The West Virginia productivity miracle

You heard it right, and that is the topic of my latest column at Bloomberg.  Here is the key idea:

In contrast, per capita income in France or Japan, by purchasing power parity measures, is in the range of $40,000 to $41,000. In other words, if we consider that living in West Virginia is especially cheap, its people may have real incomes roughly equal to the French or Japanese.

I have found that even raising such a comparison provokes outrage. After all, we are told, France and Japan have higher-quality public goods, and West Virginia has an opioid epidemic, one of the lowest rates of labor-force participation in the U.S., and one of the highest rates of uptake on disability insurance.

But that’s exactly what I mean by the West Virginia productivity miracle. The more burdened some of the state’s residents are, the higher productivity must be for those who are hard at work.


Most of the major industries in West Virginia have added workers since 1990, and the state’s population is up by about 50,000 people. Again, that performance is hardly an incredible one, but the state isn’t exactly falling into the dustbin.

And this:

It’s not that economic development for this region is mainly about turning meth-snorting squirrel hunters into steady workers; rather, it’s that West Virginia needs to build upon its existing strengths.

There is much more detail at the link.


While purchasing power parity measures may help West Virginia look better it also means investment in real estate (and some wealth creation) has a very low rate of return and makes relocating away from West Virginia difficult. To the degree that lack of mobility is a negative, living in West Virginia has serious drawbacks.

No. France's GDP per hour worked was 112% of the US's in 2005, Japan's was 78% in Geary-Khamis dollars. Source: Robert Inklaar and Marcel P. Timmer (2014), "The Relative Price of Services" Review of Income and Wealth 60(4): 727–746.

File under: economic narratives are heavily influenced by non-economic factors. West Virginia is a predominantly white, Scotch-Irish, rural state so it is low status state and underrated for this reason. France is a country with a rich culture and history and vibrant immigrant communities, so it is overrated.

Of course, the famous Greenbrier resort is in West Virginia, proof that West Virginia is more than a bunch of toothless squirrel hunters. In my low country community the private jets outnumber the pick-up trucks, proof that my community is more than a bunch of drug and alcohol addled misfits (what folks in our area call "sorry", a word that does double duty). On the other hand, the county seat located on the other side of the causeway could be confused with a town in Liberia. Poverty amidst wealth is a sign of strength? Maybe the poor folks in West Virginia and in my community should study how to be born well. It's easy once one gets the hang of it.

That may be true, but if you talk to West Virginians, they are profoundly unhappy with their state's economic performance. Like virtually all of them. The main topic of conversation in WV is how to fix the state's woes. That "productivity" isn't helping them.

Great point! If you take away the productivity miracle that Dr. Cowen highlights then things would be even better!!!!

Military members and federal workers have known this for a long time. An enlisted salary goes a lot further in some places than others. Mid-grade officers act rich when stationed in communities in the South. The variable rates for a housing allowance and subsistence (food) allowance does not fully make up the difference in locale.

But I though federal workers had regional COLAs, no? The GS-12 in DC is not getting the same step increase as the GS-12 in Mobile, Alabama, no?

In any event, I was surprised that in West Virginia the average worker gets about 70% or so of the national average of $50k per worker. I thought it would be closer to 50%. West Virginnyians are doing better than I thought.

That's the thing, the COLAs and such are never enough for the GS-12 in San Fran so that they have the same standard of living as a GS-12 living working in Topeka without them. Even with all the BAH and BAS differences, a military member is better off stationed at some Army base in the South than at the Navy base in San Diego.

I am not sure this is true, but I have been told that we were a nation born of squirrel eating. Early flintlock rifles were low caliber and accurate, for that purpose. Larger animals were fewer per mile, but one could nip out and find a squirrel close to home and pot.

The supermarket chickens of their day.

Eat More Squirrel

Squirrel meat and whisky America defeated tea and crumpets England.

Hmm, I think that the fact that French workers get better public goods (think how much money health care costs!) is a pretty big deal, especially since WV institutions are really really bad. (I once said in an MR that I could never live in WV because of the lack of a decent airport and "blue" culture; "blue" culture got interpreted as access to Indian fusion restaurants, but what I meant was decent school systems.)

