Sunday, January 02, 2011

New Year’s Resolutions to Create a Stronger Region

As we enter 2011, the shadow of the recession still hangs over the Pittsburgh Region’s economy. Although a surge of job growth last spring restored about 8,000 of the 38,000 jobs lost in 2009 and gave hope for a strong recovery, job growth in the summer and fall was disappointing. As of November, our region still had 26,000 fewer jobs and 40,000 more unemployed workers than in November 2007, the year before the recession started.

News stories about how well Pittsburgh did in the recession have lulled many people into believing that the region’s economy will automatically do well during the recovery. While it’s true we had the 5th smallest loss of jobs among the top 40 regions between 2007 and 2010, that was in large measure because other regions were losing tens of thousands of jobs that we had never created in the first place. Prior to the recession (2003-2007), Pittsburgh had the 5th worst rate of job creation in the country. Indeed, we were one of only 10 large regions which failed to restore all the jobs lost in the 2002 recession before the 2008 recession hit.

This is hardly evidence of a high-performance economic engine we can count on to drive our region in the future. If we repeat the lackluster performance of the past decade, it will be at least 2015 until we get back to the job levels we had in 2001, much less see net growth in jobs.

There are several areas where actions we take in 2011 could determine our future for decades. What should our region’s New Year’s Resolutions be?

Resolution #1: Rebuild Our Manufacturing Sector. Over half of the jobs we lost during the recession were in manufacturing, so manufacturing growth has to be a priority if we’re going to lower unemployment. Contrary to popular belief, the Pittsburgh Region still has more jobs in manufacturing than most of the major regions in the country. And there are hopeful signs of a recovery: 1200 manufacturing jobs were added here in the last six months of 2010, the 10th highest growth rate in the nation.

There are three key ways in which we can support robust job growth in manufacturing to get our economy back on track:

Provide capital for growth. Banks need to be willing to lend to firms when they have new business opportunities, and investors need to provide early-stage capital to help entrepreneurs start new manufacturing firms.

Invest in infrastructure. State and local governments need to make the investments in industrial sites, roads, bridges, and water and sewer systems that manufacturing firms need to locate and expand here. This will also create thousands of needed construction jobs.

Create a well-educated workforce. It does little good for manufacturers to create jobs if they can’t find qualified workers to fill them. See Resolution #3 below.

(For more information about how to grow manufacturing jobs, see Saving Manufacturing in the Pittsburgh Region.)

Resolution #2: Create a Higher-Value Healthcare System. One of our few sources of job growth over the past decade has been the health care sector. As a result, one-tenth of all of the region’s jobs are now in health care, a bigger share of our economy than the steel industry represented 40 years ago.

Unfortunately, all of those jobs and the most advanced healthcare technology in the world haven’t resulted in better health outcomes for Pittsburgh region residents. For example, we have the third highest rate of preventable hospitalizations among the largest regions in the country, and each year, thousands of people who are hospitalized get infections that could have been prevented. Poor quality care is one reason why the cost of health insurance in our region is higher than it needs to be, which in turn makes the region’s businesses less competitive in the global marketplace.

We can’t count on job growth in healthcare to continue at the same pace because we won’t be able to afford the costs involved. Moreover, if our region is going to attract and retain businesses and residents in the future, it will need to offer much higher-quality, more affordable healthcare. To achieve that, health plans need to dramatically change the way they pay for health care, rewarding good outcomes instead of the number of procedures performed, and citizens need to choose doctors and hospitals based on both the quality and cost of the care they provide.

(For more information about how to reform healthcare payment systems to support lower-cost, high-quality healthcare, see Paying for Value in Healthcare, Not Volume.)

Resolution #3: Create a High-Performing Public School System. Although one of our region’s historic strengths has been a high-quality workforce, over one-fourth of the region’s current high school students can’t read adequately and more than one-third aren’t proficient in mathematics.
No business could survive if one-third of its products were defective, and our region won’t succeed in a knowledge-based economy if 30% of our workforce lacks basic skills. Our particularly poor performance in educating African American students is likely a major reason we have the highest rate of poverty among working age African Americans in the nation.

It’s locally-elected school boards that need to be held accountable for this lackluster performance, and in 2011, half of the school board seats in each of our 124 school districts will be up for election. The choices citizens make at the polls this year could have a major impact on both their children and the region’s economy for decades to come. (For more information about the problems with the region's education system and the role of school boards, see Our Children Aren’t Ready for Jobs of the Future).

(A version of this post appeared as the Regional Insights column in the Sunday, January 2 Pittsburgh Post-Gazette.)


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12:05 PM  

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