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New King Study Examines the Economic Implications of an Aging Southwest Virginia Population

KIRES Economics StudyBRISTOL, Tenn., May 7, 2015 – The King Institute for Regional Economic Studies (KIRES) has released a new study. KIRES Report No. 13, “Demographics of an Aging Southwest Virginia: Implications for the Regional Economy,” was prepared by Holden Herrell under the direction of Dr. Sam Evans and Dr. Alexander Brumlik, both of King University’s School of Business and Economics. Mr. Herrell is a junior at King University majoring in Economics and Management.

The authors employed the demographic concepts of the population pyramid and the age dependency ratio to track the actual and projected trend in the age distribution of the Southwest Virginia (SWVA) population over a 100-year period, 1940 to 2040. Herrell notes “the ideal age distribution of a population is a pyramidal shape with the bulk of the population lying in younger age classifications. This shape is healthy because it has a strong base of younger members of the population to support the older members of the population.”

The authors state that results of their research are disturbing as it reveals a pronounced shift in the age distribution of the SWVA population from younger to older; in no uncertain terms, according to Herrell, “the distribution has lost its pyramidal shape.” Evans and Brumlik state that “the prevailing worry when observing this trend is that young people are leaving SWVA. Young people are essential to the healthy growth and development of an economy as they provide innovative ideas and a skilled labor force. The dilemma for SWVA is this: to keep its young people the region needs to attract new industries to expand the economic base and provide good-paying jobs. However, it will become increasingly difficult for the region to attract new businesses if the outmigration of young people continues at its current pace.”

The report notes that the pyramidal shape is not the only shape that indicates a favorable distribution of ages. As long as a population has the bulk of its members within the working age demographic (ages 15-64) it can support the dependent members of its population (14 & under and 65+). Herrell observes that the “age dependency ratio for SWVA is projected at 43 percent in 2040, compared to 28 percent for the United States.” By way of contrast, SWVA had an age dependency ratio of just 7 percent in 1940, less than the ratio for the U.S. at that time. The authors state that having over 40 percent of its future population in the dependent category is an alarming statistic for those concerned with the economic and social welfare of SWVA.

The authors write that questions raised by their research are: Is the trend in the age distribution of the SWVA population reversible? Can the community and its civic, business, and political leaders take actions to, if not reverse, at least stabilize, or slightly lower the age dependency ratio? Herrell notes “we cannot answer these questions, but we see three broad approaches to the problem.”

  • Do nothing. According to the authors, the likely result of doing nothing is an eventual depletion of the young, skilled labor force, especially in the more rural areas of the region. The end result will be a declining economy heavily dependent on government income transfer payments.
  • Think small. Upfront costs of this approach are small, but the payoff is likely to be small. Many communities in a situation similar to that facing SWVA are using this approach. Perhaps, the biggest payoff from this approach has been to improve the quality of life for current residents by providing cultural and recreational opportunities, more attractive main streets and incentives for local entrepreneurship and sustainable development. Evans and Brumlik state that “the cumulative effect of these projects will help grow the region’s economic base, but the economic impact may be too small to cause any meaningful change or stabilization in the observed trend in the age dependency ratio. However, this approach likely will be an integral part of attempts to reverse the direction of the SWVA economy.”
  • Think big. The upfront costs of this approach are large and may require some degree of public financing. Herrell notes that this approach “calls for improvements in infrastructure, workforce development, and incentives to attract new industries. The objective of this approach is to attract industries with large economic impacts and which provide a significant number of good paying jobs for a skilled labor force. This approach offers the best chance to stabilize, if not reverse, the trend in the age dependency ratio.”

The study defines Southwest Virginia as the counties of Buchanan, Dickenson, Lee, Russell, Scott, Smyth, Tazewell, Washington, and Wise. The population pyramids and the age dependency ratios were created from data published by the U.S. Census Bureau and the Weldon Cooper Center of the University of Virginia. Data for the years 1940-2010 are from the U.S. Census Bureau; projections for the years 2020-2040 are from the Weldon Cooper Center.

KIRES Report No. 13, “Demographics of an Aging Southwest Virginia: Implications for the Regional Economy,” and all other KIRES reports may be accessed electronically at http://kires.king.edu.

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