Can we learn from Europe’s approach to laid-off coal miners?

A more secure safety net for workers in transition means higher taxes, a tradeoff many Americans oppose.

 

The last Thursday of March was Black Thursday in Wyoming’s Powder River Basin, when Arch Coal and Peabody Energy announced 465 layoffs at two of the coal-dusted region’s largest mines. The job cuts came amid Chapter 11 bankruptcy filings, first by Arch and Alpha Natural Resources in January and then by Peabody in April. Given the combination of crashing prices, bankruptcies, and a global push to phase out coal and other fossil fuels, the layoffs are most likely just the first to hit northeastern Wyoming. Here, where coal provides one out of every 10 jobs, much of the state is already reeling.

“We’re on our own out here,” Peabody miner Glen Bertrand, who still had a job as of early April, told Wyofile. “Hopefully, somebody comes through and gives them some help — get some politicians doing something, because they’re not doing nothing for us.”

Wyoming Gov. Matt Mead opened temporary community resource centers in the coal towns of Casper, Gillette and Douglas to provide information on unemployment insurance, job opportunities and training, and counseling services. Following Black Thursday, more than 900 people showed up at the centers and workforce offices, including some unemployed workers from the oil and gas industry.

But the official response feels underwhelming to Bertrand and other laid-off workers. Why, they wonder, have they been abandoned, given that Wyoming produces nearly 40 percent of the nation’s coal? Billions of dollars in mining revenue pays for schools, roads and other public services in the state. What about the workers who helped produce that revenue?

Mark Perkins, left, and Scott Pearce talk about recent layoffs from the nearby Black Thunder Coal Mine at Perkins' electrical shop in Wright, Wyoming. Perkins is closing his business after the mine laid off hundreds of workers, including Pearce, due to a dramatic decline in demand for coal. The town, with a population of less than 2,000, relies heavily on the energy industry to sustain itself.

To find a different response to the crisis, Wyoming and its miners may need to look in another direction — toward Europe, in fact, where unemployment benefits generally last longer, job-training programs are more extensive, and retirement benefits are better protected. That makes it easier for both industry and mining communities to weather the hard times when they come.

Both West and East Germany relied heavily on coal for power and jobs following World War II, for example. But coal mines began declining following reunification in the 1990s. In the western part of the country, the high costs of continued “hard coal” mining from deep geological formations has forced some closures as prices have dropped. Eastern Germany has the most productive lignite mines in the world, but lignite, also known as soft or brown coal, is extremely dirty, emitting much more carbon dioxide than other fossil fuels when consumed. The government is now scaling back those operations as part of Germany’s national effort to address climate change, and to restructure its energy policy to reduce carbon-spewing coal and fossil fuel use and invest in renewables, according to Clean Energy Wire (CLEW), an independent, nonprofit German energy communications group. Germany’s environmental minister is pushing to stop mining and burning coal entirely by 2040.

The U.S., in contrast, has no such comprehensive national-level climate action or energy policy. Miners and energy officials in Wyoming and elsewhere continue to blame President Obama and the Clean Power Plan, rather than global economic and environmental pressures, for the downfall of coal, and many refuse to support climate action or even acknowledge climate change. With plenty of congressional support for that viewpoint, the U.S. has come up with only relatively minor coordinated efforts to manage sweeping energy trends. Instead of getting behind deliberate and comprehensive energy policies or climate-change planning, U.S. lawmakers have allowed global energy market forces to buffet the industry and energy workers, with few resources offered to ease the pain. Wyoming Gov. Mead’s latest state Energy Strategy is focused on fossil fuels with scarcely any mention of renewables, and he recently said the state is “doubling down on coal,” including aggressively backing unproven “clean coal” and carbon capture and storage technology, in hopes of somehow bucking the global downturn.

Through German government and industry agreements that began nearly a decade ago, mining subsidies will be phased out by 2018, creating a “soft landing” for workers and companies, compared with the typical U.S. pattern of unexpected layoffs and abrupt bankruptcies. The arrangements aim to allow much of the over-40 workforce to move out of the mines and ease into retirement, while younger workers can go through job retraining to meet the growing need for skilled labor in engineering, technology, and other industries. Germany has a strong tradition of vocational training and apprenticeship programs, supported by unions, the government and employers.

There’s no doubt that Germany, the United Kingdom and other European countries are still facing major job losses in the coalfields. But some of the worst impacts are being softened, thanks largely to trade unions.

In Germany, the mining, energy and chemical industry trade union is one of the nation’s largest and strongest. Unions do more than lobby to keep coal mines open and jobs in place; they also work to maintain welfare and retirement benefits and pensions for their members  — and they support negotiated phase-outs. In contrast, the once-mighty U.S. mining-labor movement is in steep decline. The United Mine Workers had 800,000 members in the 1930s, when unionization and support for blue-collar labor peaked with the New Deal. The union now represents just 35,000 active and 40,000 retired miners, while a mere 5 percent of mining, quarrying, and oil and gas extraction workers were union members in 2014.

