Sunday, May 31, 2009

Detroit vs. Pittsburgh: Hockey and Economics

NY TIMES (Jan. 7, 2009) -- This is what life in one American city looks like after an industrial collapse: Unemployment is far below the national average (see chart above, data through April 2009). While housing prices sank nearly everywhere in the last year, they rose here. Wages are also up. Foreclosures are comparatively uncommon.

A generation ago, the steel industry that built Pittsburgh and still dominated its economy entered its death throes. In the early 1980s, the city was being talked about the way Detroit is now. Its very survival was in question. Deindustrialization in Pittsburgh was a protracted and painful experience. Yet it set the stage for an economy that is the envy of many recession-plagued communities, particularly those where the automobile industry is struggling for its life.

“If people are looking for hope, it’s here,” said Sabina Deitrick, an urban studies expert at the University of Pittsburgh. “You can have a decent economy over a long period of restructuring.”

Yet the semisweet spot that Pittsburgh finds itself in was never inevitable. As recently as 2000, it had a higher unemployment rate than Detroit or Cleveland (see chart above). Just as Michigan has traditionally put all its chips on the auto industry, it took Pittsburgh a long time to come to terms with the end of the steel era.

MP: As Detroit faces Pittsburgh for the Stanley Cup, it reminded me of a previous CD post and NY Times article contrasting the two cities in terms of economic development.

There has been a lot of hysteria about the significantly negative impact of a GM bankruptcy on the Michigan and national economies, almost as if Detroit and Michigan could never fully recover from their long dependence on the auto industry. Pittsburgh's comeback from the decline of the domestic steel industry shows that Detroit and Michigan could survive even the unlikely demise of GM, and illustrates that there could be non-automotive life and jobs in Detroit and Michigan even without GM and Chrysler.

As the chart above shows, Pittsburgh had a jobless rate above Detroit's as recently as 2000, and now has an unemployment rate of 6.9% (seasonally adjusted), almost 6.5 percentage points below Detroit's 13.3%, and more than 1.5% below the national average of 8.5% in April.

32 Comments:

At 5/31/2009 4:07 PM, Blogger Craig said...

Metropolitan Pittsburgh's economy has, indeed, diversified -- though why it took a half century is cause for discussion. It's also important to note that the population -- not just of the city, but of the 7 county metro area has continued to decline.

This is also the case in Buffalo where unemployment is stable, home prices are rising but there have been no new net jobs generated since 2001. We, too, watch as our children move away.

Things are perhaps better for those of us left here, but growth is a forgotten concept and stagnation is greeted with some relief.

 
At 5/31/2009 4:30 PM, Blogger sethstorm said...

Unlike Detroit, Pittsburgh has a ton of labor relations firms that were able to attack freely on unions. They only had to hold the attack up long enough to drive them out of town or make them into a dismissible minority.

Now they're turning against US citizens after running out of unions to exterminate. See Grigsby and Cohen for their tactics that are about two steps away from treason.

That's not a price I'd want to pay. Unfortunately, it's one that I have to pay; I am a full-blooded citizen in a profession that is chock full of H1/L1's.

 
At 5/31/2009 6:41 PM, Anonymous geoih said...

Detroit's got a bigger problem than the declining auto industry: a community and political system stuck in the 1970's. There's plenty of success in southeast Michigan. You just have to look at the donut, not the hole that is Detroit proper.

 
At 5/31/2009 9:06 PM, Blogger Benjamin said...

Yeah, I don't know if we want to hold up Pittsburgh as an example. The city is half of what it was. And the Pittsburgh Pirates? Not long for this world.
Back in the 1960s, Reagan and executives used to brag about the swimming pools their employees had in their backyards. Now, no one brags about well-paid US workers. In fact, our wages are below Germany's, and several other advanced countries.
We keep hearing two songs: One: Free trade is raising our living standards. Two: Due to global competition, we cannot afford the wages and benefits we used to.
Okay, if true, that translates into radical declines in living standards for people who work for a living.
Hmmmm.

