This paper was written on November 28, 2000 while I was in 12th grade at Winchester Thurston School for Economics and Finance with Bernard Petruska.
The Economic History of Pittsburgh:
From Steel to Silicon
At the beginning of the nineteenth century, Pittsburgh became a leader in America’s industrial production. This industrial production dominated Pittsburgh’s economy for over a century. This attracted many foreigners to Pittsburgh which had a demand for unskilled workers. However, Pittsburgh eventually lost its position as one of the worlds largest industrial producers and became a rising city for businesses in the field of information technology. As a result, Pittsburgh shifted from a city of mostly blue-collar workers to a city of mostly white-collar workers.
As a result of its location west of the Allegheny Mountains, excellent river transportation and high quality coal deposits Pittsburgh became one of America’s most industrialized cities in the nineteenth century. It produced many raw materials such as aluminum, glass and coke and coal chemicals as well as other industrial products such as electrical generators, appliances, railroad cars and locomotives. However, one industry in particular dominated Pittsburgh’s economic scene and that was the steel industry.
In the mid-nineteenth century, Andrew Carnegie created the Carnegie Steel Company, the largest steel monopoly during the Industrial Revolution, which dominated Pittsburgh’s industrial production and economy. Because of this, Pittsburgh was dubbed The Forge of America. Because the Carnegie Steel Company was so dominant in Pittsburgh’s economy at the time, the history of the company serves to explain the history of industry at the time.
By the 1970′s, because of several factors, Pittsburgh lost the steel industry as its primary economic source. As a result, there was a dramatic shift in Pittsburgh’s economy from one based on the production of steel to more technological related fields (Yelich).
The primary factor that caused Pittsburgh to lose the steel industry as a major economic source was the increase in foreign competition. Foreign producers of steel began to use an underhanded industry tactic known as dumping. According to Dale Hathaway who wrote, Can Workers Have a Voice? The Politics of Deindustrialization in Pittsburgh, dumping is “the sale of foreign goods within the United Stats at prices below the cost of production”. As a result, the price of domestically produced steel far surpassed foreign produced steel and American industries turned to foreign sources for steel. Other factors that caused Pittsburgh to lose its domination of the steel industry were the rising cost of U.S. labor, the industries’ failure to modernize Pittsburgh’s steel making process due to the high costs of such implementation and finally, the escalating of steel substitutes such as plastic and fiberglass. Together these factors led to the destruction of the steel industry in Pittsburgh and the surrounding areas.
In the 1980′s, Pittsburgh’s post-industrial era began. Many of Pittsburgh’s manufacturing plants went out of business or left the area. The greatest losses were in the steel industry. Because the steel industry employed masses of people, the dissolution of the industry caused many people to find themselves unemployed. Between 1978 and 1983, 100,000 steel and steel related jobs were eliminated. By the mid 1990′s, the world’s greatest steel producer would be reduced to one single integrated mill, the Edgar Thompson Works, one specialty steel plant, Allegheny Ludlum, and one strip mill, the Irwin Works. According to Hathaway, at this time, industrial employment had dropped by 44 percent and service job employment rose by over 25 percent. Service jobs included such occupations as janitorial work and these required less skill and paid much less than the steel industry. As a result, people fortunate enough to find such employment ended up making barely enough to support themselves and their families. According to Bruce Stokes in Furnace of Change, unemployment rested at about ten percent and peaked to 14.7 percent in January of 1983, the highest ever since the depression of the1930′s. Because of this, Pittsburgh’s population steadily decreased as people sought employment elsewhere.
It was at this time that it became clear that Pittsburgh needed to drastically shift away from an economy based on industrial production. Therefore, Pittsburgh began to shift towards an economy rooted in information technology. Because Pittsburgh had clearly reached the end of its position as a leader in America’s industrial production, it was evident that it would have to undergo a complete transformation of its economic system. Stokes refers to this radical change as a Metamorphosis. This sweeping change is evident in the changes Pittsburgh experienced in the next decade.
The 1990′s were when Pittsburgh really saw economic improvement as it shifted to a more technologically centered economy. Businesses in the information technology arena began to appear rapidly. These included businesses that dealt with communications, the Internet, software development and robotics. The University of Pittsburgh’s biomedical research department and Carnegie Mellon University’s Engineering and Robotics Institutes were large contributors to this shift in industry towards information technology. In 1998 alone, fifteen new companies emerged that had begun as research projects at Carnegie Mellon University. One example of this is the software development company Carnegie Learning, which develops educational problem-solving software that is used in schools all over the country. As sales increase, so does the number of employees as well as the success of the company. Companies like Carnegie Learning benefit Pittsburgh because it increases employment and strengthen the economy. As new businesses emerge that work with new technologies, the economic success of Pittsburgh rises. Although, the number of people employed by these companies is less than the number employed by the steel industry, there is more potential for expansion and growth. In addition, the wages in these types of jobs are 50 percent higher than heavy industry or service jobs. As a result, a steady population growth ensues which in turn leads to an increase of residential and commercial construction that further develops the areas surrounding Pittsburgh.
Currently, Pittsburgh’s economic growth is quite protracted in comparison to the nation as well as other cities of relative size. However, its future remains promising. One explanation for Pittsburgh’s relative sluggishness in economic expansion is its traditional image of a blue-collar area as a result of its history as a heavy industry city. People do not usually think of Pittsburgh as a technologically oriented city. However, it is only a matter of time before people begin to see Pittsburgh as a new and improved city. Right now, the economy is very stable because it is more diversified as opposed to being solely dependent on the steel industry as it had before. This diversification leaves it more resistant to negative changes such as what it experienced in the 1970′s. Unemployment has also decreased. In June of 1999, it was only four percent, lower than the national average of 4.3 percent. Pittsburgh’s economic future is very promising, however, it is really dependent on the people who live in the area. The more people who put faith in Pittsburgh, the more improvement there will be in the economy.
As Pittsburgh’s economy as well as its reputation as a technologically oriented city gets stronger, more people become attracted to Pittsburgh. In addition, the increase in businesses rooted in information technology leads to an increasing demand for trained professionals in information technology. Because there is a shortage of such professionals to be found in the United States, many businesses in Pittsburgh have been recruiting abroad. One hundred years ago, when Pittsburgh was a developing industrial city, it was a place of opportunity for foreign-born workers. Now, Pittsburgh has once again become such a haven. Currently, many foreign nationals arrive in Pittsburgh to be educated at the University of Pittsburgh or Carnegie Mellon University. Most of them stay to join the wave of emerging technology firms in the area. This is good for the technology firms, however, the number of skilled foreign nationals available to feed this rapidly growing economy is in danger because of the limit of available H-1-B, working, visas. Currently, only 65,000 foreign nationals can work in the United States. Companies in need of highly technologically skilled workers are using up visas at a rate of 8,000 a month. As a result, Congress has increased the number of foreign visas to 107,500 and then again to 195,000 annually over the next three years. This increase in demand shows how Pittsburgh’s economy has risen from the ashes after its slight economic depression to become one of the leaders in the information technology industry.
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