Tuesday, March 17, 2009

The Road to the Economic Super Bowl

The Pittsburgh Region is now the undisputed world champion in professional football – six Super Bowl rings, more than any other region.

What will we do for an encore? Will the Steeler Nation focus solely on getting Ring #7, or can some of that energy be redirected to something even more important – growing our economy?

The challenge facing us is not just how to weather the recession, but how to position ourselves for solid economic growth in the post-recession economy.

Although we’ve gotten a lot of positive attention for being a “good place to ride out the recession,” our economic performance in other years has been weak. Over the last two decades, we had the fifth lowest rate of job growth among the top 40 regions, and in most years, job growth here was less than 60% of the U.S. rate.

We know the road to the Super Bowl – it goes through Baltimore, Cincinnati, Cleveland, and the rest of the AFC. We know the key players – Roethlisberger, Ward, Holmes, Harrison. We know the stats to watch for – yards rushing, passes completed, points scored.

So what’s the road to more job creation? Who are the key members of the team, and what specific goals should we be pursuing? The strategy is actually quite simple:
1. Create new ideas.
2. Turn them into new products and services at new and existing companies.
3. Help companies successfully grow and create new jobs.
4. Create a workforce capable of filling those jobs.

Goal #1. Increase Funding for Our Research Universities.

We are fortunate to have two world-class universities generating cutting-edge new ideas in many aspects of engineering and science. We are fortunate to have two outstanding university leaders in Mark Nordenberg and Jared Cohon who continue to attract top researchers, top students, and provide a solid base of good jobs that help the region resist recessionary forces.

But they need money to do it – money for researcher salaries, for laboratories, for student tuition, etc. The good news is that Pitt and CMU do extremely well in obtaining federal research and development (R&D) funding – in 2006 (the most recent data available), Pitt ranked 8th among public universities, and Carnegie Mellon ranked 10th among universities without a medical school.

The bad news is that their rankings on total R&D spending were dramatically lower (14th for Pitt and 20th for CMU) because of their small endowments and low state government support, making them dangerously dependent on the federal budget. Despite extraordinarily successful capital campaigns and generosity from local foundations, Pitt’s endowment still ranked only 29th in 2008, and Carnegie Mellon’s ranked 69th. On top of that, state support is also very low – the Commonwealth of Pennsylvania spends the 6th lowest amount on higher education relative to personal income of any state in the country.

It’s time that we see the size of our universities’ endowments and the amount of their state and federal funding as every bit a matter of civic pride as their record on the football field and basketball courts. Those dollars translate directly into both immediate jobs and into the ideas and talent needed for future growth.

Goal #2. Increase the Number of Startup Companies

Although the universities provide a stable source of high-quality jobs and a wealth of cutting-edge new ideas, the bulk of job creation will come from translating those ideas into new companies.

Our region was founded on entrepreneurship. Most of our big companies didn’t move here, they started here. But today, we have one of the lowest rates of new business formation of any region in the country, and that severely limits our potential for future growth.

We need to make startup companies and the entrepreneurs who form them as much community heroes and give them as much media coverage as we do the players for the Steelers. We should be publicly celebrating the successes of Plextronics and Andy Hannah, Renal Solutions and Pete DeComo, RedPath and Mary Del Brady, Thorley Industries and Henry Thorne, and many others, and encouraging young people to follow in their footsteps. (You can find more of our most promising startup companies at www.innovationworks.org/companies.)

Goal #3. Make Our State Business Climate Competitive

Getting more companies started is only half the battle. We need to make sure those businesses can thrive here. The bigger and more mature companies get, the more important it is for them to be competitive on costs with companies in other regions and countries.

We can help our companies in many ways – keeping tax rates low, controlling healthcare costs, providing rapid and responsive permitting, building and maintaining critical infrastructure. Although improvements are needed in all of these areas, there is no better place to start than on the most visible sign of a poor business climate – the fact that Pennsylvania has the second highest corporate net income tax rate in the country.

We’ve invested in new stadiums for our sports teams to make them competitive – we need to invest in a better business climate to make our economic team more competitive, too.

Goal #4. Achieve 100% Proficiency for Every High School Student

In order to grow here, businesses will need to find skilled workers, and in order for our children to fill those jobs, they’ll need the right skills. Whether they’re going to college or going directly to work, the critical first step is a good high school education, i.e., proficiency in basic skills like reading and mathematics.
The sad truth is that last year, over 1/3 of the high school graduates in our region weren’t proficient in mathematics, and over 1/4 weren’t proficient in reading. And if you think the problem isn’t in your district, think again: not a single school district in the entire region had over 90% of its 11th graders proficient in math.

It doesn’t take more money. Some of the best performing schools in the region spend below-average amounts of money. It takes each community demanding that their school board, superintendent, and teachers (and yes, the parents, too) focus on proficiency.

Before you name all the other goals that you think are missing – keeping crime rates low, improving air quality, etc. – think about this: if we could all agree to focus on at least these four goals, we could transform our region’s economy and give ourselves the resources to pursue additional goals. Even our social needs and cultural aspirations will be better addressed with more jobs and more employed residents.

These four goals are ones that every citizen (yes, that means you) can help achieve. What can you do?
• Contribute to the universities’ capital campaigns;
• Invest in an entrepreneur, or buy their products or services;
• Vote for legislators and governors that will create a competitive business climate; and
• Elect school board members that will focus on achieving 100% proficiency for children. (And if you have kids, make their school work a priority).

If we focus our energies and resources, we can make Pittsburgh the City of Champions, not just in sports, but in economic growth.

(A shorter version of this post appeared in the Tuesday, March 17 Pittsburgh Post-Gazette.)


Blogger Jerry said...

Can you explain figures in the "Rate of Manufacturing Startups" graph? Does that mean that ~3.5% of manufacturing companies in Pittsburgh in 2007 were startups?

9:42 AM  
Blogger Harold D. Miller said...

Yes, that's correct (it's 3.4%). More precisely, it means that of locally-headquartered manufacturing firms (as opposed to branch plants of firms headquartered elsewhere) located in the Pittsburgh Region in July 2007, 3.4% of them had been formed within the prior year.

10:21 AM  

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