 
At 5/31/2009 9:26 PM, Blogger 1 said...

"Unlike Detroit, Pittsburgh has a ton of labor relations firms that were able to attack freely on unions"...

Hmmm, you got something credible to back up that statement sethstorm?

"Grigsby and Cohen for their tactics that are about two steps away from treason"...

Oh dear, you mean there's a legal outfit outsmarting that high priced union leadership?

Are Grigsby and Cohen as treasonous as Harry Reid or Dick Durbin?

 
At 5/31/2009 10:37 PM, Blogger Liberty's Lawyer said...

I've actually done some reading on Pittsburgh recently. I don't think you can call it the "Steel City" anymore. Times have changed, and they have adapted. Other cities like Bend, OR, Elkhart, IN, and Merced, CA have not. The results are telling. I believe Merced's unemployment rate is reaching 20%.

 
At 6/01/2009 1:13 AM, Blogger sethstorm said...

"Grigsby and Cohen for their tactics that are about two steps away from treason"...

Oh dear, you mean there's a legal outfit outsmarting that high priced union leadership?

That was a reference to their "technically legal, US citizen hostile" understanding of immigration law. That is, it is an understanding that is used to exclude any US citizens to "comply" with H1/L1 law regulations. That means that even the most union-hostile Republican cannot meet qualifications; there would simply be something they'd use to exclude you.

My point is that those firms are now re-targeting US citizens instead of just labor unions.

Are Grigsby and Cohen as treasonous as Harry Reid or Dick Durbin?
That sounds less like a sincere question and more of a ideological test.

Their understanding of the law makes no haste to turn away US citizens when the regulation asks to consider them.

 
At 6/01/2009 1:51 AM, Blogger OBloodyHell said...

> Now, no one brags about well-paid US workers. In fact, our wages are below Germany's, and several other advanced countries.

Oh, CITE YOUR SOURCE you nitwit.

A ridiculous percentage of US homes include pools that don't get used more than once a month.

I live in Florida, and for this smallish city (metro/county 250k pop), the yellow pages lists *25* different contractors and sales companies. *16* different companies that install pool enclosures (fences, screening, etc.). And *51* different pool service companies. (Hint: If you can *pay* someone else to keep your pool clean and balanced, you aren't hurting badly for money!!). And this city is standalone -- it's not a subset of some larger contiguous metro area, like the WPB-Miami axis or the Daytona-Orlando-Tampa axis.

And it's easy to "pay your workers better" when your government's idiot policies keep more than 10% of them out of the labor pool. Our "economic downturn" is so bad that our unemployment, nationally, is now *almost* 2% below that of Germany's standing unemployment level. Oh, yeah, give us some o' THAT, baaaybeee! :-S

"Making more money" (assuming that's not a complete crock, like I suspect it is) is fine, as long as you're one of the ones allowed to do it. For that perennially disenfranchised underclass, though, it's a bit less pleasant.

> We keep hearing two songs: One: Free trade is raising our living standards. Two: Due to global competition, we cannot afford the wages and benefits we used to.

The first song is spot on. It's the second one which is a lying crock of sh** -- so quit singing it, already.

American industrial union workers don't do as well as they used to, for the simple fact that they can't gouge the hell of of everyone by limiting competition the way they used to.

Since an ever-shrinking percentage of Americans are doing industrial labor, that's barely even relevant.

All the new jobs are in entirely unrelated fields, vitually all of which are knowledge work. They pay just as well as the industrial jobs, on average, take place under better conditions and, since they don't exclude people from working based on who they know, represent a far more fair distribution of employment to those who want to work (i.e., you don't get to keep your job despite being inept, incompetent, or flat out dangerous, just because you're a union member -- so people doing the work are uniformly held accountable).