Also, per capita income includes social safety net income. It looks like WV GSP is only 71-72% of US GDP - not sure how big of a deal an additional few percentage points makes here, but that seems like a big one.

"...but what I meant was decent school systems"

West Virginia's average ACT score and percentage taking the test are almost identical to the national average.

What percentage of students take the ACT there versus other states?

It's in the link:

Percentage of Graduates Tested:
National: 64%
WV: 67%

Average composite:
National: 20.8
WV: 20.7

That info is in the link. 67% take in in WV. The national average is 64%. So they're not jacking up their scores by testing an unusually small percentage of students.

Higher than the national average.

WV 67% average score 20.7
NATIONAL 64% average score 20.8

Check your priors!

Now what highly politically incorrect fact might account for that?

I wish it weren't true. But it's just so obvious and nobody, including me, will say it.

"decent school systems"

Like in blue areas such as Chicago, Detroit, Newark, DC?

I once said in an MR that I could never live in WV because of the lack of a decent airport and “blue” culture; “blue” culture got interpreted as access to Indian fusion restaurants, but what I meant was ....

...I don't like those type of people.

I'm not sure about West Virginia specifically but the French work 21% fewer hours than Americans while Japan is pretty close in hours per year to the U.S.

To the extent Silicon Valley is wealthier than West Virginia, it is mainly because Silicon Valley has some very successful companies, such as Google and Facebook, and not because the Walmart in Mountain View, California, is so much better-run than the Walmart in Wheeling, West Virginia.

Which is precisely why I am skeptical of the idea that shoehorning more people into 'high productivity' cities would increase wealth. Most potential migrants wouldn't be working for Facebook or Google -- they'd be doing the same kinds of work as before they moved and at the same level of efficiency.

And assuming that housing costs remain elevated in the megacities, living standards might actually decline.

The annual mean wage of a truck driver in NYC is $49,840/year. The annual mean wage of a truck driver in Dallas is $46,400.

A single trucker in NYC would take home $38,166/year after taxes. A single trucker in Dallas would take home $37,947.

Anyone want to argue it makes sense to move from the Dallas metro to the New York City metro for a $219 raise?

They would be better positioned to service the high-income earners.

"The more burdened some of the state’s residents are, the higher productivity must be for those who are hard at work. "

You inadvertently hit upon the explanation of why West Virginia, so dependent upon the welfare state when looked at in the aggregate, has turned red in recent years. (The same applies for some other parts of Appalachia, such as eastern Kentucky, also once solidly Democratic). The remaining people in the labor force work hard at their jobs, but they're surrounded by people who have spent their whole lives on the dole in one way or another. The latter group doesn't vote much, but the former group does, and they are driven by resentment at living among so many layabouts. To live in Appalachia is know someone from high school who was largely lazy then, never worked since, but somehow draws a disability check for a mysterious back problem. It's quite widespread, and the number of lawyers willing to abet such schemes is similarly extensive (ones like the aptly named Eric Conn, convicted of defrauding the government to the tune of $600 million, have plenty of replacements), as are the number of schemes themselves. (I actually knew of a situation where parents of a decently bright child tried to get them to bomb an IQ test to qualify for SSI.) When you have that environment, Democratic Party promises to expand the welfare state are met with incredulity by those who work and vote at the highest rates: "Wait, I'm going to keep working, but you're going to give these people MORE stuff?" It is often thought that this resentment of the welfare state is racial in nature and focused on social programs whose beneficiaries are minorities away in large urban areas. It's actually driven far more by anger at their overwhelmingly white neighbors.


When I found out my "disabled" landlord personally re-roofed and re-did the electrical on his rental start to wonder.

He also had 3 mortgages on it, and was in default on the 3rd mortgage. But he refused to sell a palm tree on the property when offered $3,000 for it. (They lived out of state, too....)

My brother once rented an apartment above his "disabled" landlord who installed a wood burning boiler so he could heat the from the wood that he would split himself in the backyard.

Yes. Upper middle class people seem to find it hard to fathom the idea that poor people might exploit or game the system rather than find productive jobs. They consider it gauche to accuse the poor of causing their own problems, like blaming the victim or something. But the relatively poor tend to personally know people that do, in fact, game the system and exploit it for maximum personal benefit, and indeed many such people are fully capable of rationalizing it in one way or another. Whether that's via Marxist ideology or sticking it to the man, or whatever.

