Pennsylvania lags in innovation-based jobs despite having all ingredients for success, report finds

Pennsylvania is uniquely positioned to lead in high-paying, high-tech jobs but lags the national average in job growth in “advanced industries,” according to a new report.

Researchers at the Brookings Institute, a Washington, D.C.-based think tank, found that despite “powerhouse universities,” “breakout companies,” and “talent diversity,” Pennsylvania is performing worse than it should for generating innovation-based jobs. Advanced manufacturing jobs here grew by almost 11% between 2010 and 2019 – 8 points below the national sector.

The state has seen a modest increase in aerospace, medical care and basic chemical manufacturing jobs in recent years. Between 2015 and 2021, the total number of jobs in the manufacturing of semiconductors and electrical components and in medical and diagnostic laboratories has decreased. Scientific research is one of the few major industries that has created significant jobs.

“Pennsylvania has a history of strong policy in this area,” said Mark Muro, a senior fellow with the Brookings Metro program. “Our big criticism is that the state has deviated from it.”

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The report, released Thursday, includes policy recommendations — such as funding “innovation hubs” to support businesses in major metropolitan areas and creating competitive grunts for entrepreneurship outside of them — for the next governor to capitalize on the state’s enabling assets for innovation-based Growth.

Pennsylvania’s largest academic institutions are driving some of the most important innovations of our time, Muro said. For example, the University of Pennsylvania is a leader in gene therapy research and Carnegie Mellon University has extensive experience in robotic technology. The challenge, Muro said transforms this technology into independent businesses that can provide high-paying jobs and contribute to the local economy.

States have an incentive to support this “technology transfer” process, but the Brookings report found that Pennsylvania is doing little to support the process. In fiscal 2022, Pennsylvania invested $45 million in programs that encourage innovation and help new businesses secure capital through grants. That’s about two-thirds fewer than before the Great Recession.

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Per capita, the state invests one-fifth what Ohio invests in “tech transfer” activities to help companies develop and adopt new ideas.

“For the most part, the challenges lie outside of academia,” said Muro.

All of these challenges contribute to injustice. Most new innovation-based companies were founded in Philadelphia, Pittsburgh and State College. Only 24% were outside of these areas, in more rural parts of the state.

Investing in the innovation economy can also help address some of the injustices in entrepreneurship due to racial gender gaps. Women make up 51% of the population but only 19% of employers in Pennsylvania. Black and Hispanic business owners each make up 1% of all businesses with employees, but 8% and 11% of the population, respectively. There are also big differences in who gets advanced degrees in STEM subjects—science, technology, engineering, and math.

With more commitment from the next governor, Pennsylvania could encourage more innovation-based growth, the Brookings researchers said.

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The first step is to talk about it. “It’s really about committing to innovation,” Muro said.

The researchers noted previous commitments, such as in 1982 when Pennsylvania founded Ben Franklin Technology Partners, a government-backed investment program to support new start-ups.

They recommend providing resources to the largest innovation clusters that already exist in areas like Philadelphia, Pittsburgh, State College and the Lehigh Valley. In parallel, it is proposed to fund bottom-up economic development in 20 regions outside these major centres.

The report also recommends strengthening programs that fund entrepreneurship among underrepresented groups and promote inclusion in STEM education. They also suggest exploring partnerships with industry to ensure childcare and other services that have traditionally excluded some workers from competitive jobs in advanced industries.

Without these policies, the researchers argue, Pennsylvania will embark on a path to exacerbate injustices that already exist.

“Innovation often leads to poor results if not managed and nurtured,” Muro said.

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