Car ownership is at an all-time high, as is home ownership (yes, even *with* the foreclosures). The average American outside of a place like NYC has more square footage per person than entire families do in Europe or Japan. The number of homes with large-screen, flat-panel TVs is just phenomenal, considering that the tech only got to the cost-effective stage about 10 years ago (Hint: A 32" flat panel display was US$5,000 in 2001 -- I know, I priced one. Now the same size display is in the US$500 range, in only 8 years -- a 90% decrease in price. Does that make every American richer? YES IT DOES.)

People in this country are so damned rich and pampered and have been for so long that they whine like spoiled children when they have to eat a cheaper cookie for a while due to an economic correction. (Hint: they used to have to go hungry when such things happened, until the last 50 years)


The worst "radical decline" applying to America is the radical decline in the capacity for critical thinking represented by you and your ilk.

.

 
At 6/01/2009 1:55 AM, Blogger OBloodyHell said...

> Hmmm, you got something credible to back up that statement sethstorm?

Of course he doesn't. Seth hasn't had a credible source in his entire life. Havent' you noticed that, for the most part, he makes this sh** up.

 
At 6/01/2009 1:58 AM, Blogger OBloodyHell said...

P.S. note how seth's response is still more BS rhetoric, without a shred of linkage to back up anything he claims.

 
At 6/01/2009 6:27 AM, Blogger 1 said...

"That was a reference to their "technically legal, US citizen hostile" understanding of immigration law"...

Hostile, eh?

Interesting choice of words you used there but then again considering who wrote the laws (H1/L1 law included) we have only ourselves to blame since we elected those law writers...

"That sounds less like a sincere question and more of a ideological test"...

Actually it was a test, 'NOT' only idealogical though...

"Their understanding of the law makes no haste to turn away US citizens when the regulation asks to consider them"...

What?

"Seth hasn't had a credible source in his entire life. Havent' you noticed that, for the most part, he makes this sh** up"...

That gave me a chuckle OBH...:-)

 
At 6/01/2009 10:31 AM, Anonymous Anonymous said...

OBloodyHell, I like the cut of your jib!

 
At 6/01/2009 10:40 AM, Anonymous gettingrational said...

The lessons from Pittsburg are diversity of industry and the proximity to collaborative higher learning institutions. A successful local economy depends on the ability of the local industry to add ever higher value to goods and services. The cluster of higher education and industry working together along with local government is the key.

Detroit seems to be a economic loser today but based on the hockey stick like graph presented a Stanley Cup win is inevitable.

With regards to labor relations:
It seems that adding even more value to products and services should be mantra to the unions. They should be demanding that their members be the best trained in the industry. Further, members should be encouraged to make suggestions for constant improvements of process. But this implies a deal with competent, competitive management that will be loyal to it's workers.

 
At 6/01/2009 11:53 AM, Blogger fboness said...

Poor sethstorm. You ought to start your own economics blog.

 
At 6/01/2009 11:58 AM, Anonymous Benjamin said...

O Bloody Hell-

I am bit taken back by the ad hominem nature of your arguments, but I will answer one question, at least in a quick and dirty way.

http://www.bls.gov/news.release/ichcc.t02.htm

This chart shows higher employee compensation all through Europe, let alone Germany, in manufacturing.

It is my personal observation that the standard of living in Germany, Austria, Switzerland, France, even Italy is higher than that of the USA. I suspect Japan's living standards are higher too.

Not all of this is due to our economic system or their's. Other factors, such as the work ethic or amount of government corruption, come into play.

For example, about the only people on earth who log even more hours worked per year than Americans are Mexicans. Yet their living standards are lower, I assume largely due to the hopelessly corrupt nature of their government. I understand the wealthy in Mexico barely pay taxes at all.

As for a radical decline in life for working people in the USA, it appears obvious. Despite increases in productivity of a few percent a year, the average wage in the USA has been frozen since 1972, while Sociali Security and sales taxes have ramped up. I won;t even mention the cost of health care.

I concede that average incomes have increased---but I stand by my statement that people working for a living have not participated n the rise in wealth for more than three decades.

I look forward to a civilized discourse with you.

 
At 6/01/2009 11:59 AM, Blogger QT said...

