Among the truisms to which regional policymakers frequently adhere, the most pervasive may be that a region must grow to be successful. However, population growth and job growth are not preconditions for a region to become economically healthy. Rather, the composition and characteristics of jobs required to meet the demands of a region’s growing (or changing) industrial structure typically determine the health of a region’s economy. High-productivity industries and progressively managed firms generate high-skill, high-wage jobs that raise a region’s per capita income.
Indeed, for a region that has lost its prior locational advantage or is unable to attract high-productivity industries, growth may falter or reverse, but its economic health need not decline if policies recognize the transition; assist those most impacted; and generally lower the cost of living, including adjustments to the scope and cost of public infrastructure. Too often, shrinking regions refuse to accept the reality that their population will not resume a growth path.
Aside from the apparent fallacy of the growth paradigm, the policies that emanate from such a belief typically maintain unrealistic expectations given a region’s economic structure, often ignore stronger countervailing market forces, and routinely waste resources in pursuit of misplaced goals. Pittsburgh’s regional economy offers a persuasive counterexample to the growth paradigm even though its policymakers also often chased economic growth rather than economic health.
This article appeared in the Second Quarter 2019 edition of Economic Insights. Download and read the full issue.