It wasn’t the shale, yinz

Pittsburgh

Paul Krugman muses on why deindustrialization left Detroit a basket case, but not Pittsburgh. Both metros were one-industry towns well into the 1970s (cars in Detroit, steel in Pittsburgh). Both took huge economic hits in the 1980s when the factories closed and the jobs went away. Yet today Detroit is a bankrupt wasteland, while Pittsburgh isn’t doing too badly. What’s the difference?

Krugman tentatively suggests that “Pittsburgh, by taking better care of its core, also improved its ability to adapt to changing circumstances.” By contrast, Detroit, he thinks, may have been so eviscerated by the exodus to the suburbs that it lost “the kind of environment that could incubate new sources of prosperity.”

I come from Pittsburgh, and I think Krugman’s roughly right. Specifically, I think it’s an “eds and meds” story.

Pittsburgh is home to two top-rank educational institutions, the University of Pittsburgh and Carnegie Mellon University; CMU in particular draws the kind of brilliant entrepreneurial students who start viable high-tech companies. It’s also home to the University of Pittsburgh Medical Center, aka UPMC, a behemoth of a health system that owns 20 hospitals and has 54,000 employees. Virtually everything to your right as you drive down Fifth Avenue in Pittsburgh’s Oakland neighborhood is UPMC – it’s like the Borg on the Hill there.

According to this article, post-industrial Pittsburghers "practically saw themselves as defined" by eds and meds. And how's this for data: Among Pittsburgh’s private-sector employees, one in five works in health care.

Yet more than a few of the 200-plus comments on Krugman’s post think it’s all about the Marcellus Shale. I’ll grant that the timing looks right at first glance, given that Detroit’s and Pittsburgh’s employment numbers start diverging around 2007. But the scale and geography are all wrong … and actually, as I’m about to argue, the timing is wrong, too.

Scale first. The fact of the matter is that the Marcellus Shale’s effect on the jobs market has been absurdly overhyped. Gas companies and their political allies continue claim shale development is leading to hundreds of thousands of jobs. In reality, fewer than 25,000 new jobs statewide can be attributed definitively to Marcellus Shale activity.

In the Pittsburgh area, the mining sector added just 3,200jobs between 2007 and 2011, out of a regional payroll of more than 1 million. And that’s in an eight-county area. A job in rural Washington County doesn't count toward reducing unemployment in downtown Pittsburgh.

Which brings up geography and timing. It’s true that a number of gas companies have established regional headquarters in Pittsburgh. But that was a choice, not a necessity. Northcentral Pennsylvania doesn't have any Pittsburgh-sized metropolitan area, yet that hasn't prevented drillers from going gangbusters up there. If their site selectors had scouted Pittsburgh and found a ruined urban wasteland, they could have set up shop just fine in Washington County instead.

Fortunately, by 2007, Pittsburgh had done most of the hard work of reinventing itself – becoming pace Krugman “the kind of environment that could incubate new sources of prosperity.” When the drilling firms turned up, they found a hospitable downtown business district, so they signed office leases and moved in. That’s all to the good – every job is a job, contributing to Pittsburgh’s bottom line. 

But these jobs are an effect, not a cause. They’re a modest added bonus, not the reason Pittsburgh isn’t Detroit.