Ed Glaeser did a very interesting paper regarding the decline of cities like manufacturing centres like Cleveland and Detroit vs. the rise of NYC and Boston over the past 35 yrs.

 
At 6/01/2009 1:23 PM, Blogger QT said...

Benjamin,

I realize that your post is not addressed to me, however, I would thank you for trying to keep this discussion civil.

Excellent chart. It does, however, pertain only to hourly wages in manufacturing which comprises about 10% of the U.S. workforce. While the decline in Detroit's manufacturing base is the subject for this post, the phrase "people who work for a living" seems to describe a broader societal demographic.

If I understand you correctly, you are concerned about declining standards of living and stagnating wages for middle and lower income Americans who work for a living.

If one looks at median family income figures from the OECD, it would appear that only Switzerland is ahead of the U.S. on this measure (You have to scroll further down the page to see this). The median is the middle of the income distribution so this also fails to tell us what is happening to personal income and living standards in the U.S.

Per capita GDP figures seem to suggest that the U.S. is ahead of Europe but this also does not measure personal income.

The Minneapolis Federal Reserve did a comprehensive analysis of long term trends in American personal income which helps to put many issues into perspective.

Have a good day :)

 
At 6/01/2009 2:09 PM, Anonymous Benjamin said...

QT-
Thanks for your comments, all of which have merit.
Of course, GDP per capita and other figs cannot capture (completely) living standards.
Europeans routinely take six weeks off per year, and enjoy national health insurance. Their streets are safer. Excellent schools for nearly everybody. How many annual income are the above realities worth?
I often wish I had been born in Scotland or Japan, rather than the USA, with its second-rate public schools, unsafe streets, and lousy health care system.
I suspect the developed parts of the world are passing the USA by, and will continue to do so.

 
At 6/01/2009 2:13 PM, Anonymous Benjamin said...

QT-
I meant to ask, "In annual income, what would you say safe streets, good public schools, six weeks off a year, and national health insurance are cumulatively worth?"

 
At 6/01/2009 2:43 PM, Blogger sethstorm said...

Now the same size display is in the US$500 range, in only 8 years -- a 90% decrease in price. Does that make every American richer?
Not if the poor quality requires to to use those savings to re-buy the product. That $500 display has 90% less quality in it.

Hostile, eh?
Yes, I mean citizen hostile. They would gladly find a way to exclude you no matter how you politically lean. Democrat, Republican, Independent - it doesn't matter; you're a US citizen that is in their way.

All the new jobs are in entirely unrelated fields, virtually all of which are knowledge work.
Where Grigsby & Cohen (and others) will gladly help you get around having to hire citizens who already have the necessary skills.

You ought to start your own economics blog.
I'll take that as a compliment.

 
At 6/01/2009 3:17 PM, Blogger QT said...

Benjamin,

I would agree that safe communities, excellent public education and good healthcare are not readily quantifiable in terms of income and that these would appear to be definite benefits of the European system.

That being said, one must also acknowledge that Britain's model of rationed care is somewhat less than ideal and international crime statistics place New Zealand, Finland, Denmark and Britain ahead of the U.S. One also needs to consider that generations of Europeans, Scots and Brits have emigrated to Canada and the U.S. due to the lack of economic opportunity in Europe/UK and a very rigid class system where one's career depends on one's connections rather than one's abilities.

I think Thomas Payne identified a very important difference between the US and Britain models of government. In Britain, the House of Lords was designed to prevent mob rule whereas in the U.S., the founding fathers designed the constitution to pit one group against another to ensure that no single group or individual was able to gain control thus ensuring the public interest.

I don't tend to think of this as a better/worse either/or distinction. There are many different variations in Europe in terms of public policy and governent and each has advantages & disadvantages. There is certainly a great deal to be learned from other countries.

 
At 6/01/2009 3:36 PM, Blogger QT said...

Murders per capita ranks Russia, Estonia, Lithuania, Belarus, Ukraine, Georgia and Bulgaria ahead of the U.S. Not sure if these countries are currently considered Europe or not.

