Thursday, March 26, 2009

Pittsburgh Versus Syracuse

As economic disparity increases within the Rust Belt, I expect intra-regional migration to grow. Since the grass is no longer greener in the Sun Belt, at least for the time being, the talent churn between postindustrial cities becomes more important. Case and point, Pittsburgh's gain is Syracuse's loss:

A California company has opened a window manufacturing factory near Pittsburgh instead of a Syracuse suburb because it took New York officials too long to approve tax incentives for the project, the company's top executive said Wednesday.

Kevin Surace, president and chief executive officer of Serious Materials, of Sunnyvale, Calif., said the company decided to put the manufacturing operation in Vandergrift, Pa., after New York state officials took several months to review the company's application for Empire Zone benefits for a site under consideration on Morgan Road in Clay.

Serious Materials opened the plant in a former window factory in Vandergrift two weeks ago and held a ribbon-cutting ceremony at the plant last week with Pennsylvania Gov. Edward Rendell. The plant employs 35 people, and the company expects to employ 150 at the facility by the end of the year as it ramps up production, Surace said. ...

... Monday, President Barack Obama praised the company for reopening the Pennsylvania plant, which had been shut down by a previous owner last year. When the plant closed, more than 100 jobs were lost in Vandergrift.

"Today, that factory is whirring back to life, and Serious Materials is rehiring the folks who lost their jobs," he said in an address to about 100 clean-energy entrepreneurs and researchers at the "Investing in the Clean Energy Economy" conference in Washington, D.C. "And these workers will now have a new mission: producing some of the most energy-efficient windows in the world."

I don't think most people appreciate the significance of the labor migration that occurs within the Rust Belt. The popular myth is that everyone is heading south. Take a look at Chris Briem's map of Pittsburgh out-migration:

Youngstown attracts more Pittsburghers than Charlotte, NC does. Atlanta is as an important destination as Cleveland or Columbus. Winning jobs from neighboring states can substantially influence migration. I speculate that someone living in Buffalo, short of staying put, might move to Pittsburgh instead of Tampa given the dearth of opportunities in cities hit extremely hard by the economic crisis.

The Serious Materials story highlights how Rust Belt states are locked in a zero-sum game, seriously undermining any shrinking city's ability to compete with the likes of Austin:

Four years ago UT, the Greater Austin Chamber of Commerce and the Austin mayor's office flew to South Korea to help persuade Samsung to situate a second flash memory chip factory in its area, a project worth $3.5 billion. The state of New York was offering $500 million in tax abatements and other subsidies, twice as much as Austin. Juan Sanchez, vice president of research at UT, started talking about his $500 million annual r&d budget, which funds a software laboratory that churns out a consistent supply of computer minds. But it was the people in the photos he brought with him that broke the ice with Samsung. Many of the students in the pictures were from Korea, and by the way, Sanchez was sure to add, there are more students from Korea at UT (933 out of 47,334 total currently) than from any other foreign country. "I am sure on an emotional level that probably helped catch their attention," said William Cryer, a public affairs counsel for Samsung who attended the meeting.

Given the human capital shortcomings, Rust Belt states are left out-bidding each other with subsidies that companies such as Samsung value less than they do a talented workforce. Richard Longworth would point out that this is a losing proposition and the same stale thinking that has hobbled the Midwest for decades. Greater critical mass of innovation is required to compete globally and why initiatives such as the Tech Belt make a world of sense.

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