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King University News :: King Institute for Regional Economic Studies Releases Report on the Economic Impacts of Job Losses in the Coal Mining Industry

The King Institute for Regional Economic Studies (KIRES) at King University has released its seventh report, “Economic Impacts of Job Losses in the Coal Mining Industry.” 

Coal companies in Southwestern Virginia announced a new round of layoffs in their industry in early February 2013.  Layoffs have been ongoing in the Central Appalachians and other coal mining regions since the latter half of 2012. 

According to Evans, “The US department of Energy in its February 2013 outlook for coal production in the Appalachian region forecast a decline of 5.4 million tons in 2013, on the heels of a decline of 33 million tons in 2012.  This forecast implies that more layoffs may be in the offing.”

The newly released paper, KIRES Paper No. 7, presents estimates of the impacts of potential job losses in the coal industry on the economy of the Coalfield region of Southwestern Virginia.  The paper was prepared by Dr. Sam Evans, associate professor of finance and economics at King University.

According to the study, the role of coal mining in the region’s economy is enhanced by significant multiplier or spillover impacts associated with coal production and employment.  For example, coal mining employment directly accounts for 7.5 percent of total employment in the Coalfield region. However, after taking into account the multiplier or spillover effects of coal mining, it is found that coal mining is the basis for 17 percent of total employment in the region.  Likewise, earnings paid to households employed by the coal mining industry directly account for 16.5 percent of total earnings paid to households employed in all industries in the region.  But, the percentage of total earnings tied to coal mining is 27 percent, after the spillover affects of coal mining are taken into account.

The study found that each coal mining job supports 1.27 jobs in other sectors of the region’s economy.  The loss of 100 coal mining jobs, for example, would lead to 127 jobs being lost in all other industries, for a total loss of 227 jobs in the Coalfield region.

“Another important finding was that each job in the coal mining industry generates nearly $128,000 in earnings paid to households employed in all industries of the region’s economy,” added Evans.  “A loss of 100 coal mining jobs would depress total earnings paid to households employed in all industries of the Coalfield economy by $12.8 million.

The study concludes that layoffs in the coal mining industry have significant and wide ranging impacts on the Coalfield economy.  The short-term economic losses may be mitigated somewhat by severance pay packages and unemployment insurance and/or the extent to which terminated employees find alternative employment.  However, the unfortunate economic fact for the Coalfield region is that it takes the creation of 2 to 6 new service sector jobs, depending on the sector, or nearly two manufacturing jobs to offset the total amount of earnings lost when one coal mining job is eliminated.

KIRES Paper No. 7, “Economic Impacts of Job Losses in the Coal Mining Industry,” is available in electronic format at http://kires.king.edu.

KIRES Paper No. 8, slated for release in May 2013, will profile and present an economic analysis of the economy of the First Congressional District of Tennessee.

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