 
At 6/01/2009 5:20 PM, Anonymous Benjamin said...

QT-
I agree, it is difficult to precisely assess the virtues of one system vs. another. And, of course, there is the matter of taste and chance luck. Cultural and ethical norms....
But you do mention immigration. There is hardly a trickle anymore of immigration from developed Europe to the USA. Or vice-versa.
I would say the Scots, and the Japanese, and even the Italians are happy with their lot in life, and they are not coming here. Mexicans, yes. The poor of Asia yes.
BTW, click a little deeper on your crime link, re New Zealand and the USA. I think you will be red-faced!
There were 16,205 murders in the USA, vs. 51 in NZ. Also 95,136 rapes in the USA, vs. 1,059 in NZ. Even adjusting for population....
I gather a lot of less serious crimes were recorded, and probably seriously recorded in NZ, to arrive at the rather odd results.
NZ is much safer than the USA. Actually, I have always wanted to visit or live in NZ or Aussie. Even your native Canada sounds enticing at times...

 
At 6/01/2009 5:20 PM, Anonymous Anonymous said...

As noted in the first comment, compare Census population growth stats for Detroit Metro vs Pitt Metro vs U.S. National.

I understand this is a learning board that a teacher uses for his actual students, but this stat seems to give a seriously narrow view of how to fix a city.

Otherwise, the only way to fix Detroit would be to displace about a million people over the next 30 years.

 
At 6/01/2009 10:31 PM, Anonymous gettingrational said...

Please accept my apologies for my spelling of Pittsburgh above. I own a small business in a city that ends in burg and I was going on instinct thus the spelling Pittsburg.

 
At 6/01/2009 10:57 PM, Blogger QT said...

Benjamin,

The figure cited was total crimes per capita. The murder stats were provided separately and notably NZ is not ahead of the U.S. on this measure. As you probably know already if you've read Freakonomics or follow crime statistics, violent crime and murder in the U.S. has declined over the past 20 years.

The point is to move away from the idea of perceptions to per capita metrics (ie. crimes per 100,000) where comparisons can be made with some degree of objectively. By using a per capita measure, we can compare apples to apples rather than trading perceptions. Comparing the total number of murders fails to factor in the difference in population ie. U.S.(306.5 million) vs. NZ (4 million).

With regard to immigration, isn't the low level of immigration also indicative of very regressive, protectionist policies? When one considers that H1 visa are filled in one day, doesn't that suggest that there are many highly educated, skilled foreign workers that would like to come to the U.S.?

With regard to whether Italians or Scots are happy with their lot, I cannot say whether other people are happy, sad or suicidal. This would seem to be a subject of conjecture which has little to do with the subject of this post.

Again we digress to Europe, NZ etc, however, the fundamental issue of income stagnation and the decline of living standards which you raised has not been resolved.

I hope that you will at least take the time to read the report of the Minneapolis Fed on this subject which suggests that there are certainly areas of concern in particular with income stagnation among Americans lacking a high school education but that the overall picture may be much more promising than you believe.

Have a good evening.

 
At 6/02/2009 12:22 AM, Blogger sethstorm said...

immigration also indicative of very regressive, protectionist policies? When one considers that H1 visa are filled in one day, doesn't that suggest that there are many highly educated, skilled foreign workers that would like to come to the U.S.?
The problem is when the citizens exist that could fill those same positions. Instead of acknolwedging them and meeting the challenge, the response is to avoid them in any way possible. The only effect is that we close the door to entry-level work that gives needed experience to US citizens.

As it is written now, there is too much potential for (and evidence of) abuse of the law to work in the favor of the governed (US citizens). At the very least, require the methodology used to search for citizens be able to come up with a hirable citizen(and pursue any who apply, first).

Make the law work for the citizens first(to prove it's just a supplement), then to the applicants. Those foreign applicants may exist, but you'd have to have a multinational such as IBM to be able to fully reciprocate(by being able to apply for foreign work).

