A picture I took in downtown Harlan while visiting a friend. It’d be a really nice downtown if there were more people. Also, check out this cool festival my friend helps organize; you should go!

From Coal-Country to the Sunbelt

Could Appalachians Really Be Ideal Solar Labor Force?

A new study, covered by Vox, has suggested that coal workers could be well-suited to be the workforce for a burgeoning solar industry. The claim essentially is that the declining coal sector has created transferable skills, and Appalachians could be a kind of reserve-army-of-labor for the production and installation of solar cells.

Cool. Maybe. But Vox raises an interesting question: is there a geographic barrier to this? Appalachia isn’t big solar country. And if there is a geographic barrier, couldn’t coal miners move? I got into a discussion on this topic yesterday, and was eventually asked:

So, will they move? I’ve empirically shown before that oil & gas booms show very-strongly-tied migration patterns. Historically, miners have very high migration rates: when work is geographically fixed and firms cannot move, all geographic adjustment occurs through labor. Add in extreme volatility due to resource exploration/exhaustion and commodity price booms, and mining and migration go hand in hand. Miners are movers.

Sadly the 2015 CPS migration file did not give us a breakout of migration by industry in the core tables, so I dunno what their most recent migration rates are. But in times when the locations of mines are changing, miner migration shows huge spikes, and in other times, it is no lower than average.

In principle, then, there’s no reason to think Appalachian miners wouldn’t leave for jobs. And, tellingly, as coal mining has declined, net migration from Eastern Kentucky has gone steeply negative from recent positives according to some sources.

Thus, miners can move, and in fact many of them do move. So the article is right, right? We can seamlessly move from a coal- to a solar-employment base?

Nope.


The Rent Is Too Darn High

Those Solar Wages Actually Suuuuuuck

The study in question found that employed coal workers could boost wages by about 11% by transitioning to solar.

That sucks. Like, that’s awful. Mind-numbingly-bad. No sane person would transition from their coal job to a solar job for just 11% increase in wages.

Why? Simple! Solar jobs are concentrated in (1) urban areas and (2) states like California, Massachusetts, New York, and New Jersey. Wanna know what those states have in common?

They cost an arm and a leg!

Let’s say our coal worker lives in West Virginia. Or Kentucky. Or maybe Wyoming. Or, ooo, rural Pennsylvania! Here’s a more detailed price map:

I’ve covered state price levels extensively here. But note that Beckley, WV is one of the cheapest metro areas in the nation. Rural Wyoming is at most average-costing. Northern and western Pennsylvania are cheap. Rural Kentucky is really cheap.

Now look at LA. Look at San Francisco. Look at Massachusetts. Heck, look at urban Texas! Even the “cheap” urban areas are “expensive” compared to overwhelmingly rural coal-country.

Let’s say you can get an 11% pay bump; no let’s be generous, let’s say a 20% pay bump, by moving from your coal job in Beckley (inverted RPP of 125.5) to a job working in a solar job in the DC metro area. Say you made $45,000 in Beckley.

Well, that $45,000 had a “real” local purchasing power of about $56,000 in Beckley. You could buy a nicer house, get more miles on your car, have cheaper repairs, maybe hire a cleaner for the house occasionally. Your paycheck in DC goes up to a nominal $56,000… but the real purchasing power is just $47,000. You live in a smaller house, and you’re definitely mowing your own lawn. The neighbor kids in DC are too busy with after-school extracurriculars to mow the lawn for cheap, and professionals are expensive.

In other words, taking a pay increase would be foolish for an employed coal worker, because the typical solar-job location is much higher-cost than rural mining country. This is partly because of zoning, but it’s also because, hello, no matter how you zone, rural areas are cheaper than urban areas. Game, set, match. You will always have to offer a pay bump to move from rural to urban areas if you want to equalize real incomes. Now, urban areas may offer other amenities that replace lost real income for some people, but, on the other hand, some people also really hate cities.

Pro-tip: most coal miners are not longing to live in cities. They don’t want to take a real-income hit for the joy of living in the big city for the most part. Many rural workers have hobbies and lifestyles that are difficult, expensive, or outright illegal in urban areas (shooting sports, hunting, dirtbiking, paintball, etc).

What About the Unemployed?

Well… What About Them?

