As we enter another election season, office-seekers will put forward their ideas about how Pennsylvania can spark an economy that has long been sluggish. Special concern is likely to be expressed about Pennsylvania’s smaller communities and rural counties, which in many cases have been struggling with job and population losses for a decade or longer.
In the minds of many office-seekers, Pennsylvania’s Marcellus natural gas reserves represent a still underdeveloped resource that sits at the head of a value chain including power generation, petrochemicals, and artificial intelligence, as well as other industrial sectors.1 And, if the past is prologue, many will make the case that shale gas and its downstream offspring are key to job growth and economic prosperity going forward. At the same time, they will likely also claim collateral benefits, including lower utility bills and enhanced tax revenues.
The problem is that these expectations do not align well with facts and what we know about the workings of the shale gas industry and its downstream industries. Data going back two decades to the start of the shale gas fracking boom show a natural gas industry that, while growing wildly and making immense contributions to economic growth as measured by gross domestic product, has also done little to stimulate job growth, raise wages and incomes, or stem population losses. In fact, in some cases, it may have worsened these trends.
Since reaching peak employment of nearly 31,000 in 2014, the number of jobs provided by Pennsylvania’s shale gas industry has fallen by nearly half, leaving a figure that amounts to only a quarter of one percent of jobs in the Commonwealth. Wages have declined proportionately. And these trends are worsening as continuing productivity improvements reduce the industry’s need for labor. As of 2024, shale gas generated just one job per million dollars of GDP as compared to six jobs per million dollars of GDP in Pennsylvania’s economy as a whole.
The result is that the shale gas industry has little beneficial economic impact in host communities, even in the counties where it is most concentrated. This reflects the fact that shale gas is a highly capital-intensive and non-labor-intensive enterprise that injects little of the investment it commands or of the income it generates into local economies. As a result, since the start of the fracking boom, just two of Pennsylvania’s eleven major natural gas counties have experienced job growth as great as that of the state. Eight of the eleven have suffered net losses of jobs. So, during a period in which the number of jobs statewide grew by 7%, job growth was less than 1% in the state’s major gas-producing counties.
That being the case, it’s not surprising that wage growth has been 20% less in the Commonwealth’s natural gas counties than in the rest of the state. But most disappointing is the 2% decline in population in Pennsylvania’s shale gas counties, while statewide population grew by 4%. The important question is, what do these trends augur for the future and how much of a role is the shale gas industry and downstream industries capable of playing in building a more prosperous Pennsylvania?
The answer is that the shale gas industry’s ability to contribute to a more prosperous Pennsylvania appears to be quite limited. That’s because the industry’s failure to contribute meaningfully to job and income growth is structural in nature. Production growth requires the industry to keep natural gas prices low, which in turn requires greater efficiency and productivity. That results in less demand for labor, producing the phenomenon we have witnessed in recent years of growing production combined with job losses.
Major industries that are downstream of gas production — principally power generation and data centers — are similarly afflicted in that they may be even less labor-intensive than the shale gas industry. Meanwhile, Pennsylvania has adopted a number of tax policies that also greatly restrict yet another potential avenue through which the shale gas industry might inject money into the state and local economies.
Pennsylvania has so far refused to enact a severance tax on natural gas, choosing to rely instead on an impact fee. As a result, Pennsylvania generates only $1 of tax revenue for every $3 generated by West Virginia’s severance tax and every $6 that Texas gets from its natural gas production tax. Pennsylvania then compounds the problem by exempting oil and gas from local property taxes.
The irony is that, if this favorable treatment of the shale gas industry was, as office-seekers often claim, undertaken to encourage production growth, then it’s backfiring — while output in Pennsylvania has been flat since 2021, the state’s much more heavily taxed neighbor, West Virginia, has seen production grow by a third.
The bottom line is that economic development strategies, which imagine shale gas to be a foundation upon which prosperity can be built, are destined to fail. Not because the shale gas industry and downstream industries won’t expand — they very well might. The problem is that, even if they do, Pennsylvanians will see little benefit.
Little of the immense amounts being invested or of the sales revenue that they generate will enter local economies, producing an effect more or less like the one we’ve witnessed since the birth of the Marcellus and Utica gas boom — immense growth as measured by GDP accompanied by almost no measurable improvement in the metrics of economic prosperity that matter to people — jobs, wages, and incomes.