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Ripple effect from drilling cutbacks lowers wages throughout Western Pennsylvania

| Thursday, Sept. 15, 2016, 10:48 p.m.

Southwestern Pennsylvania saw some of the steepest wage declines in the nation in the first quarter, particularly in Washington County, where the natural gas industry's struggles appear to be rippling throughout the region.

Washington had the second-biggest drop in average weekly pay among the nation's largest 344 counties, and Allegheny ranked seventh, according to Labor Department data released last week.

Both counties are home to large energy companies. Natural gas drillers operating in the Marcellus shale employ a fraction of the region's workforce, but the industry has ancillary effects for other companies that serve the sector, such as law firms, engineers and geologists.

It was those professional service firms that had the sharpest declines in their average wages, suggesting that declining business demand from the natural gas industry is affecting workers beyond those on well pads, said Frank Gamrat, an economist at the Allegheny Institute for Public Policy.

“I would say that one has its roots in the energy sector trickling out to the general economy,” Gamrat said.

Average weekly pay in Washington County declined 12.6 percent in the first quarter from a year ago; in Allegheny County, average wages fell 6.4 percent.

Overall, average wages fell 5.8 percent across the seven-county metro area, compared with a 0.5 percent decline nationwide.

Consol Energy is based in Washington, and Range Resources has regional offices there. EQT is based Downtown. All of those firms pulled back on drilling earlier this year to offset declining revenue from lower natural gas prices.

Hiring cutbacks among natural gas firms have resulted in more available workers for some positions, easing pressures on employers to raise pay in order to attract talent.

But the biggest wage declines came in professional and business services, which includes law firms, engineers and technical services. In Washington County, average weekly pay in that sector declined 36 percent from a year ago, and in Allegheny County, it fell 14 percent.

“That's a category that will be providing a lot of services to (the energy) sector, which has been declining, and so we would expect to see some wage pressures there,” said Mark Price, an economist at the Keystone Research Center in Harrisburg.

Energy companies have a smaller presence in the other five counties in the greater Pittsburgh region, but wages were still under pressure everywhere. Average weekly pay shrank in every county except Westmore­land County, which had an increase of 0.6 percent.

Chris Fleisher is a Tribune-Review staff writer. Reach him at 412-320-7854 or cfleisher@tribweb.com.

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