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West Virginia University

West Virginia’s economy is vulnerable to a heavy hit from COVID-19

3-Apr-2020 12:25 PM EDT, by West Virginia University

As West Virginia continues its fight against the rapidly spreading novel 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.”

“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. 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.”

“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. 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.”

“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. 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.”

“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. 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 West Virginia’s can compete in the post-COVID economy.”

“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.”

West Virginia University experts can provide commentary, insights and opinions on various news topics. Search for an expert by name, title, area of expertise, or college/school/department in the Experts Database at WVU Today.

-WVU-

law/04/03/20

Call 1-855-WVU-NEWS for the latest West Virginia University news and information from WVUToday.

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