The Pittsburgh Economy

Pittsburgh economy

Pittsburgh, Pennsylvania has a diversified economy, with an emphasis on services, healthcare, higher education, tourism, finance, corporate headquarters and hi-tech. Formerly known as “The Steel City” and the center of the American steel industry, the city no longer has any steel mills within its limits. However, companies based in Pittsburgh, such as US Steel, Ampco Pittsburgh, and Allegheny Technologies, own several functioning mills in the metropolitan area.

The 2009 G-20 summit was held in Pittsburgh due to its transition to a modern economy. On September 8, 2009, Barack Obama noted the city’s transformation, saying, “Pittsburgh is a shining example of how to move into the 21st century economy while creating jobs and businesses.”

Tara Weiss, a writer for Forbes magazine, compiled a list of the best cities for job growth in 2009, with Pittsburgh taking the 169th spot due to its successful health care, education, technology, robotics and banking sectors.

The city of Pittsburgh has achieved a top five ranking in the Places Rated Almanac in four of the seven multi-year rankings since 1983, 1985, 1989, and most recently 2007.  This publication considers Pittsburgh to be one of the world’s most livable cities.

Initiating the Economy

In the mid-18th century, the Pittsburgh region had an economy based on farming and trade. After the American Revolutionary War, the government imposed a tax on whiskey to pay off national debt. This resulted in the Whiskey Rebellion of 1794, which was the first rebellion against the government. The Federal government had decided to impose a tax on whiskey, however, the farmers protested since they had no money to pay the taxes on their bartered goods. Consequently, Washington had to send troops to suppress the protest and impose the tax laws.

In the 18th century, the discovery of vast coal reserves in Pittsburgh, including the most significant bituminous coal reserve in the US at Coal Hill (later named Mount Washington), fueled the city’s growth. Pittsburgh was also strategically located at the convergence of the Monongahela, Ohio, and Allegheny Rivers, providing access to major American trade routes; this made it a renowned industrial powerhouse.

The first and most prominent industry that appeared in the 1800s was boat building, which included both flatboats for transporting pioneers and their belongings downriver and keelboats that could be propelled upstream by a strong crew.  After this, the second largest industry in the area was glass production. The first glass factory was established in 1795 by James O’Hara and Isaac Craig.

In the 1800s, the economy of Pittsburgh was established.

The wealthiest industrialists in Pittsburgh during the 19th century could all be found living in the same area, East Liberty. This list of industrialists included H. J. Heinz, George Westinghouse, Andrew Carnegie, Thomas Mellon, Andrew Mellon, Henry Clay Frick, and Philander Knox. All of these men believed in the capitalist system and their area had the highest income per capita in the world during this time. Andrew Carnegie was also famous for his philanthropy; he wrote The Gospel of Wealth, saying that all wealth beyond what was necessary to sustain one’s family should be given to the benefit of the community. This led him to open the Carnegie Library, which is free to the public, in 1890. Carnegie donated over $350 million to organizations that were for the public good. The Duquesne Club and the Greater Pittsburgh Chamber of Commerce were both founded by these wealthy industrialists in 1873 and 1874, respectively. The Pittsburgh Stock Exchange was also formed in 1864, and after a few changes, was open for all stocks by 1894. The New York Stock Exchange board even considered relocating their trading floor to Pittsburgh’s facilities in 1966. However, the stock exchange closed their Fourth Avenue financial district doors in 1974 due to computerization consolidating trades in other cities.

Railway lines expanded to Pittsburgh in the mid-1800s with the opening of the Ohio and Pennsylvania Railroad in 1851 and the Pennsylvania Railroad providing service to Turtle Creek from their Philadelphia base the same year. The following year, the Pennsylvania Railroad was finished to Downtown Pittsburgh, and the Allegheny Valley Railroad was constructed in 1856. Andrew Carnegie took advantage of the railways by founding the Pittsburgh Locomotive and Car Works in 1865, which became a leading business in the city until 1919.

In 1892, the economy of Pittsburgh was hit by the Homestead Strike between the Amalgamated Association of Iron and Steel Workers and the Carnegie Steel Company. The workers had not been able to come to an agreement regarding a new wage contract and the result was a violent confrontation with several people dead and wounded. In the end, Carnegie Steel company was successful in avoiding union formation in Pittsburgh.

