No Labor Day Joy in Pittsburgh

Member Group : Allegheny Institute

Compounding the litany of financial difficulties confronting the City of Pittsburgh the latest jobless figures (July 2010) show a recession-high unemployment rate in the City’s labor force of 9.1 percent—a level not experienced in well over a decade. The unemployment rate has almost doubled since the July 2007 reading of 4.7 percent.

Over the longer period dating back to the beginning of the decade, the number of employed residents has been unable to return to the near 153,000 reading recorded in 2001. Indeed, this July’s count of 142,200 employed residents was almost 11,000 below the decade’s opening level. Similarly, the City’s labor force currently stands at 157,000, 3,450 below the 2001 posting of 160,451.

Throughout much of the last decade, the unemployment rate was fairly flat, averaging 5.3 percent from 2001 to 2006. The flat trend result was attributable in large part to matching declines of approximately 6,000 in both labor force and employment over the period while the count of unemployed fluctuated but by 2006 stood at virtually the same level as in 2001. However since July 2006, the number of employed residents has fallen by 4,000 and labor force has increased by 3,000 leading to the doubling of unemployed from 7,300 to 14,200 currently.

Lack of labor force growth reflects the ongoing loss of population in the City. The drop in employment for City residents shows up in the very meager gains in earned income tax collected by the City over the last ten years. Gains that were much slower than inflation. Paltry income growth accompanied by the long term slide in employed are no doubt major contributors to the low median home price in Pittsburgh, which in turn limits the real estate tax base.

Consider too the irony of spending over a billion taxpayer dollars on new stadiums and convention center, which are tax exempt structures. And underway is the half billion dollar (plus the costs imposed on businesses during construction) North Shore Connector that will add zero to the City’s tax base in addition to contributing virtually nothing to the ability of the community to move people to where they need to be.

Combine the City’s exorbitant pattern of spending and financial mismanagement with little job growth or increases in residential property value and the fiscal plight of the City is easily understood.

The problem now is the City is trying to find solutions for years of imprudent behavior by going after visitors and non-resident workers. Visitors, non-resident employees, non-resident property owners and County taxpayers are already paying enormous amounts to support City functions through the amusement tax, RAD tax, parking tax, payroll preparation tax, Local Services tax, etc. Going after them more aggressively is a very shortsighted approach to fixing Pittsburgh’s fiscal woes.

Unfortunately, the plan to lease Parking Authority garages threatens massive increases in the parking rates in the City—increases sizable enough to hurt businesses significantly.

Far better for Pittsburgh’s politicians to recognize that one of their biggest problems—if not the biggest—is the power and influence organized labor has over the governance and policies of the City. There is an inability and unwillingness to stand up to the unions, especially the public sector unions who are major contributors to the legacy cost anchor that prevents the City from moving forward as well as a major deterrent to making the decisions necessary to reduce expenditures, outsource services or enter into meaningful consolidation efforts with the County.

Instead, all the City’s elected officials will soon be marching in a parade extolling the virtues of collective bargaining and the need for unions in both the private and public sectors. It might be good short term strategy for politicians and their re-election prospects in cities with a lot of well-to-do people who can be taxed heavily to support above market wages and benefit packages for City employees. But as we see in Pittsburgh and cities across the country, this is not a good long term strategy because eventually the overtaxed will leave and the tax base will be insufficient to sustain the excessive generosity extended to employees.

JakeHaulk, Ph.D., President

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