Just last month, some 35 Pittsburghers were arrested in an effort to shine a light on the economic hardship facing thousands of workers at Pittsburgh’s dominant health care provider, UPMC. On Labor Day, other low-wage workers are expected to join them and take to the streets to drive home that Pittsburgh’s new prosperity still leaves out too many families.
Is today’s Pittsburgh – with tens of thousands of jobs that don’t support a family and the unrest that comes with that— the best we can do?
The two-tier economy in Pittsburgh isn’t going away on its own: high job growth among low-wage occupations means the city is barreling toward a new normal with a shrinking middle class, more low-income families and income flowing increasingly to a select few.
Economist Thomas Piketty, in his widely heralded book, “Capital in the Twenty-First Century,” shows that the polarization in Pittsburgh is happening throughout the advanced economies.
Mr. Piketty’s book contains the most comprehensive data on inequality ever assembled. It covers multiple countries and goes as far back as the French Revolution.
He documents that we’re drifting backwards, from responsive democracy and high upward mobility to a political system that locks in and rationalizes economic stratification persistent across generations.
Mr. Piketty’s concern is grounded in data: 1945-80 was unique in history, the only period in which over half of wealth was not inherited. Two world wars destroyed much inherited wealth, and fast post-war growth created much new wealth. For 35 years, people’s own initiative impacted their economic success more than the station of their birth.
Mr. Piketty’s data since 1980 show inherited wealth growing again, fueled in part by extraordinary income inequality. We are returning to a world where 90 percent of wealth is inherited. Such inequality is incompatible, he fears, with robust upward mobility and also with democracy responsive to ordinary people, not the wealthy.
Wealth inequality will grow through 2100, Mr. Piketty projects. His aim, however, is not predictive accuracy but action to forestall this result.
That brings us back to Pittsburgh today.
The trends Mr. Pikkety documents globally are pressing down on families locally. While some policies to address inequality must come at the state, national and global levels, Pittsburgh can “act locally.”
We need to strengthen the Pittsburgh middle class, lift more families to self-sufficiency and enable them to save, invest in their children and acquire wealth of their own.
We can start in the health care sector. It is the largest part of the region’s “eds and meds” economy and home to thousands of jobs that do not today support a family.
In health care also, UPMC, a single giant network, accounts for 30,000 jobs. Shifting UPMC’s lowest-paid jobs above $15 per hour would, by itself, strengthen low-income families and communities in the region.
Lifting UPMC wages would also have a powerful demonstration effect on the broader service sector: retail, care-giving, restaurants including fast food, and on down the line. These jobs cannot move offshore because they have to locate near their customers.
UPMC workers have been leading Pittsburgh efforts to raise service industry wages and to form a union. Now we’re seeing other low-wage workers — casino employees, fast food workers, janitors, even adjunct professors — follow suit. As we’ll see on Labor Day, discontent will continue to mount until something gives and jobs improve.
Lifting all service sector wages over $15 per hour would provide a powerful boost to consumer spending in the region, creating jobs and driving down unemployment.
Lifting wages above $15 per hour would also have little impact on health care costs. Most of the health care dollar goes to higher-paid employees, to capital costs and to prescription drugs. Making all health care jobs middle class also provides a foundation for workplace cooperation that would raise quality and productivity.
MIT operations management professor Zeynep Ton has shown that creating “good jobs” in retail can lower costs – at Costco and Trader Joe’s, for example. If it’s possible in retail with few high-paid professionals and little expensive equipment, then it’s possible in health care.
If Pittsburghers would like two of America’s most prized inventions — the American Dream and responsive democracy — to endure beyond one short window in history, the region needs to act now. Let’s start by supporting the efforts of health care workers to lift themselves into the middle class.
After all, what kind of Pittsburgh do you want?
Stephen Herzenberg is an economist and the executive director of the Keystone Research Center.