The Rise of “Big Steel”

The emergence of “Big Steel” has been seen in the Pittsburgh area, with it playing a major role in the economy.

After the reorganization of Carnegie Steel into U.S. Steel in 1901, it and J&L Steel had a powerful impact on the local economy. Additionally, several other secondary players, such as Cyclops Steel in Bridgeville, Pennsylvania from 1908 to 1987, Mesta Machinery in West Homestead, Pennsylvania from 1898 to 1983, Dravo Corporation on Neville Island, Pennsylvania until 1984, National Steel Corporation until 1992, Wean United as an independent until 1993 (still having its US headquarters in the city), Harbison Walker Refactories as an independent until 1967 (while still maintaining its US headquarters in the city), and the still active Allegheny Technologies and Ampco Pittsburgh, all contributed to the region’s production capacity. Bethleham Steel, Republic Steel, and LTV Steel also had significant local operations. Other major mills in the area included:

  • The McKeesport National Tube Works operated from 1872-1987.
  • The Edgar Thomson Steel Works was established in 1873 and is still active.
  • The Hays Army Ammunition Plant was operational from 1942-June 1971.
  • The Clairton Steel Works was founded on April 21, 1903 and ran until 1984.
  • The Duquesne Steel Works opened in 1886 and ceased operations on October 1, 1984. During the 1940s, it had as many as 9,000 employees.
  • The Homestead Steel Works existed from 1881-May 24, 1986.
  • The Carrie Furnace operated from 1884-1982.
  • Saxonburg Mill was active until 1987.
  • The Verona Mill opened its doors on April 4, 1905 and had two 20-gross-ton Symthe acid open hearth furnaces, capable of producing 14,400 tons annually.
  • The Mon Valley Works – Irvin Plant opened in 1938 and is still in operation.
  • The Midland Cyclops Steel Plant operated until October 15, 1982.
  • McKees Rocks, Pennsylvania‘s Wheel and Axel plant (Lockhart Iron and Steel and Pressed Steel Car Corp.) had as many as 12,000 workers.
  • The Donora US Steel Wire mill employed 4,500 people until 1966.
  • The Monessen American Chain & Cable had 1,000 employees until 1972.

In 1894, Andrew Carnegie established the Union Railroad in Pittsburgh, Pennsylvania and it remains in use today to provide transport to local steel mills.

During the 20th century, the economy of Pittsburgh underwent a radical transformation

At the start of the 20th century, the economy of Pittsburgh was reliant on the steel industry and the city had a population of 321,616.During this period, the population of Pittsburgh increased and then eventually decreased by the end of the century. At one point, it had the eighth-largest population in the U.S. In 1901, the Amalgamated Association of Iron, Steel and Tin Workers conducted a strike against the U.S. Steel Corporation subsidiaries, the first strike since 1892.

In 1903, a front page of the Pittsburgh Press drew attention to Pittsburgh as a focal point for three different railroads. Eight years later, the city was dubbed the “Stogie capital of the nation” due to the numerous noteworthy cigar makers located there.

Pittsburgh achieved a remarkable level of production in the steel industry in the 1920s, with one third of the national output being generated there. The city was home to the largest tube and pipe mill, structural steel plant, rail mill, wire manufacturing plant, and bridge and construction fabricating plant in the world. The boat building and metal industries formed the economic base of the region. The use of coke from coal replaced the use of charcoal from wood in iron and steel making, thus enabling Pittsburgh to become the hub of the industry. The Pittsburgh area had access to around 40% of the nation’s coal, located within 100 miles of the city.

As a result of the New Deal reforms enacted by Franklin Roosevelt, unionization of the steel industry in Pittsburgh was successful. The Wagner Act of 1935 provided workers with the right to form labor unions and made it illegal for employers to oppose or disrupt union activity.

In the 1950s, industrial executives joined forces with regional government authorities to encourage and maintain more trade in the area. The RIDC (Regional Industrial Development Corporation) was established to realize this objective.

