Sunday, March 04, 2007

The Hidden Source of Future Job Opportunities in the Pittsburgh Region

If you’re thinking about future job prospects, will you find more opportunities living in the Pittsburgh Region or in other parts of the country? The standard statistics on job growth seem to indicate that the Pittsburgh Region is a poor choice. For example, preliminary figures for 2006 show that jobs here grew by only 0.79%, less than half the U.S. growth rate.

But not all job opportunities come from job creation. In particular, when a current worker retires from the labor force (assuming their employer decides to fill the vacancy), that creates a net new job opportunity in the regional economy, even though there is no increase in the total number of jobs.

Every community has workers approaching retirement. But a higher proportion of workers in the Pittsburgh Region are nearing retirement than in any other large region. At the end of 2005, 17.7% of the workers in the Pittsburgh Region – more than 1 out of every 6 – were age 55 or older. In contrast, only 13.1% of the workers in Austin and San Diego were that age. In Atlanta, Charlotte, Dallas, Denver, Houston, Indianapolis, Minneapolis, Seattle, and Silicon Valley, 15% or less of the workforce is age 55 or older.

That means that over the next decade, Pittsburgh will likely have a higher rate of job opportunities resulting from retirements than any other region. And that could make a dramatic difference in how Pittsburgh looks to a potential job seeker.

Here’s an example. Pittsburgh and San Diego have about the same size economies – in 2006, the Pittsburgh Region had 1.1 million jobs, and San Diego had 1.3 million jobs. Let’s assume that over the next ten years, in each region, 2/3 of the workers who are currently aged 55-64 retire after they pass age 65, and that their employers fill their jobs. That will create an average of 10,700 net new job openings per year from retirements in the Pittsburgh Region, compared to only 9,000 in San Diego.

So even though total jobs in Pittsburgh are growing half as fast as in San Diego (there were 9,000 net new total jobs in Pittsburgh vs. 18,600 in San Diego in 2006), when you combine retirements and job creation, Pittsburgh may well create 70% as many job opportunities as San Diego (19,700 vs. 27,600).

Moreover, the competition for these job opportunities will be lower here than in other regions. The high average age of our population means we will have fewer young people entering the workforce relative to retirements than will other regions. In the 2000 Census, Pittsburgh had the second smallest ratio of people aged 10-19 to people aged 55-64 of any major region in the country. (By 2010, most of the 10-19 year olds will have entered the workforce, while most of the 55-64 year olds will have retired.)

Regions like Atlanta, Dallas, Denver, Minneapolis, and San Diego had twice as many 10-19 year olds as 55-64 year olds, while Pittsburgh had only 50% more. That means that even with slower job growth than other regions, Pittsburgh is likely to have more job openings than its current workforce can fill, providing job opportunities for new residents.

There’s a downside to this, though – if employers can’t find enough workers to fill the jobs that open up due to retirement, they may have trouble remaining competitive. The Three Rivers Workforce Investment Board last year issued a report calling attention to the fact that many of our key industries have large portions of their workforce approaching retirement.

We need to encourage job-seekers to move here and take advantage of the opportunities from both job growth and job openings, so we can grow our population base and insure that we don’t have a workforce shortage.

4 Comments:

Anonymous The Jackal said...

Harold,

I believe you are reaching a bit with this one. While I agree that you can spin a tale that makes lemonade out of lemons, the fact remains that this region consistently fails to generate enough jobs to not only grow the population, but even to keep it stable.

Pittsburgh is perceived as tired and old compared with much more diverse and energetic Sun Belt economies. The only way to change this perception is to actually start generating quality jobs that then drive the demand for greater service sector employment. You have correctly delved into this issue previously.

Replacement labor can maintain the current employment levels but won't do much for growing the region and attracting many newcomers.

We need to move away from the Government directed economic development that picks winners and losers based on the questionable choices of these "experts". Let's instead level the playing field for all employers by reducing regulations and taxes across the board. This will jump start new ventures and over time, generate increased tax revenues and employment.

This model works over and over again throughout the country. Why it is not put into practice in Pennsylvania is frustrating, but in my opinion, stems from the fact that so many people who reside here have never lived anywhere else. They simply cannot compare this region critically to others because this is the only reference point they have to work from. Performing better than Cleveland or Buffalo may have been applicable a generation ago, but it's completely irrelevant now.

We should expect more from our elected leaders. They are cleary failing us.

10:41 AM  
Blogger Harold D. Miller said...

Describing the opportunities that are available from job openings is not meant in any fashion to cover up the fact that we aren't doing as well as we should on the net job creation front. (In fact, that bottom-line performance statistic is right in the first paragraph of the article.) Moreover, even the job creation we have is coming too heavily from the health and education sectors, and we can't rely on continued, unlimited growth there. The region clearly needs to improve its job creation performance, and a big part of that starts with the state providing a competitive business climate.

But don't denigrate the opportunities that will be available from job openings due to retirement. They are disproportionately high-quality jobs, and that means that they can be attractive enough to encourage someone to relocate here. And if the jobs are filled by people who are already here being promoted, that still opens up an attractive job for a relocatee or a new graduate from one of our local universities or colleges.

The point is that the glass is half full as well as half empty (actually probably a little better than half full), and while we need to be working hard on filling up the part that's empty (by business climate improvements, etc.), we also need to work hard on letting people know about the part that's full.

5:56 PM  
Anonymous Anonymous said...

Harold,

What say ye regarding the state revision that knocked the Pittsburgh region 2005 job growth down to zero (yes zero!)? Perhaps the "turning the corner" spin was a bit premature...Only 10k jobs were created last year. That's job growth of <1%.

I was in Austin last week and they added 35k new jobs last year. That's 6x the Pittsburgh level when normalized for regional population.

It's more clear than ever that the government directed "economic development" process is a failure here in Pennsylvania. When will the population acknowledge this and change the course of the region before there’s no one left?

12:36 PM  
Blogger Harold D. Miller said...

I say it's pretty depressing, that's what I say. Maybe the fact that it's "zero" rather than just "slow" can finally be a wake-up call to those who don't agree that the state's business climate needs to be improved dramatically. The state had money to spare last year and did almost nothing to make the business tax structure better; this year, the state is suddenly out of money again and proposing to raise taxes -- the worst possible signal to send to prospective investors.

The fact that the rate of new job creation is so small, though, makes it all the more important to remind people that there will still be some job opportunities from retirements. Otherwise, there would be no reason at all for a job seeker to move here.

4:39 PM  

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