By Amanda Stiebris
While the shift to clean energy feels like a new frontier in many ways, it is also deeply familiar in others. We have seen a similar threat of job loss in the energy industry before when we first moved from coal to oil and gas. From the last energy transition, we learned two major lessons: (1) concentrated job losses are persistent and (2) social safety net programs are insufficient for inducing growth in affected areas.
Persistent job loss
In 1979, the coal industry was at its peak with over 200 thousand employees. However, as the price of coal started to fall after 1980, employment in the industry plummeted with it. As of 2019, that number was just over 50 thousand and has since dropped further during the COVID-19 pandemic. Just like with the fossil fuel industry, the coal industry has historically been tied to location in hubs like Kentucky, Ohio, Pennsylvania, and West Virginia where employment was heavily reliant on coal. As a result, the coal bust devastated these local economies. Compared to areas less reliant on coal, these hubs saw larger declines in employment rates, drops in average per-worker compensation, and shrinkage in the working-age population. Effects of the coal bust have also been long lasting. Declines in employment and compensation lasted well into the 2000s before finally slowing in the 2010s. Even then, part of the recovery for employment rates in the 2010s has been due to younger and more-educated workers leaving the area to find jobs elsewhere. The outmigration, caused by decades of economic disparity in former coal communities, has left the worst affected regions with disproportionately older, sicker, and poorer populations.
The inadequacy of the social safety net
In the wake of the 1980s coal bust, the government’s main tools to combat economic hardship were through the social safety net. Programs like unemployment insurance, cash transfers, food stamps, and subsidized healthcare were widely used in the worst affected areas and continued to supplement large parts of people’s income almost 50 years later. As recently as 2019, government transfers were 40 percentage points higher as a share of personal income for regions highly exposed to the coal bust compared to those with only moderate exposure. Directly after the coal bust, there was a spike in retirement and disability transfers, but the vast majority of long-term differences came from Medicaid and Medicare transfers. The regions’ continued reliance on subsidized healthcare is an indication of the persistent effects of economic distress and the inability of these communities to rebound.
Most of the programs implemented are designed to alleviate short-term income loss for individuals. As such, other than subsidized health care, most programs had little to no long-term effects at helping communities devastated by widespread, permanent job loss. It is important to note that job retraining and education programs also saw little uptake during the coal bust. Even though people had lost their livelihoods, these programs were not effective at getting people and communities at large back on their feet. This is important to keep in mind as we look at place-based interventions for the shift away from fossil fuels.
Takeaways
As we begin to approach the move from fossil fuel energy to renewable sources, we must reflect not only on the history of the coal bust itself but also on the failings in our response to the localized economic collapses it caused. We can anticipate that communities with high reliance on oil and gas could face the same challenges of employment, wage, and population loss that was common in coal countries. Similarly, we can predict that individual-based policies will be insufficient to help these communities under threat of economic hardship from the energy transition. In our next post, we will look at the alternative approach of place-based policies: policies that place a heavier focus on revitalizing regions and distressed local economies at large rather than focusing on individual income loss.
Local Labor Market Impacts of the Energy Transition
This is the second post in a series covering the working paper “Local Labor Markets Impact of the Energy Transition: Prospects and Policies” by Gordon Hanson, Faculty Co-Director of Reimagining the Economy at Harvard Kennedy School.