In the early to mid-1980s, the steel industry encountered a drastic downturn, leading to the displacement of nearly half of all steelworkers in the nation. It was reported that in the Pittsburgh area, the number of steel workers plunged from 90,000 in 1980 to only 44,000 in a span of four years.

Since 1957, Motor Coils, located in Forest Hills and Braddock suburbs, has been a major provider for American railroads.

In the 20th century, the city of Pittsburgh was host to a number of prominent advertising and public relations companies, such as Ketchum and Burson-Marsteller.

From the early part of the 20th century, retail chains such as G. C. Murphy, Thrift Drug, Thorofare, Fisher’s Big Wheel, and Giant Eagle emerged. Phar-Mor had a significant presence in the local retail market from the 1980s to the 2000s, until Thorofare ceased operations in 1982 and Thrift Drug was acquired by Eckerd in 1996. Later, Loblaws closed their stores in 1958, Kroger’s shut down in 1966 (although there are still stores close by in West Virginia counties), and A&P in 1972. IGA stores in the area ceased to exist during the early 2000s.

Shifting to the Current Economy

From 1970-1990, the Pittsburgh SMSA experienced a transformation in the main employers, which were prevalently from the manufacturing sector. In 1970, one in three jobs was from manufacturing, but by 1980 this had dropped to one in four. The average manufacturing worker was making $360.89 weekly, which was $70 more than the state and national average. The most common job was blue collar, accounting for 68% of the jobs market. During this period, there was a forecast of a decrease in the manufacturing industry, and it was assumed that Pittsburgh would turn to “industrial robots”. Since 1955, the population of those employed in manufacturing has declined steadily. In 1955, 41.8% of Pittsburgh was in the manufactory business, but in 1980 that had dropped to 25.3%.

The economic landscape in Allegheny County, Pennsylvania has been largely supported by the fields of health care and higher education, which provided the most high-wage jobs between 1999 and 2005. These two industries accounted for almost 80% of all such jobs. Additionally, the Pittsburgh region saw growth in other sectors such as professional services, finance, and wholesale trade; however, much of the job growth was located outside of Allegheny County. Nonetheless, the tourism industry has had a positive effect on the county, creating more than 11,000 jobs, with 6,000 of those being within Allegheny County.

For decades, Pittsburgh has been a hub for finance and banking activities.

Pittsburgh’s Largest Private Employers

Among the biggest private employers in Pittsburgh are the following ten firms, which are listed in order of size.

The following table shows the top ten largest employers in Pittsburgh, Pennsylvania, along with their respective numbers of employees and the products or services they offer:

Rank | Employer | Number of Pittsburgh Employees | Product(s)

1 | University of Pittsburgh Medical Center | 40,600 | Health Care

2 | University of Pittsburgh | 12,600 | Higher Education

3 | PNC Financial Services | 9,200 | Financial Services

4 | Allegheny Health Network | 8,900 | Health Care

5 | Giant Eagle | 8,000 | Supermarkets

6 | Bank of New York Mellon | 7,610 | Financial Services

7 | Highmark | 5,270 | Health Insurance

8 | U.S. Steel | 4,700 | Steel Manufacturing

9 | Carnegie Mellon University | 4,600 | Higher Education

10 | Verizon Communications | 3,750 | Telecommunications

The 2008 economic recession had less of an impact on Pittsburgh than many other cities across the U.S. This was largely due to the city’s transition away from a dependence on manufacturing to an economy focused on health services, education, and tech. Furthermore, the housing market in Pittsburgh saw a two percent increase in prices in the final quarter of 2008, compared to a higher decline in other cities. From 2006 to 2011, the Pittsburgh Metropolitan Statistical Area (MSA) saw a ten percent appreciation in housing values, which was the highest out of the largest 25 MSAs in the U.S. Conversely, 22 of the top 25 MSAs experienced a depreciation in housing values during the same period.

