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BRISTOL, Tenn., February 9, 2015 – The King Institute for Regional Economic Studies (KIRES) has released a new study. KIRES Report No. 12, “Replacing Coal Mining Jobs:
Marginal Economic Impacts of Selected Industries in Southwest Virginia,” was prepared
by Dr. Sam Evans, director of KIRES and associate professor of Finance and Economics,
and Dr. Alexander Brumlik, assistant professor of Economics for King University’s School of Business and Economics, and by Kayla Ketron, a senior Accounting student at King University.
The authors note that coal mining has for generations been a key component of the
economic base in Southwest Virginia. “There were around 12,000 coal mining jobs in
the region just 25 years ago,” said Evans. “However, there has been a persistent decline
in coal production and jobs over the past quarter century. The down trend was somewhat
arrested during the 2010 through mid – 2012 period, but recent data show renewed losses
in coal mining jobs over the past two years. The latest available jobs data as reported
by the Virginia Employment Commission show that coal mining jobs during the second
quarter of 2014 fell to around 3,500, a loss of 1,400 jobs since 2012.”
Projections for future coal production in the region are not encouraging. The US Department
of Energy forecasts production declines in the Central Appalachian region (Southwest
Virginia, Eastern Kentucky and Southern West Virginia) for the foreseeable future.
The report defines Southwest Virginia as the traditional coalfield counties of Buchanan,
Dickenson, Lee, Russell, Tazewell, Scott, and Wise, plus the city of Norton, and Bristol,
Va., and the bordering counties of Washington and Smyth. Although coal production
is concentrated in the region’s northern counties, the economic impacts of job losses
in the industry are enormous and ripple throughout the region. As an example, the
loss of 1,400 coal mining jobs noted above would cause a total loss of 3,240 jobs
in the region; total earnings paid to households employed in all industries in the
region would decline around $215 million.
The report’s authors employ a methodology which allows them to rank industries according
to their marginal economic impact. The marginal economic impact for a given industry,
coal mining for example, is measured as the “change in total earnings of households
employed in all industries for each job created in coal mining.” The marginal economic
impact is not the same as an industry’s total contribution to the local economy. Some
service industries provide thousands of jobs in the local economy, but have small
marginal economic impacts, whereas coal mining and some manufacturing industries with
far fewer employees have large marginal impacts.
According to the study, industry marginal economic impacts are helpful in answering
questions, such as: (a) How many jobs in industry X are required to have the same
marginal economic impact as one job in industry Y?; (b) What is the economic impact
of a new retail development?; (c) What is the economic impact of the gain or loss
of 100 jobs in a particular industry?; and (d) Which industries have the potential
to expand the economic base of a region? Question (d) is a particular concern for
residents of Southwest Virginia as they have witnessed a significant erosion of the
region’s economic base during the past quarter century.
Estimated marginal economic impacts for 60 industries in the region are presented
in the report. These estimates are based on regional economic impact multipliers for
Southwest Virginia, which were developed by the Bureau of Economic Analysis (BEA)
in the US Department of Commerce. The industries are ranked according to their marginal
economic impact and also by how many jobs are required in each industry to offset
the impact of losing one coal mining job.
The report’s authors found that the marginal economic impact for coal mining is $154,397.
“This means that for every coal mining job that is lost, total earnings of households
employed in all industries in Southwest Virginia fall by $154,397,” said Ketron. “Each
coal mining job supports an additional 1.3136 jobs in all other sectors of the region’s
economy. The loss of $154,397 in earnings is attributed to all 2.3136 jobs, not just
the coal mining job.”
The ranking of industries by their marginal economic impact reveals that manufacturing
industries, characterized by relatively high average earnings and extensive supplier
linkages, and the higher-paying service industries dominate the top of the rankings.
The lowest ranked industries in terms of their marginal economic impacts are service
providers whose primary locally purchased input is hired labor, with average earnings
at the low end of the scale. As an example, the study shows that the creation of 1.51
jobs in “machinery manufacturing” will offset the economic impact of losing one coal
mining job; however, the creation of 5.71 jobs in “food services and drinking places”
are required to offset the loss of a coal mining job.
According to the authors, tourism is often promoted as a means of diversifying and
rebuilding the economic base of communities or regions experiencing losses in a key
industry, such as mining. Southwest Virginia is in this category and for good reason,
namely, its natural beauty and cultural heritage. The study reports marginal economic
impacts for (1) retail trade, (2) accommodations, (3) food services and drinking places,
(4) amusements, gambling and recreation, and (5) performing arts, spectator sports,
museums, zoos and parks.
Evans, Brumlik, and Ketron estimate that tourists’ spending at retail stores has a
multiplier of 0.142, meaning new retail sales of $1 million raise household earnings
by $142,000. This amount is less than the marginal economic impact of a single coal
mining job. The multipliers for the other four tourist industries are larger, ranging
from about 0.34 for “accommodations” to 0.46 for the “performing arts” grouping. The
multiplier for the “performing arts” grouping implies that the economic impact from
tourists’ spending at these attractions is more than three times the impact of the
same dollars spent at retail establishments.
The authors suggest that a reasonable rule-of-thumb to assess the economic impact
of tourism spending would be to use the average of the earnings multipliers for the
five industries noted above. The average multiplier is 0.3846, indicating that total
earnings of households increase about $385,000 for each $1 million increase in tourist
spending in the region.
The KIRES Report No. 12, “Replacing Coal Mining Jobs: Marginal Economic Impacts of
Selected Industries in Southwest Virginia,” and all other KIRES reports may be accessed
electronically at http://kires.king.edu.
King University is a Presbyterian-affiliated, doctoral-level comprehensive university. Founded in
1867 as King College, the University offers more than 90 majors, minors, pre-professional
degrees and concentrations in fields such as business, nursing, law, medical and health
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administration, education, and nursing. A number of research, off-campus learning
opportunities, and travel destinations are also available. King University is a NCAA
Division II and a Conference Carolinas member with 25 varsity sports. For more information
about King University, visit www.king.edu. King University does not discriminate against academically qualified students of
any race, color, national or ethnic origin, sex, age, or disability. King University
is certified by SCHEV to operate locations in Virginia. For more information, contact
the King University office at Southwest Virginia Community College, 309 College Road,
Richlands, VA 24641.