Pittsburgh dead last in US startup index

By: Rebekah Devorak | Opinions Editor

This is an editorial piece, and the views of the writer in no way reflect the views of The Duquesne Duke, its staff, or Duquesne University. 

Cleveland finally has one single piece of evidence to use when trying to convince others why it’s a better city than Pittsburgh.

The Ewing Marion Kauffman Foundation, a Kansas City-based private business foundation, recently released its 2016 Index of Startup Activity. According to its website, this index ranks major metropolitan areas in “new business creation activity and people engaging in business startup activity.”

Out of the 40 cities listed within the study, Pittsburgh came in last for the second year in a row. According to the index, the city’s population of new entrepreneurs is just 0.12 percent (or 120 people for every 100,000), down from 0.15 percent in 2015. By comparison, the number-one ranked city Austin, Texas, has a rate of 0.60 percent, up from just 0.55 percent in 2015.

Cleveland, in case you’re wondering, ranked number 37, a remarkable three spots ahead of Pittsburgh, with a rate of .15 percent.

Failure is quite the peculiar position for Pittsburgh to be in – twice now – because the city has gotten so used to being among the best at a number of things in recent years. For example, Travel + Leisure named Pittsburgh to its esteemed and globally-diverse “Best Places to Travel” list for 2016. In 2015, Zagat titled Pittsburgh the number one city for food. Just two weeks ago, Harper’s Bazaar christened Pittsburgh as “America’s Most Underrated City.”

Not only does this new study damage our pride, but it points to a sizable weakness in the city’s makeup. Pittsburgh is home to headquarters for major corporations such as Google and Uber, and it will soon be hosting Facebook. But where are the burgeoning entrepreneurs? Why aren’t they taking the Steel City by storm like they are in Las Vegas, San Francisco and Miami?

That’s a difficult question without a clear answer. One reason may have to do with the fact that starting your own business isn’t a sure thing. Where there is reward, there is risk, and that risk could be driving these potential business moguls to pursue tamer, more stable avenues. According to the U.S. Bureau of Labor Statistics, only about half of all new establishments survive the first five years. After that, it dwindles down to a bleak 33 percent going the distance of a decade.

With the job market looking so uncertain in numerous fields, people young and old might not want to bet it all (whether that be whatever is left from student loans or a retirement fund) on a dream that is statistically destined for downfall.

Another major issue is related to business taxes. According to the Tax Foundation, Pennsylvania has the second highest corporate income tax rate in the United States at 9.99 percent. Only Iowa — at 12 percent — has a higher rate. Texas and Ohio do not have corporate income taxes at all, which could play into why they have more startup businesses.

This may be looking at it all through dark-colored glasses, but one thing is for certain. Small startup businesses have a huge impact on the local economy, and that’s something that any town and its residents can benefit from.

Entrepreneur Magazine estimated that in 2012, there were between 25 and 27 million small businesses within the United States that accounted for 60 to 80 percent of all jobs. A 2013 Forbes article cites that startup businesses are responsible for the generation of 65 percent of new jobs since 1995. The same article also says that these businesses raked in a total revenue of over $989 billion in 2011.

Cities that underperform in creating new businesses therefore underperform in creating new jobs. While Pittsburgh is home to small businesses – all one has to do is explore any of the 92 neighborhoods to see that – there is definite room for improvement that should be considered seriously. It’s alarming that the number of people creating their own businesses has actually backtracked since 2015, especially when the benefits are bountiful.

As a city of proud Yinzers, we haven’t made a habit of losing to Cleveland in anything recently. Let’s not start now.