Sunday, September 03, 2006

Do Low Salaries Contribute to the Region's Brain Drain?

The Pittsburgh Region has a high quality of life and a low cost of living – major attractions for talented workers. But are employers here competing effectively for the best talent?

For example, our region has been creating science and engineering jobs faster than the nation as a whole. Moreover, our local universities graduate some of the best engineers in the country. Carnegie Mellon has the 7th best undergraduate engineering program in the country, and Pitt has the 53rd best, according to U.S. News and World Report.

But engineers in the Pittsburgh Region are paid less than in most other regions. Pittsburgh ranks 34th out of the largest 40 regions in average salaries for civil engineers, 35th for computer software engineers, 34th for electrical engineers, and 25th for mechanical engineers.

The low rankings mean large salary differences – as much as $10,000 - $20,000 per year. For example, computer software engineers here earned an average of $67,630 in 2005. But they made $89,530 in Houston, $86,110 in Baltimore, $82,020 in Denver, and $77,900 in Philadelphia. For electrical engineers, the average salary in the Pittsburgh Region was $70,350, but it was $92,970 in Austin, $81,920 in Dallas, and $77,840 in Minneapolis. Although the cost of living is higher in some of these other cities, it is not enough to offset salary differentials this large.

Even more striking are the wage differences in another of our region’s high growth areas – health care. The Pittsburgh Region ranks dead last among the top 40 regions in average annual wages for healthcare practitioners and technicians. We rank 37th in salaries for pharmacists, 38th for RNs, 39th for medical and clinical laboratory technologists, 40th for pharmacy technicians, and 40th for radiology technologists and technicians. Again, the differences are large – radiology techs make an average of $38,920 here, but make over $50,000 in Milwaukee and Minneapolis, and over $45,000 in Cleveland, Detroit, and Indianapolis.

Does this have an impact on the region’s ability to attract and retain talent? A study done several years ago by Susan Hansen and her colleagues at the University of Pittsburgh suggests it does. They found that low salaries were a key reason why many graduates of our local universities left the region – although the cost of living elsewhere might be higher, recent grads are still attracted to higher starting salaries.

Not all jobs in Pittsburgh pay less than other regions. Our teachers and construction workers are relatively well-paid. We have the 12th highest salaries for elementary school teachers among the top 40 regions and the 17th highest for middle-school teachers. (Salaries for preschool teachers, on the other hand, are lower than most other regions, ranking 35th.) Pittsburgh ranks 16th in average annual wages for construction laborers, 17th for electricians, 14th for plumbers, and 17th for structural steel workers.

Production workers here are also relatively well-paid – annual wages rank 20th out of the top 40 regions. This likely reflects the fact that Pittsburgh has retained higher-skilled production jobs. The regions with the lowest production wages are all in southern states.

However, if the region is going to keep creating higher paying production jobs in growth industries, it needs to have the best scientific, engineering, and medical talent it can get. A salary that is competitive in the local job market may be very uncompetitive in the national market. Rather than reducing costs, lower pay may cause problems filling key positions, and contribute to the “brain drain” that will reduce our competitive edge.


Blogger Barbosa said...

To add some numbers to the comments you made about average salaries for computer software engineers in Pittsburgh and other areas, according to Bankrate's cost of living calculator, you could have the same standard of living in:

- making $64,675 (4% less)

- making $86,270 (28% more)

- making $73,139 (8% more)

- making $90,087 (33% more)

So it looks like the computer software engineers are really only making higher salaries than those in Pittsburgh in Houston and in Denver. They would be making about the same compared to those in Baltimore and more than those in Philadelphia.

10:57 PM  
Blogger Amos_thePokerCat said...

Of course, the lower salary differentials are across the occupational board, and are averages. In my case, unfortunately being forced to move back to PIT from DEN for family obligations, my wife, a nurse, took a 30% pay cut. As an highly experienced software engineer, I would have had to take a cut closer to 50%. High tech recuiters in the area are very familiar with the problem, and talk quite frankly about it. These numbers, if anything, are very low estimates of the problem I experienced first hand.

Of course, this difference in living standards assume you are not buying a house with intention of acculating wealth. I would like to see a 10 year, or 20 year comparison between, lets say, DEN, and PIT, so we could add in the appreciation of housing over a multi-year period, instead of counting it unfairly as a one-time fixed cost of living.

Booming house market here in PIT. Going right along with the salaries. Ya. Hope nobody is counting on retiring on that nest egg.

2:50 AM  

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