Non-profits that operate on a national level

Pittsburgh is the home of several non-profit organizations that operate nationally or globally, including:

  • The Learning Disabilities Association of America was established in 1963
  • The Institute for Research, Education and Training in Addictions was founded in
  • The National Center for Juvenile Justice was formed in 1973
  • The Colcom Foundation was established in 1996 Colcom Foundation
  • The Laurel Foundation was founded in 1951 Laurel Foundation
  • The Heinz Endowments Heinz Endowments
  • Printing Industries of America was created in 2003 Printing Industries of America

Progress in the 21st Century

Since the 1990s, the economy of Pittsburgh has changed in terms of banking, health care and technology. In December 2004, the city was forced to enter Act 47 due to its financial status. Unemployment was 6.8% in January 2003, but the rate decreased drastically to 4.8% by April 2005. The health care service sector is an important part of the city’s economy as it accounts for one in five jobs. Pittsburgh also managed to stay afloat during the recent economic downturn. By 2008, the business services sector had increased by 3,000 jobs and the city had created over 1,000 construction jobs in the region.

The technology sector plays an important role in the economy of Pittsburgh.

The city of Pittsburgh has become known as a technology hub, with big players such as Google, Apple Inc., Intel, Uber, Facebook, and RAND all having campuses established there. Additionally, the Pittsburgh Technology Center, Pittsburgh Supercomputing Center, and Pittsburgh LAN Coalition are all contributing to major innovations in the area, though this needs to be further verified.

The city is home to the international headquarters of a number of businesses, including Duolingo, Petrosoft, Modcloth, and Songwhale.

The 2009 G-20 Conference in Pittsburgh

In 2009, the G-20 Summit was held in Pittsburgh.

Refer to the 2009 G-20 Pittsburgh summit for further information regarding the topic.

The city of Pittsburgh was chosen to host the 2009 G-20 summit for many reasons, one of them being its background of successful manufacturing, business services, and green energy. With nearly 100,000 workers employed in the manufacturing sector, the city stands as the second-largest market for metals industry employment in the United States. Additionally, it is home to major business and financial services, which contribute significantly to the area’s economic output. The city’s history of innovation in energy, such as oil, coal, and natural gas, has been a great asset. However, a more comprehensive focus has been placed on sustainability and efficiency while preserving the environment, with over 30 LEED certified buildings.

A plan to promote economic growth

Pennsylvania’s counties are required to craft a land use and growth management plan, with Allegheny Places being the plan devised for Pittsburgh and Allegheny County. Adopted in November 2008, it is a “unique blueprint for a sustainable future” crafted by the citizens of the County. This plan is overseen by a steering committee of over 100 members, an advisory committee with over 400 members, and a sounding board. The plan advocates for a future in which:

  • All residents are provided with equitable access to the advantages and advantages of economic growth
  • Former brownfields are being converted and developed
  • Transit-oriented initiatives to reduce traffic congestion and link Oakland, Downtown and the Pittsburgh International Airport
  • The support of greenways will join the community with parks, trails, riverbanks, etc.
  • There is affordable and top-notch housing available for everyone
  • A diversified economy provides secure, well-paying jobs

The plan for economic growth involves enterprise zones, progressions in research and technology, the construction of research parks like the University of Pittsburgh Applied Research Center, collaborations with economic development groups, and the launching of venture capital programs.

In certain locations within the inner city, an Urban Enterprise Zone provides exemption from import duties, taxes, and certain government regulations. Research of enterprise zones has demonstrated a correlation between their implementation and job growth and investment in the zone. Generally, it has been observed that the zones demonstrate economic activity that is not commonplace in the encompassing metropolitan area. However, the effectiveness of these zones is often contingent upon local circumstances. Allegheny County contains 26 enterprise zones, 17 of which are situated in the City of Pittsburgh.

The growth of the research and technology sector in the region has been aided by the local universities, medical centers, the technology cluster, and the availability of financial capital. This has an effect of attracting business and creating or increasing the number of jobs. Nevertheless, since this type of development is recent, it is challenging to make any clear conclusions about its potential. Additionally, the universities are the source of technology transfers to industry, which is a result of students being trained in specific programs to meet the particular needs of the industry.

The National Bureau of Economic Research published a report in 2014 which found that Pittsburgh is the second-most successful city in the United States for intergenerational economic mobility; meaning that it is the second-best place to realize the American Dream.

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