So there’s no compelling reason for a coal worker to think a solar job would be better for them. Nominal wage gain maybe, but likely a real income loss, combined with probably a loss in utility from less preferred living conditions.

But what about former coal miners? What about the unemployed? What about coal miners who, looking forward, expect to become unemployed?

For these groups, the defining questions relate to government programs. If I go back to school or a training program, do I lose any of my benefits? For many individuals, the answer is yes. Becoming a student can impact eligibility for some benefits and Federal programs.

Let me explain to you just how important program eligibility really is.

Source. BEA’s FIPS coding of Virginia’s independent cities is not playing nice with the map interface I use at Datawrapper, so that explains the gaps for Virginia.

The above map shows what percentage of total income in a county is cash or cash-equivalent transfers from the government (SNAP, for example, is treated as cash-equivalent). Notice anything interesting about West Virginia and Eastern Kentucky? Well, fancy that, turns out, government benefits are a big deal! In fact, all 7 counties where benefits exceed half of all income earned are in eastern Kentucky. Of the 71 counties where benefits exceed 40% of income, 27 of them are in Kentucky, almost all of them eastern Kentucky. Three more are in West Virginia’s coal belt, including McDowell County, WV, the most depopulated county in American history.

Commentators who want to explain Appalachian migration patterns without reference to government programs, and especially residence requirements for eligibility and anti-asset provisions, are wrong to the point of negligence.

You cannot, cannot explain why people might stay in or leave Appalachia without addressing the source of a third to half of the region’s income.

Programs that discourage saving by stringently asset-testing benefits or by prohibiting hoarding (such as TANF or SNAP) trap beneficiaries in place, because migration has steep fixed costs in the form of transportation costs, lease deposits, and income to cover time spent looking for work. Programs that require you to re-file or re-apply if you have a change of address, such as unemployment insurance, create additional barriers of time, complexity, and potentially lost income that is especially burdensome on individuals who aren’t great at navigating bureaucracy.

Finally, virtually all government programs have flat-ish benefits, meaning you don’t get more money for living in a costlier location. Recipients of cash- or cash-like benefits have a strong incentive to reside in the lowest-cost areas they can, and to hold on to paid-off, owner-occupied housing no matter how dilapidated, isolated, unpleasant, or unsafe it may be. A house with no monthly bill is extraordinarily valuable to individuals with small, fixed cash incomes.

The result is that out-migration is lower than it would be if there were fewer asset tests, more streamlined eligibility and residency bureaucracies, fewer anti-hoarding rules, or if benefits were delivered in one lump of cash. In fact, out-migration would probably be higher if there were no government benefits at all. If state and local governments were to declare a “poverty disaster quarantine zone” and discontinue all transfers to individuals in designated counties, outmigration would immediately rise.

Also, some people would starve, and many out-migrants would suffer incalculable distress and separation from established networks. Also, local area income per capita would spike dramatically, housing costs would fall even more, and, in 10 years, the average income of out-migrants would probably be higher than it would be under current policy. Why do I say this? Because every instance we know of where we have good record keeping where there was a big natural disaster in poor areas that destroyed peoples’ homes and led to their flight, the refugees on average ended up at least no worse off, and their children virtually always ended up substantially better off.

To be clear, I absolutely do not advocate engineering a disaster of this sort in poor Appalachian areas as a means of encouraging out-migration. But the reason we shouldn’t do it is not that it’s not economically efficient. A good economist recognizes that sometimes, for creative destruction to occur, you need some actual hard-core honest-to-goodness fire-and-brimstone destruction. No, the reason we shouldn’t go the hard-reset route for poor Appalachian areas is that inflicting that kind of suffering and abrogating so many promises to such vulnerable people would a moral horror that I, for one, could not live with.

That said, we absolutely should streamline benefits programs, remove onerous residency requirements, seek to reduce cost of living in job-rich areas, provide people grants for relocation, reduce asset-testing and anti-hoarding rules for many programs, and maybe even introduce some regional adjustments to program benefit generosity. It would be reasonable for the Federal government to announce that areas that have low price levels and high unemployment will see the benefit amounts reduced slightly, while areas of moderate price levels and low unemployment will see benefits increased, as a means to nudge people to move.


Isn’t This All Kind of Paternalistic?