The one interesting thing is that this sort of thing is totally cross-cultural. Whites do it, black do it, poor immigrants do it, but white alt-righters direct more of their ire at non-whites and immigrants. Or maybe the alt-righter ARE the meth-addled welfare frauds and they are just miffed that other people are dipping into the same honey pot.

The Scotts-Irish didn't break into a car on my street at 2pm last week. Or smash a woman head into the pavement when she was running at 5am. Or steal a car from my buildings garage. Or loot the mall five blocks away from me in a city wide riot. Or gather in a hundred strong motorcycle gang and engage in a high speed chase with dozens of cop cars through the park next to me with random people all around being put in danger.

They didn't make the property taxes in my city some of the highest in the nation, then blow it all on corruption and scandal. They didn't vote for a Democratic party that considers me deplorable and wants to destroy me.

They didn't make my father change his barbershop song because someone decided it wasn't politically correct. They didn't try to shut down my high school because it didn't have enough black kids.

This isn't even a proximity issue. Our gentrifying area didn't plop down in a black neighborhood, but a working class white neighborhood. There is a "hard living" WWC bar one block away form me, and yet none of those people has ever done any of those things to me, despite probably having not the best SES or IQ. Blacks have to come in on public transport to do all the crime in my neighborhood.

The Scotts-Irish did fight disproportionately to defend America. They were on the right side of the revolutionary war, 1812, civil war, and world wars. We have a West Virginia because they voted against secession and backed it up with guns.

They've usually been a common sense swing vote in American cultural and electoral history.

So yeah, I've got nothing against the Scotts-Irish, they've done me no harm and done me much good. Brown people haven't done me any good, and inflict new harms on my and the people I care about day in day out. There is no comparison.

They were on the right side of the revolutionary war, 1812, civil war, and world wars.

Which black and brown people do you suppose *weren't* on the right side of these wars?

I have a theory that some of the people who are gaming these systems know, in their heart of hearts, they shouldn't be doing it and that its bad.

But, you simply can't stop yourself. You need a Man on a White Horse to cut you off.

"tough love."

Trump was maybe gonna be that guy, but nahhhh.

BTW, some of these guys aren't "poor" if they own rental property. "Own" is relative I guess.

But yeah, its a poor to middle class thing. You don't find it in gated enclaves of the upper classes.

No. The upper class sell them Oxycontin through medicaid. Or collect a fat rebate while shoving the liability into the CMS covered cap. The guy running the massive lidocaine medicaid scam I'm trying to bust lives behind an electrified fence on his own compound. No government welfare amongst the upper class.

Trump was never going to be that guy. Trump was the guy who was going to tell them it was totally okay because that's how the game is played - he was just going to help them rig the system more in their favor.

This is something a lot of people never get. Trump isn't some small government pull-yourself-up-by-your-bootstraps individualist. He's a "machine" politician of the Democratic mold. He's totally all about patronage and using the state to funnel money to interested constituencies. He just got the working class white union guys who power that machine to switch parties.

Upper middle class people seem to find it hard to fathom the idea that poor people might exploit or game the system rather than find productive jobs.

In order to grow into this Mandarin class, you almost universally have to have had tremendous advantages growing up, enough that you could have become a slacker if you wanted. But you used the serious resources to drive yourself all the harder.

They think that giving out a UBI will make everyone hard-working like themselves, because they cannot imagine any way that people function. They don't know people who insisted they couldn't work, until their patron cut off their beer money and suddenly they found a job within 2 days.

There are two kinds of people in the world - people who need a carrot and people who need a stick.
The people who need a carrot can't imagine what it's like to not pursue the carrot, and the people who need the stick generally think that the carrot is worthless and everyone who wants it is a sucker.

And the latter group's life is mainly about avoiding the stick and stealing free carrots when they can.

Bill Clinton overwhelmingly won the Scotts-Irish. Hillary lost them. I don't think the Scotts-Irish changed, so Dems have only themselves to blame.

The biggest city in WV is about 50000. If you removed the population of large metro areas from the calculation of income/work etc statistics for rich states, would their rural areas really look better than WV.

