Economic development in Allegheny County over the last few decades has been driven heavily by government subsidies and directives putting taxpayers—County, state and municipal—in the role of venture capitalists. This approach has produced minimal benefits for the citizens of Allegheny County in terms of employment gains.
Since 1990 the County has sponsored or supported several high-profile economic development projects including the new airport terminal, sports stadiums, a new convention center, and a new operations center for a once prominent airline that continues to shed area jobs. Despite the hundreds of millions of public dollars poured into these, and a large number of smaller, less prominent projects, the number of employed County residents is almost the same as the level reached two decades earlier.
In 1990, the average annual level of employment for Allegheny County, as reported in the Current Population Survey (commonly referred to as the household survey) of the Bureau of Labor Statistics, was 616,654. By 2008, before the recession hit, average annual employment stood at 611,285—a small decline from 1990 and possibly a statistically insignificant change. The peak level during these two decades occurred in 1997 when the average annual number of employed reached 635,247. Thus, the 2008 figure represents a 24,000 drop in the number of County residents working over the 11 year period. In fact, the latest recession lowered the annual average number of County residents working in 2010 to 591,721, a level not seen since before 1990.
By contrast, Pennsylvania’s statewide data shows that the latest recession dropped the level of employment only to 2003 levels. From 1990 to 2008, the state’s average annual level of employment grew 10.7 percent—certainly a more robust growth rate than that of Allegheny County with Commonwealth employment rising from 5.51 million to 6.1 million. Despite its own fascination with taxpayer-subsidized economic development, the growth in jobs across the Commonwealth was fairly steady for the better part of the two decades. But it too could have performed better with a more business friendly approach that relied less on handouts to encourage private sector development.
Comparing the County’s and the Commonwealth’s performance with that of the nation as a whole illustrates just how anemic their respective employment gains have been over the last two decades. From 1990 to 2008, the average annual count of working Americans climbed by more than 22 percent. Even taking the latest recession into account, the national employment level was still 17 percent above the 1990 reading. Meanwhile, comparing the County’s 2010 employment to the 1990 reading shows a four percent decline while the state employment gain over the same period was held to 6 percent—about a third of the national rate.
So what has the County been doing over the past decade or so? Besides backing the high profile taxpayer subsidized developments mentioned above, they have also been focused on helping businesses relocate within the County’s borders. Dick’s Sporting Goods moved down the road from its former facility, with help from taxpayer subsidies (Policy Brief Volume 8, Number 5) and American Eagle Outfitters relocated from Marshall Township to the City’s South Side. And let’s not forget the County approved tax increment financing package for PNC bank to build a new office tower downtown.
This resembles moving Potemkin villages more than an effective economic development strategy. Obviously, as the employment data discussed above reveals, all this effort has had little payoff for net new job creation. Proponents will argue that without all this public involvement, the jobs picture would have been even worse. That hypothetical cannot be proved. Moreover, the proponents’ claim pre-supposes that public direction of development is the only option. Working to create a business friendlier environment has been given short shrift. Many of the problems stem from state laws dictating the labor and the regulatory climate, but by and large local officials have never gone to Harrisburg to have those laws changed. So they are complicit in the relatively poor business climate that exists in the County.
The County’s economic development approach has been necessitated by the anti-business climate that so heavily permeates local governments. This climate promotes labor union interests at the expense of employers. Allegheny County and the City of Pittsburgh have each recently enacted mandated wage laws, at the behest of labor unions, directing those who receive taxpayer money for economic development projects to pay a prevailing wage for those who will work in these developments. While those who live at the taxpayer trough get no sympathy for taking government handouts, the message sent to firms, even those not receiving public money is loud and clear—local governments are not afraid to dictate terms of business. And of course this begins a cycle of using subsidies to counteract mandates further entrenching government’s role as developer.
A new approach to economic development is needed in Allegheny County. The County needs to remove obstacles to economic growth such as mandated wages and cut the onerous regulatory facing firms in the County. The County needs to work with both state and municipal and school district officials to reduce the tax burden faced by firms so that subsidies are no longer required. Finally, the County needs to abandon its heavily one sided pro-labor stance in favor of promoting a climate that welcomes and encourages new and existing businesses. Until these measures are undertaken, the County will continue to lag in job growth and economic development.
FrankGamrat, Ph.D., Sr. Research Assoc.Jake Haulk, Ph.D., President
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