Sunday, April 04, 2010

Saving Manufacturing in the Pittsburgh Region

As a result of the national recession, the Pittsburgh Region lost 28,600 jobs between 2008 and 2009. Although that’s terrible news, what’s even worse is that more than a third (35%) of all the jobs we lost were in the manufacturing sector. In fact, manufacturing accounted for a bigger share of total job losses here than in all but three of the top 40 regions in the country. (Even in Detroit, only 32% of the lost jobs were in manufacturing.)

Our region lost nearly 10,000 manufacturing jobs in a single year, or more than 10% of the 98,400 manufacturing jobs that were here in 2008. Because manufacturing jobs are among the highest paid in the region, the impact on regional income was even bigger: 50% of the wage income that Pittsburgh region families lost between 2008 and 2009 was due to manufacturing job losses.

The impact of losing manufacturing jobs goes well beyond the production workers who are directly affected. Many of the region’s professional and business services jobs are in firms which provide services to manufacturing firms, and a lot of health care, retail, arts, and other jobs in the region depend on the spending by manufacturing employees. This means that our loss of manufacturing jobs has probably contributed to many of the job losses we’ve experienced in non-manufacturing sectors.

What kinds of manufacturing jobs did we lose? Two-thirds (6,800) of all manufacturing job losses, and nearly one-fourth of all the jobs we lost in the recession, were in five traditional manufacturing subsectors – primary metals (i.e., the steel industry), fabricated metal products (e.g., machine shops), machinery manufacturing (e.g., tool and die manufacturers), chemicals, and “non-metallic minerals” (i.e., glass and cement/concrete).

It’s not that these industries were unusually hard hit in Pittsburgh; in fact, they lost a smaller proportion of their jobs here than in many other regions. Rather, those five traditional sectors still represent 46,000 jobs, more than half (54%) of all the manufacturing employment here, so the job losses they did experience had a disproportionate impact on our overall economy. Pittsburgh has a higher concentration of manufacturing jobs in these five sectors than any large region in the country except for Houston. (If you thought the steel industry was gone from southwestern Pennsylvania, think again: 1 of every 7 manufacturing jobs in southwestern Pennsylvania is still in the steel industry, with many more in businesses that supply the steel industry.) In contrast, 50% of the manufacturing jobs in Seattle are in the transportation equipment industry, and 68% of the manufacturing workers in Silicon Valley produce computer and electronic products.

What about manufacturers of high-technology products? In our region, companies that make computer and electronic products, electrical equipment, and medical equipment and supplies employ over 14,000 people, or 17% of all manufacturing jobs in the region. These businesses lost over 700 jobs (5%) between 2008 and 2009, but this was less than half the rate of job loss in other manufacturing sectors, demonstrating the value of diversifying our manufacturing sector into information technology and life sciences.

Fortunately, although we lost a lot of manufacturing jobs, we didn’t lose nearly as many manufacturing businesses. Although 76 manufacturing plants closed between 2008 and 2009, that was fewer than 3% of the nearly 3,000 manufacturing facilities that were here in 2008.

The fact that most of our manufacturing businesses are still here provides hope that we can recover many of the manufacturing jobs we lost when the economy turns around. We can’t take that for granted, however. If we want to remain a major manufacturing center, public and private sector leaders need to help existing manufacturing businesses grow and also work to further diversify our manufacturing sector by encouraging more new technology startups. Here are five areas for priority attention:

•More investors are needed to provide early-stage capital and technical assistance so that entrepreneurs can start and grow new manufacturing firms;

•Banks need to increase lending to existing firms so they can recall workers and take advantage of business opportunities as the national economy improves;

•High school students need to pursue manufacturing as a career choice so that manufacturers can find skilled workers when they need them;

•Citizens need to support local government investments in the roads, water and sewer systems, industrial sites, and other infrastructure needed by existing and new manufacturers; and

•The Governor and General Assembly need to cut the state’s Corporate Net Income tax and resist expanding the sales tax, so manufacturers here can be as competitive as possible with businesses in other parts of the country.

(A shorter version of this post appeared as the Regional Insights column in the April 4, 2010 Pittsburgh Post-Gazette.)


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