Fundamentally, when one thinks of the American Dream, they are thinking about mobility. At its core, social mobility is the ability to improve one’s life and achieve their own vision of happiness and overall well-being. This could be through “material well-being,” such as higher incomes and more luxury items, but it could also involve other aspects of life that makes one better off—like family well-being and a fulfilling career.
Given the complexity and individual preferences that go into one’s best life, any reasonable measure of social mobility must take into account a more holistic approach. This was precisely the goal of my index, co-authored with Gonzalo Schwarz, on social mobility in the United States. We based this index on four major pillars: Entrepreneurship and growth; institutions and the rule of law; education and skills development, and social capital. We have done our best to measure the artificial (mostly policy-based) and natural (more individualized) barriers that exist within states that hamper mobility.
West Virginia ranks only 42nd in the country, according to our measure. This is worse than every neighboring state except Kentucky, which is one spot below. On a score of zero to 10, West Virginia scores a measly 4.16—over two points less than the top state, Utah, and a little over a point higher than the lowest scored state, Louisiana.
Among the four pillars, West Virginia ranks worst (47th) in the “Entrepreneurship and Economic Growth” pillar. Most damning in this area was the state’s score on “Business Dynamism,” which was dead last in the entire country. West Virginia has the lowest core start up rate (4.5 percent), the lowest growth in total firms (-2.94 percent), the lowest labor force participation rate (54.9 percent), one of the lowest housing permits per 1,000 people (1.8), and an extremely low level of patent activity (just 0.07 patents per 1,000 people). To be frank, there was not a single variable in this indicator where West Virginia scored well.
Why is dynamism so low? In part, regulation and taxes. West Virginia scores very low on occupational licensing laws, meaning that many residents must jump through various hoops with respect to time and money to receive permission to perform certain tasks. Given the already below-average incomes and high poverty rates in the state, this is simply not feasible. To add insult to injury, West Virginia is quite punitive with its tax policies—the state has below average scores for corporate, income, and sales taxes, lowering the reward to achieving success in the first place.
This is a double whammy: It is hard to start your career and when you do, you are penalized for it.
Another barrier to opportunity is the legal framework in the state. West Virginia is near the bottom 10 in access to justice, making it more difficult for individuals to receive the justice they deserve. Furthermore, the state received an “F” from the Institute for Justice for its punitive civil asset forfeiture, providing further evidence that its legal systems do little to protect the individual. From a business perspective, the quality of the state liability system is also quite poor. According to the U.S. Chamber’s Institute for Legal Reform, 89 percent of respondents state that a liability system impacts important business decisions; unfortunately, West Virginia
West Virginia’s education outcomes are far from ideal too. The state’s standardized test scores are only second worst to New Mexico. Once someone attends a university in West Virginia, the return on investment is also incredibly low. The median ROI on a degree from a university in West Virginia is just over $60,000, falling in the bottom 10. Furthermore, over one-third of college graduates in the state have a negative ROI from their college degree. Fixing the economic situation to allow students who are educated here to find opportunities, along with further implementing more school choice measures, could put West Virginia in a much better position.
One area where West Virginia does fine is in terms of “Social Capital.” However, this still just ranks 29th in the country. While there are a multitude of member organizations and strength of community bonds, volunteering and donation rates are quite low.
There is plenty of room for improvement in West Virginia, almost too many to count. What’s important is that the state has to start somewhere.
Whether it means restructuring the tax code, improving legal institutions, or trying to fix education, any movement in a positive direction can improve citizens’ lives. With a new governor leading the state comes an opportunity to tackle the most important issues plaguing West Virginia.
“Justin T. Callais, PhD, is chief economist at the Archbridge Institute and co-editor of Profectus, an online magazine dedicated to human progress and flourishing.”