The United Mine Workers remains strongest in West Virginia and Kentucky, where underground mines still need large workforces, compared with the West’s strip mines. “In the Powder River Basin, union mining is almost nonexistent,” says University of Wyoming economist Robert Godby. That means that, though the union has fought hard to prevent companies from trying to duck out of retirement benefits in Appalachia, it has little stake or influence in the Powder River Basin.

Coinciding with labor’s decline in past decades, many companies have converted from pensions that guarantee monthly payments to retirees to contribution programs such as 401(k)s, which provide more investment choices but saddle employees with risks without offering guaranteed benefits. Further, as companies declare bankruptcy, they can bail on paying into multi-employer benefit plans — where several companies pool their employee welfare and retirement benefits — negotiated through collective bargaining agreements.

Most (government) assistance money goes toward Appalachia, with its larger mining workforces, while only limited funds are making their way West.

Arch Coal, at least, has said it will continue to make retiree benefit payments after filing for bankruptcy. But the company’s executives also paid themselves exorbitant bonuses despite the bankruptcy announcements. For laid-off workers, Arch is offering between four and 26 weeks of severance pay, based on service time.

Behind decisions over union representation, retirement benefits and government welfare services, notes Godby, is a larger political philosophical debate over what’s known as the social contract. As students of Hobbes and Locke may recall, social contract theory posits that citizens who live under a government basically give up some “natural rights” (our right to do pretty much whatever we want, including rob or steal) in order to protect other liberties (such as our right to have property and not be robbed, or to have secure and insured banking institutions).

In Europe, following the chaos and devastation of World War II, governments and citizens have mostly supported a greater public safety net, Godby says, requiring more public welfare and social services than in the U.S., where limited government remains a dominant mantra among conservatives and even some progressives. On top of that, Europe’s politics are generally more left-leaning, with social-democratic influences that walk the line between capitalism and socialism. If any American miners are pining for German-style support now, though, they may want to get behind Bernie Sanders.

Of course, a more secure safety net means higher taxes to pay for government resources, a tradeoff most Americans are still resisting. So, while Wyoming miners make an average $83,000 a year, a laid-off worker collects just $470 a week, or roughly 30 percent of their past income, based on Wyoming’s Unemployment Calculator, and benefits can run out after half a year. In Germany, salaries are comparable or lower while tax rates are about double U.S. rates, but unemployment benefits pay job seekers two-thirds of their former earnings for up to two years, and healthcare doesn’t vanish with a job loss.

In Svalbard, Norway, sinking coal prices are also forcing job cuts and mine closures. But despite the downturn and remote location, between the mainland and the North Pole, the region’s small communities are hanging on — thanks to intervention and investment from the Norwegian government. An initial $55 million payment and another, more recent $11.4 million payment helped the state-owned mining company, Store Norske, concentrate operations in one expanded mineshaft while closing down others, which should give the community time to develop alternative industries and jobs without immediately shuttering the mine. Meanwhile, with assets from Store Norske, the government formed a local tourism enterprise to attract visitors and helped develop a university Arctic research program. In an interview with the news site Arctic Deeply this March, Arild Olsen, the mayor of Longyearbyen, the world’s northernmost permanent settlement, as well as a former miner and union spokesman, called the ventures “a brilliant idea.”

An 80-foot wall of coal at a Peabody Energy mine in Powder River Basin in Wyoming. The company filed for Bankruptcy in early April 2016.
Peabody Energy

In the U.S., government support isn’t quite as robust. At the federal level, President Obama launched the POWER Initiative last year to provide $65.8 million for job training and creation for energy workers and to support economic diversification for slumping coal communities. But that program is relatively minor, considering the size of the country and its energy industry, and the grim forecast for coal. Not to mention, most of assistance money goes toward Appalachia, with its larger mining workforces, while only limited funds are making their way West. By contrast, Agora Energiewende, a German energy-policy center, recently proposed an annual $280 million (250 million euro) “structural change fund” for 25 years to cushion the economic blow and job losses in coal-mining regions.

Godby says the minimal federal help is a consequence of our decision to cede greater authority to states. But that also leaves the states dependent on their own resources, exposing another catch: Because energy development is responsible for filling Wyoming’s coffers, as the industry declines, so does state revenue and spending.

Wyoming is making across-the-board budget cuts as energy revenues fall off, including chopping more than $732,000 and reducing branch services from the Department of Workforce Services in the most recent budget.

“We’re much more dependent on local economic conditions, and that makes it even tougher for the state just when we need these programs,” Godby says.

Coal mining has, of course, always been tough work. Coping with the decline of the industry may prove even more daunting than the last century’s challenges: improving health and safety conditions or reducing environmental impacts. The fallout is undoubtedly going to be felt most harshly by workers, families and towns in the Powder River Basin and other coal-mining regions that, for decades, have powered the country and the world. Still, the U.S. is unlikely to embrace European-level tax rates anytime soon to pay for a better safety net to help unemployed workers. Without a major policy shift, Wyoming and the other states that rely on fossil fuels are likely to face more major layoffs and rocky times, with uncertain outcomes for communities lacking other industries. Perhaps, as the going gets tougher in Wyoming, the tough will reconsider the social contract.

Joshua Zaffos is an HCN correspondent in Fort Collins, Colorado. Follow him @jzaffos.

version of this article was also published in our magazine, on May 16, 2016.

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