 
At 6/02/2009 1:18 AM, Anonymous Benjamin Cole said...

QT-When I have the time, I will peruse the Minn Fed report. I am sure you know there are reports by the scads, coming to varying conclusions.
I can assure you, I know few middle-class people in America who think they are staying in the middle-class with the same efforts that their parents made. Whiners all? Maybe. But it does seem a two-income family is needed, where once a one-income family could make it.
Immigration from other developed nations: No, I think the reason few people come here from developed nations is life is "better" where they live. Why leave six weeks of vacation, national health insurance good schools and safe streets for the USA?
My understanding is the quotas from developed nations are not filled.
On crime: Adjusting for population, the US is much more dangerous than other developed nations. I am ashamed to say it, but your chance of getting murdered or raped in the USA is probably many times that of your native Canada.
Is this due to our economic system? Even I don't say all of it. Some of it is our culture, and our polyglot population.
Crime rates are down in the USA, thanks probably to a huge increase in incarceration--a very mixed blessing.
Be happy with Canada.

 
At 6/02/2009 10:12 AM, Blogger QT said...

sethstorm,

Shouldn't one also consider the total number of H-1B visas issued in comparison to the total number of workers in the American workforce?

The Department of Homeland Security approved about 132,000 H-1B visas in 2004 and 117,000 in 2005.

Total unemployed is 11.1 million and the total U.S. workforce is 154.7 million.Using the higher figure of 132,000, H-1B visa represents 1% of unemployed and 0.0008% of the total U.S. workforce.

I can certainly understand your disgust with the antics of Grisby & Cohen. One also needs to keep the scale of the problem in perspective.

Benjamin,

While I enjoy living in Canada, it is not perfect as my sister who lives in Toronto and hears weekly gunfire can tell you.

Female workforce participation in Canada is 75% vs. 67% in the U.S. and tax free day falls in June not April. I believe that women benefit from working socially, intellectually, and financially and that the success of a child is positively influenced by the life skills of their parents. Setting goals, defining personal limits, learning to work as a member of a team, experiencing set-backs, handling conflicts, etc...a mother who never works outside the home sometimes struggles to develop these lifeskills which one develops naturally through working with others.

Canada's healthcare system has suffered from chronic underfunding due to years of trying to bring our national debt under control. The areas targetted have primarily been diagnostic equipment, personnel, and medical & nursing school enrollment. Canada for example trails the OECD in MRIs per capita (fewer than South Korea) and suffers from
long waiting lines for specialty care, cancer treatment, and hip/knee replacement. At present, there are thousands of patients in Ontario who do not have a family doctor. The government has in recent years tried to increase funding when it was apparent that access to care was being compromised.

Despite the challenges of the health care system, I have learned to find resources in the absence of hospital and physician ratings or even patient guides to available resources. The internet rocks!

I am looking out my window at the most gorgeous day imaginable. Life is what we make of it.

 
At 6/02/2009 11:06 AM, Anonymous Anonymous said...

QT-
That Toronto gunfire is probably American gangsters who crossed the border. :)

 
At 6/02/2009 11:36 AM, Blogger 1 said...

"Yes, I mean citizen hostile. They would gladly find a way to exclude you no matter how you politically lean. Democrat, Republican, Independent - it doesn't matter; you're a US citizen that is in their way"...

Thanks for the link to the opinion piece sethstorm but where are the facts?

Mr. Berry shortened the video from the version that he received, adding subtitles and music for emphasis. "I grabbed the two masters and edited it down, just to make it more convenient for the few hundred people I thought might want to watch it...

So what do we really have here besides a bit of propaganda in video from Kim Berry?

I still have yet to see something illegal in what Cohen & Grigsby are doing, can you show something factual that shows the actions to be against the law...

The only real mistake I see here is Cohen & Grigsby offering up an apology ala Sotomayor...

 
At 6/02/2009 2:13 PM, Blogger sethstorm said...

Ask them for the video.

That will be the proof of their practices.

 

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