"The state has lost about 13,000 mining jobs since 1990, but gained about 30,000 jobs in leisure and hospitality, and added 60,000 jobs in health care and social assistance."

Those job gains don't sound like the sort that have anything to do with productivity. Somewhat the opposite.

Now I know that meth is snorted.

I've lived in KY, and going from central or western KY into eastern KY is a dramatic cultural change. I don't know much about WV but understand much of it is similar to eastern KY. I suspect that (if it's like KY) economically the cities in WV are doing much better than the rural areas, and the Appalachia most think of is doing far worse than the cities. (I tried to find this mapped, but was unable).

Meth is usually smoked, but it can also be snorted. You may also be surprised to learn that heroin is very often snorted, and injecting heroin is not really a common way to use it.

Fun fact: the official word for ingesting a drug through snorting it is "insufflation".

As a member of the complacent class, I fail by not knowing the proper drug usages and terminology. I should hang out with a different crowd.

You can also inject meth.

Bonus: "insufflation" (and its counterpart "exsufflation") are also used to describe elements of religious liturgy, usually involving exorcisms and blessings.

"I have found that even raising such a comparison provokes outrage. After all, we are told, France and Japan have higher-quality public goods, and West Virginia has an opioid epidemic, one of the lowest rates of labor-force participation in the U.S., and one of the highest rates of uptake on disability insurance."

Here's the number one public good: murder rate in West VA is about 10 times the murder rate in Japan. Subways and trains and clinics on every streetcorner are nice, but low crime is an incredibly valuable public good. I'm pretty sure you could try and quantify it in the US too, by tracking home prices vs. crime rate, except that because Americans are used to elevated crime rates (crime rates today, though still incredibly high by the standards of developed countries, are significantly lower than they were in the 90s) I would imagine they're less sensitive to fluctuations in the crime rate than people from safe countries might be. Well, that and all the confounding variables, like macro industry trends, Lehman shocks and so on.

The other thing is that Japan has really low productivity partly because they have such low unemployment (they employ a lot of their zero marginal productivity workers), and because they expend a lot of worker hours on low productivity services (like having huge numbers of shop attendants and greeters) and fixing or touching up things that aren't actually broken and have many years of useful life remaining. There's a complex near my condo in Tokyo with a section of wood decking, and I think they replace that deck completely at least once a year so it always looks shiny and new. In the US, I feel like they might replace it, oh, every 5 years or so if there were a lot of wear. That's a lot of labour expended on an activity that, in economic terms, is probably of negligible value, and there's stuff like that all over.

+1, Informative post

"crime rates today, though still incredibly high by the standards of developed countries"

Not really. Crime rates, are, in anything, only moderately higher in America than Europe. See this source:

America has a higher rate of rape and burglary than France, while France has, in most years, more car thefts and robberies.

You hear people say "international crime reporting for crimes other than homicide are unreliable." And certainly the rates of non-homicide crime in third world dictatorships will not be reliable. But we're comparing developed countries here. For some crimes, for example assault, there may be definitional problems. But what definitional problem can there be for car theft? Seems like a pretty unambiguous crime to me.

A 1,000 year old home looks better than a mobile home, but is it really?

Drive out in rural areas anymore and everything is manufactured housing until you get up to 3500 sq ft type ranges. There is clearly a lot of value there and the upkeep on them has gotten to be much lower as the designs and construction improve. Most people would rather have 20 more acres than a custom built stick frame home. As someone said earlier, update your priors!

Also, the insulation & economic efficiency of the HVAC unit is vastly improved.

the kind of people who are shocked to learn that French people are poorer than West Virginians are . . . .well, nevermind.

...You might be a different kind of redneck

I bet that France and Japan would be much more "productive" if they received the same $10k/capita or so in net transfer from the United States that West Virginia receives. That is, if we define productivity as income per capita.

And San Francisco would probally be much less productive if it was part of the Greater Asian Prosperity Sphere too. Get back to me when the coastal states figure out how to win wars on their own.

I'm gonna have to give you a warning, Mr. Haysom.

You are going to have to come with us.

Is that all you got?


It might be more productive.

"$10k/capita or so"

Or so. Okay!

Those countries did and do receive large net transfers from the USA.

