During the past several weeks, Pittsburgh universities and their students have argued strongly against Mayor Luke Ravenstahl's proposed tax on tuition payments. They've called it unfair because many students have few resources and they've said it would discourage young people from coming to Pittsburgh. The mayor has countered with concerns over the city budget.

Neither side has yet mentioned a critical issue: the impact such a tax would have on Pittsburgh's economy and capacity to innovate. This impact is likely to be negative given the link between a dynamic academic environment and economically vibrant industry.

To illustrate the link between the tuition tax and innovation, we need to consider one of Pittsburgh's most innovative groups of firms: suppliers to the steel industry.

As everyone in Pittsburgh knows well, the steel mills were the source of our economic resilience for many decades. But few Pittsburghers today are aware of our region's continued ties to the global steel industry.

Although Pittsburgh lost most of its steel-making capacity during the end of the 20th century, it did not lose its steel-making expertise. That expertise was funneled into more than 300 regional suppliers to the steel industry, which have built a national and global reputation as leaders in the production and understanding of steel technology.

With a critical mass of both product and service providers, Pittsburgh's "steel technology cluster" has become a key link in the global steel value chain. There is no other metropolitan region in the United States that has as many establishments engaged in providing goods and services to the steel industry.

As part of a long-term research project at the Center for Industry Studies and with the support of the Heinz Endowments, I released a report on the steel technology cluster in the fall of 2008. It highlights the fact that Pittsburgh has what most other regions struggle to achieve: unique expertise in a high-tech and high-growth industry.

Pittsburgh's expertise in steel technology was built by decades of experience in the innovation and commercialization of a complex materials-science challenge: the production of steel. Although much of the productive capacity has relocated, the innovative capacity has remained and provides more than 12,000 jobs in the region.

Just as Pittsburgh's steel-making legacy served as the foundation of the cluster, Pittsburgh's current R&D in steel technology will support its future. The cluster's ongoing ties to the region depend on the region's reputation for steel-technology expertise. That expertise is generated by both the firms' R&D departments and by the R&D efforts of Pittsburgh's colleges and universities.

The Pittsburgh area is home to 35 colleges and universities, with a total enrollment of nearly 130,000. Of 30,000 degrees awarded each year, more than 5,000 are in engineering, science and technical fields.

Two of the largest universities, the University of Pittsburgh and Carnegie Mellon University, have international reputations for expertise in materials science and metallurgy. Together, academia and industry have created a reputation for excellence that anchors current cluster firms and attracts new firms to the region.

The relationship between the universities and industries is not limited to the steel technology cluster. The virtuous circle of academic research and industrial innovation occurs in several other technology-based regional industries, including medical technology, computer technology, robotics and nuclear power.

The success of this virtuous circle, however, is critically dependent on a dynamic and engaged group of students. Without top students, universities cannot attract top professors. Without top professors, research programs falter. Without research, innovation slows.

The firms of the steel technology cluster face an additional problem. The employees of most firms in the cluster, and in the larger steel industry, have a high average age -- generally in the mid-50s. As a result, these firms were facing critical shortages in key technical personnel prior to the recession. Orders were up and demand for labor was growing. Many employees were approaching retirement age and the search for new hires was highly competitive.

The recession has slowed demand for the moment, but the slowdown is temporary and will be overcome. When that day comes and the steel technology cluster renews the search for new hires, will Pittsburgh be ready?

To be ready, Pittsburgh must support and sustain its global reputation for expertise in materials science, metallurgy and innovation. We want to convince the next generation of innovators to choose Pittsburgh over Boston or San Francisco as a place to develop their talents. We do not want to become known as the first city in the nation to tax its youth to solve its fiscal problems.

Pittsburgh's reputation has recently been re-invigorated by the Steelers' Super Bowl success last year, the selection of the city as the host for the G-20 summit and the election of one of the nation's youngest mayors. Suddenly, we were getting national press that invited the nation to reconsider the rusty image of Pittsburgh and think of it in a new light.

Not only is it nice for Pittsburgh to have an innovative image, it's also economically important. A reputation for innovation and expertise helps to attract new ideas and new talent, which support industry's ability to remain competitive and our region's ability to be resilient. Will this image be enhanced or harmed by gaining national fame as the first city to design a special tax just for college students?

As a regional economist and an analyst of industrial organization, I believe that any revenue gained from the tuition tax will quickly be lost as students choose more inviting locations to study and businesses choose what they perceive as more innovative locations to operate.

The tuition tax is a classic example of choosing the short term over the long term. Certainly, one of Pittsburgh's strengths has always been its perseverance over the long haul. Let's not become shortsighted now.

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