Taking Stock and Looking Forward: Virginia’s Economy and Policies to Build a Stronger Future

With many schools resuming in-person classes, an acceleration of vaccine rollout, and positive reports about how many jobs are being added each month, it might feel like everything is getting back to normal. Yet we can’t afford to return to a status quo that was failing too many of our communities, and much more needs to be done. By using available policy tools, we can build a more equitable recovery and economy for the future.

Where We Stand

People are the economy, and Virginia’s economy is doing well only when people in Virginia are doing well. Despite the rising stock market, the impact of the pandemic on the real economy is far from over, and too many people in Virginia are still without work. There are still 214,000 people in Virginia who are without a job despite seeking to work – twice as many as were unemployed a year ago before the major impacts of the pandemic – and there are another 200,000 people who have dropped out of the labor force, whether because of the challenges of supervising remote schooling or the lack of safe employment options. A number of economists have warned that many of these jobs will not automatically return with the reduction in COVID cases, since employers have found ways to rely less on human labor in their work processes. Further, one lesson of the Great Recession is that a slow recovery harms families and communities, particularly those that face the highest barriers. Job recovery was a long process – the recession officially ended in 2009 yet it wasn’t until 2014 that Virginia recovered to as many jobs as in 2007. The unemployment rate for Black residents of Virginia rose to 11% in 2009 and stayed that high for two more years before gradually declining to 4.4% in 2019.

Being put out of work means many families are struggling to make ends meet. Nationally, 34% of adults with children and 29% of all adults reported difficulty covering usual household expenses according to Census Bureau data covering March 17-29. In Virginia, 27% of adults reported difficulty covering usual household expenses during the March 3-March 29 period (smaller sample sizes at the state level require pooling more weeks of data).

And not everything was working well before the pandemic. Two basic components of economic well-being are income and wealth. In terms of income, almost 3 in 10 working people in Virginia were being paid less than $15 an hour in 2019, often while doing critical work such as food production and caring for children and elders. That’s less than is needed to affordably rent a typical studio or one-bedroom apartment in Virginia. Because of unequal access to high-quality public schools and ongoing discrimination in seeking employment, Black and Latinx people in Virginia are even more likely to be paid under $15 an hour. And that’s for people who have been able to find jobs – Black people in Virginia are twice as likely as white people to be looking for work but unable to find it, and in recent years relative unemployment rates have risen for Latinx people in Virginia as well. This February and March, 8% of Black workers in Virginia were still unemployed.

And in terms of wealth, both young and middle-aged adults were already facing high levels of student loans and rising rent costs, even as headlines blared about a rising stock market. This has been particularly true for Virginians from families who weren’t able to help with college costs or making a down payment on a first home. Many of those who were already boxed out before the pandemic are families of color who, because of past and ongoing barriers to wealth-building, are less likely to receive an inheritance or other large monetary transfers from older family members.

Opportunities for a Just and Equitable Recovery

Policymakers at all levels of government have the opportunity to learn from the lessons of the Great Recession and invest in a robust, equitable recovery. 

Policies for Virginia

For state policymakers, the federal American Rescue Plan Act provides a historic opportunity to make investments in communities and families who have been shut out for too long. With $3.77 billion in flexible funding for the state of Virginia and another $222 million for capital projects (additional funds will go directly to localities), policymakers can help build a full-employment economy and invest in rectifying past wrongs through investing in labor-intensive, one-time initiatives and seeding wealth-building initiatives for families of color. 

To build a full employment economy, the state could make transformative investments in building safe, energy-efficient schools for the current and future generations of children, increased K-12 funding for reading tutors through the Virginia Reading Corps to help children make up for lost instructional time, grants to nonprofit organizations to better help low-income families make home improvements to reduce energy bills, and support for local governments to help young people enter the labor force through summer jobs programs. State policymakers could require that jobs funded through these grants pay wages above a certain threshold (perhaps 150% of the Virginia minimum wage). Alone, these sorts of policies won’t solve every problem, but they would create meaningful improvements in our communities, help address climate change, and provide a decent wage and experience to people who have been shut out of the labor market. 

To rectify past and ongoing discriminatory barriers to wealth-building, Virginia could use some money to seed wealth-building programs, whether wealth-based baby bonds for the next generation, meaningful down payment assistance for today’s working families, or undoing some of the harm caused by the locating of highways and toxic industries in communities of color. 

Federal Policies

For federal policymakers, low borrowing costs and the opportunity to build an equitable recovery while addressing the climate crisis creates the imperative to make transformative investments in a stronger, healthier future. In addition to building a more resilient and more climate-friendly infrastructure, this should include reducing child poverty (which has long-term benefits both for the individual and society as a whole), strengthening the earned income tax credit, expanding access to affordable housing and health care, strengthening food assistance programs, investing in child and elder care and making sure providers are paid a decent wage, and expanding paid leave. (For more information on how a federal infrastructure package can support a broad-based, long-lasting improvement in family economic security and opportunity, see this recent report by the Center on Budget and Policy Priorities.) And after decades of sharp increases in the real (inflation-adjusted) cost of going to college, federal policymakers should provide broad-based student loan debt forgiveness while addressing college costs going forward so that the next generation of students are not burdened with the same challenges.

Paying for Improvement

Investing in policies that keep families in their homes, workers employed, students enrolled in college, and businesses open – and focusing those investments to those who have faced the highest barriers – is both just and smart policy. Right now, state lawmakers have some available federal funds to make a down payment on these initiatives. To scale up to what is needed for a just recovery and maintain it will require everyone to invest in our shared future, including asking the winners of the pandemic economy to pay their fair share. Both state and federal policymakers can clean up the tax code to raise the resources needed to make permanent improvements in public programs that support thriving communities. This should include closing loopholes for multistate corporations through tools like combined reporting at the state level and correcting the Trump-era give-away for pass-through businesses at the federal level, as well as other loopholes that particularly benefit wealthy, well-connected individuals. And both state and federal policymakers should reinstate fair taxation of inherited wealth and use that money to create broad-based wealth-building opportunities. There’s a lot of work to be done to build an equitable recovery and economy, and there’s also a lot of opportunity to do so. Let’s get to it.

Category:
Economic Opportunity