Japan doesn't have to have such large armed forces as we defend them.

They also nationalized our car factories in Japan prior to WW II.

I really am amazed at how people toe the new line that front line bases overseas are defending "them," and not a long term strategy to keep wars far from our shores.

Japan was not occupied to protect them.

That's like saying Bill Gates didn't create Microsoft to benefit me, he only wanted my money. The US defending nations like South Korea, Greece, and Turkey ensured that they remained independent nations outside the Soviet Orbit. Yeah, we didn't just do it out of the goodness of our hearts, but that doesn't mean nations under the US defense umbrella didn't derive enormous benefits from it.

This is not a new line. People have been complaining about free-riding for decades.

Also, defending South Korea at a cost of thousands of dead, and then a lot of money...yeah, that was a real cost and a real boon to South Korea, Japan, etc.

Taiwan now spends pitiful amounts on defense. But they are safe from China...because they know America will defend them. Communism is effectively dead, so why should we care if Taiwan becomes another province of China?

Same in Europe. Russian adventurism isn't related to some global ideology that could possibly threaten us. Let German boys defend Germany.

The Taiwanese would love to just buy more weapons from the USA. If just the USA would sell.

America is the world's cop because it's a lot more stable than having a bunch of competing powers.

You get complaints from the Chomsky-left that we're interfering and the Trump-right that we're paying money to support them. To a degree, both have points on how the situation could be slightly improved. But this situation is still close to the best one that history has found that actually works.

There's no altruism in geopolitics.

Just looking at that article, I see leisure and hospitality increasing. But also health care and social assistance. How is "social assistance" considered a productive industry as opposed to be a government expense again????? And if health care costs are going up that just means the population is aging. That's not a positive thing.

At the same time, i see retail trade staying flat. Again, not an indicator of a generally growing economy. If the hospitality Industry and other sectors were really contributing positive growth, there would be a spillover effect on retail, because disposable income would be rising. There isn't.

The BEA publishes real per capita income stats by state that are deflated by the regional cost of living indices they also publish.

The last time I looked closely at data was for 2011-2013. 2014-15 data is probably out now.

They ranked West Virginia as the 42 poorest state with a per capita real income of 91% of the national average. The state ranked 50th had income equal to 84% of the national average and the best state was 139% of the average.

I'm willing to bet than the data from the BEA is much more accurate than the data you dug up.

IN 2011, West Virginia had an age adjusted death rate of 952/100K as compared to 741/100K for the national average. It's one of the few states where death rates exceed birth rates.

This was second only to Mississippi.

West Virginia might be a "productivity miracle" but its people are still dying out.

A pretty great and in no-way condescending article until the comment about meth-snorting squirrel hunters. You were almost there.

" In other words, if we consider that living in West Virginia is especially cheap"

The low cost of living should be adjusted by some hedonic factor to account for comparatively poor amenities. Santa Barbara is much more expensive than Duluth, but it has incredible natural beauty, a great climate and culture abounds. All else being equal most people would pay a sizable premium to live in coastal California.

As an analogy, Indians drive much cheaper cars than Americans. Naively you'd bump the purchasing power adjustment to reflect that. But much of that simply is an artifact of Indians driving much lower quality cars than Indians. Americans can also buy very low-quality cars cheap, they just choose not to.

The real question is, why is it so hard and haphazard to produce new great cities in the US. Certainly it could be done circa 1890, but it doesn't really seem to possible today. Or at least not in any systematic, predictable way. One way for W.Va. to take advantage would be to create an Austin or Asheville like metro. Somewhere combining relatively cheap cost of living with hip culture and a decent job market for educated professionals. But there's really no "playbook" for that.

In terms of pure natural beauty, there's no reason West Virginia shouldn't be the Colorado of the east. People who travel half way around the world to experience exotic cultures, wouldn't think of visiting WV, but it's really unlike anything else in the US.

I haven't been, but isn't the terrain similar to parts of other states everywhere from Vermont to Georgia, except that a higher percentage of it is mountainous?

"As an analogy, Indians drive much cheaper cars than Americans"

Cars are a LOT more expensive in India in relation to Indian incomes as compared to United States (for similar PPP adjusted incomes).

Comments for this post are closed