And Why Don’t You Trust The Free Market?

I trust the market! I really do! Also, I acknowledge that Appalachians, my people, are killing themselves with drugs at record rates. In the last 10–15 years, drug OD rates, especially in Appalachia, have increased by an order of magnitude. Suicide rates have risen as well.

I am paternalistic when faced with economically needy populations trapped in depressed areas by generations of bad policy choices and corruption alongside centuries of prejudice, who have resorted to self-murder and delusion as a way out. Yes, I am paternalistic under those circumstances. It was not “paternalistic” to abolish slavery, nor was it a lack of faith in the free market to offer freedmen help adjusting: it was attempting to make right a wrong. A whole set of vastly smaller but still meaningful wrongs have occurred and continue to occur in poor areas throughout the US, especially Appalachia, and it is not paternalism or nanny-state-ism to suggest that maybe the damage done by violence, corruption, mismanagement, and incompetence for years and years should be accounted for with better policy today.

Getting to the point, Appalachia’s legacy of corruption and mismanagement that underlies much of its poverty was not a free-market product. Bad governance was often forced on the population by state capitals who viewed the region with disdain, distaste, or as confederate-sympathizing western Kentucky saw union-sympathizing Appalachian Kentucky for many years after the Civil War, outright hatred. Severance tax revenues, far from being used in an efficient Pigouvian manner to offset the incredibly large externalities of mining, were siphoned off out of the region entirely, when they were collected at all. Waves of violence have washed across the region for generations, resulting in countless ballot-box shootings, assassinations, riots, and open warfare between the government and the governed. Outsiders see feuds as some cute Appalachian novelty: they were intense political contests reflecting entrenched partisan interests.

So to look at Appalachia today and think that we can just let the free market do its thang and everything will be peachy (or, also in vogue, that poor people are always super-rational actors whose existing behavior is necessarily optimal, thus attempts to change it are inherently inefficient) neglects that the region has been uniquely deprived of good governance and uniquely exploited by the nation on the whole. I would argue that only the descendants of slaves in America can make a more credible claim to having been exploited (and by “credible” I obviously mean “yes this is an incontrovertible historical fact,” and if you want my whole take on slavery and migration, listen to my Podcast). All that to say, when governments mess something up, sometimes it does take policy changes to fix the problem.

Or consider the role of social networks. Many people don’t migrate because migration is risky, and they’re risk averse. But the risks people think about are not the risks the economy faces. People worry about the risk of not fitting in in a new place, the risk of being judged for their accent, the risk of missing family, the risk of not finding a good church, the risk of being lonely. These risks define our lives as people, and really don’t matter for the economy.

Recent research has shown that declining social trust may explain some decline in migration rates. People today are less confident that their post-migration social lives will be good, and are foregoing income, employment, and educational opportunities as a result. This is really bad, and I suspect, entirely speculating without evidence here, that populations subject to prejudice, stereotype, and discrimination (ethnic minorities like African Americans and Appalachians — and yes I will fight you on Appalachians as an ethnic minority) are probably uniquely susceptible to this effect.

We need to break that hesitancy. The ideal way would be to restore social trust, to rebuild society and see to it that people get along better. But, um, hello, have you not been watching Season 2016 of America? Fat chance of that. In lieu of actually repairing society, providing people with countervailing incentives to push back against their unproductive fear of social detachment could be highly beneficial, if not for them, then for their children and grandchildren.


Conclusion

Coal miners are not going to be solar engineers. I mean sure, some might, but there will be no seismic shift. The real economic returns for employed coal workers probably are not very appealing, while the unemployed face programmatic and cultural barriers to migration. These barriers could be addressed by the right set of programmatic reforms, which could pave the way to the envisioned coal-to-solar smooth transition. But merely providing training funds is unlikely to encourage a significant number Appalachians or solar firms to relocate towards one another.

I’ve written about Appalachia a lot, as I’m a Kentucky native, my wife’s family lives in Appalachia, and I have many friends living and working in the region. Check out my brief visual history of Appalachian population growth, a previous discussion on whether poor whites should just move, a brief history of Kentucky’s migration, and a description of recent migration deep in Appalachia.

Check out my Podcast about the history of American migration.

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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith. I’m married to a kickass Kentucky woman named Ruth.

My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.