that this crisis will lead to a fundamental shift in how our economy works. To compete, West Virginia will need to make critical investments in broadband – both wireless and wired – and in education, especially at the K-12 level,” said Stephens. “These investments have been needed for some time, but the crisis has exposed how critical they are. Broadband will not only facilitate work-from-home, it will promote better telemedicine and remote education and will provide support for the state’s small businesses; all of which will be critical to ensuring [the state] can compete in the post-COVID economy.”

Until the state and the country get through this outbreak, Stephens said people can do their part to mitigate as many potential negative outcomes as possible.

“In the meantime, to ensure a rapid recovery, we need to heed the stay-at-home orders, practice social distancing, wash our hands and help in other ways to minimize the rapid spread of the disease and ease the burden on our medical infrastructure. We can also help support local small businesses by doing little things like ordering takeout from local restaurants. It’s a tough time for everyone, but together we can get through this and focus on the recovery,” said Stephens.

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