The Pittsburgh transformation is a model for others, but there’s more to do

 

The Allegheny Conference on Community Development recently finished a three-year plan based on listening sessions that examined the business challenges and opportunities for the 10-county southwestern Pennsylvania region.

“While we’ve got challenges, I believe the opportunities in front of us more than present us with a chance to deal with those challenges to keep the momentum going,” says Dennis Yablonsky, CEO of the Allegheny Conference on Community Development.

Yablonsky spoke at the Chase Smart 50 awards event in November on economic development and the region’s transformation.

What we have today is an economy that is balanced, diversified and innovation-driven, and because of the balance and diversification, it’s sustainable, he says.

There is, however, still work to be done.

Finding the right people

Businesses cannot find enough people with the right skills to meet their hiring needs, Yablonsky says. This is due to major demographic challenges.

Over the next 10 to 15 years, companies need to replace 136,000 retiring baby boomers.

At the same time, there’s a skill mismatch in terms of job seekers and openings. Two-thirds of the region’s open jobs don’t require a four-year college degree, but young people still don’t have the right training for those jobs.

This region also is the only place in the country that has more deaths than births, Yablonsky says. While the population is growing, it’s barely making up for the birth/death ratio.

Finally, Pittsburgh is the least diverse region in the country, with 11 percent minorities and immigrants. The national average is 33 percent.

“You will not be able to sustain your business with a workforce that looks like me, and most of the people in this room,” he says.

Lesser business obstacles are building new infrastructure and pockets of economic disparity.

Opportunities ahead

With the second largest natural gas resource in the world, energy and related manufacturing present an enormous opportunity.

“There have already been benefits in terms of jobs in the exploration and the production side of that business,” Yablonsky says. “But the real benefit to this Marcellus Shale-related activity is the usage of that gas.

“If all we do is take the gas out of the ground, separate it and pipe it somewhere else, we will fail to take advantage of the vast majority of the benefit, economic and otherwise, that will come from this,” he says.

The best way to do this is by encouraging energy-intensive Asian and European companies to build facilities near inexpensive natural gas, and getting investments from the petrochemical plastics industry, which needs methane crackers to build their products.

Yablonsky says three different cracker plants are being discussed. Just one project would add $12.6 billion to the regional economy, a 3 percent addition.

The other opportunity is to continue to encourage the growing, burgeoning technology industry, he says, as major corporations move back-office tech operations from the East and West coasts.

The energy, energy-driven manufacturing and technology industries in turn will drive the other sectors, namely financial services and health care.

 

The transformation

Southwestern Pennsylvania has gone from an unemployment rate of 18.3% in 1983 to 5.2% today. So, how did it happen?

Everyone wants to know. (More than 7,000 stories have been written about the Pittsburgh transformation.)

Yablonsky says the three legacy industries — financing, manufacturing and energy — all of which were in trouble, reinvented themselves through innovation, focus and sustainable practices.

The region also leveraged world-class university and health care access like Carnegie Mellon University, the University of Pittsburgh, Pennsylvania State University and the University of Pittsburgh Medical Center to create new knowledge-driven industries. For example, there are now 1,600 technology companies in southwestern Pennsylvania.

Finally, significant philanthropic investments improved the quality of life. With $6 billion in foundations, the Pittsburgh region has the second-highest concentration of philanthropic assets in the county. Every year more than $350 million is invested in the area.

 

 

The region at a glance

There are more people working in southwestern Pennsylvania than ever. The unemployment rate is 5.2%, well below national and state averages, and the rate has consistently gone down over the past five years.

The jobs are higher pay and higher quality than the average. In the region, 43% of people work in high-paid jobs. The typical metropolitan area has 37%.

The Pittsburgh region continues to be a very attractive place for corporate expansion. Last year, 302 projects were publicly announced. That’s No. 3 in the Northeast in raw numbers, not per capita adjusted numbers.

For the first time in more than 20 years, the population is growing as the region gets younger and better educated.

There are more than 24,000 open jobs in the 10-county region, and that number continues to go up.

Pittsburgh has been ranked as the most livable city in America, as the No. 1 place for recent college graduates, as the third best place in the country for people in their 20s, and as one of the top 20 places in the world to visit — National Geographic only listed two cities from the entire U.S.