Sunday, September 14, 2008

College Students and Seniors Make The City Seem Poor

A new report from the Census Bureau says that the City of Pittsburgh is one of the poorest large cities in the U.S. Median household income in Pittsburgh in 2007 was $32,263, the 4th lowest level among the central cities in the top 40 regions. By comparison, median income in the City of Charlotte was $52,690, more than 60% higher.

Why are incomes in Pittsburgh so low? Surprisingly, part of the answer is that Pittsburgh has so many colleges and universities. Most college students don’t earn much money while they’re in school, and so cities that have more college students will have lower overall income. And that’s exactly what’s happening in Pittsburgh.

Pittsburgh has a higher proportion of college students than almost any other major city in the country. In 2006, the Census Bureau estimated that more than 1 out of every 7 (15.5%) residents of the City of Pittsburgh was in college or graduate school, the second-highest percentage among the central cities in the top 40 regions. By comparison, fewer than half as many (6.8%) of the residents of the City of Charlotte were in college.

As a result, nearly 1 out of every ten (9.3%) households in the City of Pittsburgh is headed by someone under the age of 25, the second highest percentage among the central cities in the top 40 regions. Only Austin – another big college town – has a higher percentage of young households.

Not surprisingly, households headed by people under age 25 have lower income than older households do. Nationally, median income for households under 25 is $26,747, a little more than half of the overall median household income of $50,740. So cities like Pittsburgh that have more young households will have lower overall median income. And in college towns, the households under age 25 are even poorer, because more of them are in school and not working. In Pittsburgh, their income is unusually low, though – median income for households under age 25 is only $13,342, the lowest level by far for that age group of any city in the top 40 regions. This may be due to unemployment and low wages among young people not in college.

It’s not just young people in college that make Pittsburgh look poor. It’s also senior citizens. One out of every 4 households (24.4%) in the City of Pittsburgh is headed by someone age 65 or older, the second highest percentage among the top 40 regions. Only Miami has more senior households. In contrast, only half as many (12.2%) of the households in Charlotte are 65 or over. Since households 65 years or older have lower incomes than others, Pittsburgh’s overall income will be lower than other regions simply because it has more households in that age group.

If you look at households in the 25-44 age range, the median income in the City of Pittsburgh is much better -- $43,369 in 2007, ranking 27th among the central cities in the top 40 regions. That’s still low, but hardly the worst in the country. Unfortunately, the City of Pittsburgh has the second-lowest percentage of 25-44 year old households among the top 40 regions. Some of that is likely a legacy of the region’s economic collapse in the 1980s – the 18-22 year-olds who left the region in search of jobs then would have been in the 25-44 age group today.

Although the City of Pittsburgh’s unique age distribution contributes to its low ranking on income, it’s not the only factor. The City’s small physical size makes it easier than in other regions for upper-income workers to live outside the City but still work in the City. But even at the regional level, income levels within each age group here are below most other regions. Some of this reflects the lower cost of living in the Pittsburgh Region, but it’s also due to relatively low salary and wage levels for many types of jobs. More on that in a future post.

(A shorter version of this post appeared in the Sunday, September 14, 2008 Pittsburgh Post-Gazette.)


Anonymous Anonymous said...

Quite the contrast in number of college students between City of Pittsburgh and cities of Detroit and Cleveland... which are near the bottom in % in college and were a couple of the "cities" below us in median income...

4:57 PM  
Anonymous Anonymous said...

The over-abundance of students and focus on universities growing their "business" also reflected in the unique way economic/technology development groups (that receive public funding) utilize their resources. Instead of providing funding to potentially high growth tech venture companies, the system is politicized. There is a much greater likelihood that a (LOCAL) univ. affiliated start up will receive support...and the track record of such companies is quite bad. Though some local universities such as CMU and to an extent Pitt have well known tech dev. capabilities, the city is really weak on most factors that go into nurturing successful start-ups. Interestingly enough, they also seem to actively prohibit and ignore companies from outside the community to establish operations and grow here, again favoring these local univ. groups...which exposes a great deal of conflict of interest problems, etc.

3:47 PM  
Anonymous Anonymous said...

Univ. resources are under-utilized as a result of the above, but the situation may be difficult to change as local leaders in business, politics have little incentive to change and have actively avoided being confronted with direct comparisons with other regions, nation-states, etc as such comparison would greatly expose the problems here. For example, the city maintains numerous tech/econ dev. organizations that do not provide such vital resources as acct., legal, PR, etc. resources to start ups.....they mostly provide generalized seminars held by private contractors trolling for clients. This is a waste of public resources and actually provides public/gov. support of tech dev. with a bad name.

One derivative may be the loss of the most promising companies to other regions that actually care about keeping and supporting tech companies. The city does not seem to understand that it is competing for companies on the national and global stage, and that though people truly enjoy living here..bother boomerangs and new people who lack pre-programmed stereotypical views of the city, may quality people and organizations will be turned off by the above and may decide the risk is too high to stay.

The univ. and health care businesses carrying the city are also in a bubble phase...the demise of the growth of academia (like the rest of the country) may occur sooner, the hollowing out of healthcare here is inevitable considering the demographics within 10-15 years. By then, perhaps there will be more support for true start ups...but it would most assuredly be too late for the city to position itself as a leader in nurturing and growing successful high tech ventures...

3:59 PM  
Anonymous Anonymous said...

While I certainly have my concerns about some of the regions economic development efforts, the notion that our TBEDs only provide seminars or only fund university startups is just ludicrous. (And with absolutely no evidence provided, I might add.)

IW, PLSG, TTC and Idea Foundry collectively invested somewhere between 10 and 14 Million $$ directly into companies last year. Not seminars. Investment. And those companies, while not transforming the region as of yet, have many that are making good progress.
It is interesting that those who do not get funded always point to bias, conflict of interest, lack of understanding, etc to explain why they didn't get funded.
Could we do more? Of course. Should we do more. Absolutley. But, there are more damn resources available to would be entrepreneurs here than in the vast majority of places. And I don't see successful entrepreneurs who built profitable companies lamenting the lack of assistance or local VC. They didn't wait for the region to hand them what they needed -- they went out and made it happen. As a host of folks are doing right now.
Maybe its time we figured out that we don't have a shortage of good TBED, we have a shortage of good entrepreneurs.

3:49 PM  

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