in Business Incentives, Coronavirus, COVID-19, Economic Development, Education, Employment, Family Income, Income Inequality, Jobs, Manufacturing, New York, New York City, Upstate New York

With a New Governor, New York Faces Economic Challenges

For decades, New York has had substantial disparities in economic performance. Although some parts of the State are doing relatively well, much of it has declining employment, higher levels of poverty, lower levels of household income, and fewer adults working than the nation as a whole.

Over most of the past decade, job growth was limited to Eastern New York, in the New York City and Albany-Schenectady-Troy metropolitan areas. The rest of the State lost jobs. Although the New York City metro area had the most significant employment growth between 2011 and 2019, its recovery during the COVID pandemic has been the slowest in the State. It is well below the regional average – ranking 42nd of sixty metropolitan areas in June 2021.

The percentage of adult New Yorkers who work varies substantially. However, more than 65% work in Nassau, Hamilton, and Saratoga counties, less than half in Franklin, St. Lawrence, Bronx, and Delaware Counties are employed. The percent of residents aged 16-75 that worked was equal to or higher than the nation in only 11 of 62 counties.

Median household incomes differ in New York counties, with some much higher than the national median of $67,521 and others much lower. The median household income in the wealthiest county (Nassau) was $116,000, almost three times that in Bronx County, where it was $40,088 in 2019. Only 17 of 62 counties in the State had higher household incomes than the nation.

There are enormous disparities in poverty, as well. Among children under 18, 39% living in Bronx county were in poverty, ten times the percentage in Putnam County (4%). Forty-one of New York’s counties had poverty rates higher than the nation.

These problems do not have a single solution. Many reflect national and regional trends over which the state has little control. State and local policies should recognize the significant geographic disparities in opportunity and growth, with programs tailored to meet differing local needs.

The State’s regional economic development strategies are ill-equipped to remedy the State’s economic inequalities because state assistance focuses primarily on supporting capital investments rather than helping people compete for good jobs. Worse, the State’s initiative has encouraged localities to focus on narrowly targeted efforts to create jobs through big projects in highly competitive technology industries, with mixed results, rather than on a diverse portfolio. Also of concern is that reports on the State’s most significant regional economic development initiative are little more than project catalogs, reporting in detail only on process accomplishments – how many projects are underway and completed. The reports do not connect specific regional initiatives to goal focused outcome metrics.

Employment Change since 2011

Source: U. S. Bureau of Labor Statistics – Data for October of Each Year

Since 2011, New York’s employment performance has been similar to most of its neighbors. Like six of ten states in the region, New York has lost almost one percent of the jobs that existed in 2011. Only Massachusetts, Rhode Island, and New Hampshire had rapid employment growth through October 2021. Vermont lost more than 8% of the jobs that existed in 2011. While New York’s performance was only about one percent weaker than the region’s average, the Northeast as a whole performed relatively poorly during the period. Only Mississippi, Hawaii, Illinois, Wyoming, and Alaska lost a higher percentage of jobs outside the region.

Forty-seven of 66 counties in New York State lost employment between 2011 and 2021. Like much of the nation, New York lost jobs because of the COVID pandemic, but even before the Pandemic, job growth in the State was slow – 39 of 62 counties had lost jobs between 2011 and 2019. Employment in the State as a whole grew by 4.9% during that pre-pandemic period, compared to 11.8% nationally.

October 2021 vs. October 2011

Counties in the New York metropolitan area had employment gains, but most of upstate New York saw job losses, except Saratoga, Albany, Schenectady, Rennselaer, and Ontario Counties. By 2021, nine counties had lost more than one out of every ten jobs that existed in 2011. Counties ranging from Northern to Central New York and the Southern Tier showed significant losses. Counties that lost jobs were typically small – average employment in the counties losing more than 10% of the jobs in 2011 was 30,208, compared with 170,867 in the counties gaining employment.

New York’s problem is not unique – more than half the counties in the United States lost jobs between the 2010 and 2020 census. These numbers reflect the concentration of employment growth nationally in larger metropolitan areas. In New York, the only locations showing growth over the past ten years were in the New York Metropolitan area, in the Albany- Schenectady-Troy metro area, and Sullivan and Ontario counties.

Source – Bureau of Labor Statistics. Data for October 2019 and October 2021

Although COVID has hurt employment everywhere, regional population change and the decline of rural populations have driven much of the differences in employment change. Job growth, like population growth, has primarily taken place in a few states in the South and the West. Large metropolitan areas like Boston and Columbus in the Northeast and Midwest are among the few places in the region that have seen gains like those in faster-growing parts of the nation.

As in the rest of the nation, COVID-19 resulted in significant job losses, particularly in service industries, like lodging and dining, that involve substantial interpersonal contact, with the most significant impact on low-wage jobs. The number employed nationally remains below that in February 2020, before the Pandemic hit. The Northeast, Mid-Atlantic, Midwest regions, California, and Nevada remain the hardest-hit locations. Again, New York’s performance did not differ significantly from neighboring states.

The Pandemic Has Hit the New York Metropolitan Area the Hardest

The COVID-19 Pandemic has hurt New York’s economy more than most states, with statewide employment 5.5% lower than in 2019 through October 2021. The New York City metropolitan area – before 2019, the metro area with the fastest job growth- was most affected, losing 6.6% of its jobs in October 2019. Employment in the New York Metropolitan area grew 7.3% between October 2011 and October 2019 but wound up with only 0.7% growth between 2011 and 2021 because of the Pandemic’s impact.

Because the New York metropolitan area has about two-thirds of the State’s residents, its relatively strong performance before the Pandemic helped its employment performance substantially. But, with the strong pandemic impact on the metro area, the State must prioritize measures to restore job growth to the region if the overall employment picture is to improve.

Traded services increasingly dominate the economy. Historically, large population centers like New York City have done well in these industries because of their large, diverse labor markets. But, the COVID-19 Pandemic has raised a critical issue for the New York metropolitan area because the factor that provided it an advantage – the concentration of skilled workers with the ability to interact – is less relevant in an economy where many employees work from home and interact only over remote meeting applications. Unless the New York City metropolitan area can reduce the risk of interpersonal interaction from COVID, its economy will continue to suffer.

The rise of work from home has also devastated service businesses in central business districts. Coffee shops, restaurants, convenience stores, and the like in these areas depend mainly on workers who populate the areas during working hours. The loss of much of the customer base has led to many service business closures and employment cutbacks. To recover, the region must continue to focus on strategies to encourage workers’ return to office settings.

To date, the primary emphasis of the State and New York City has been maximizing the number of people vaccinated against COVID, probably the most effective available response to the problem. Still, it faces resistance from people who do not wish to be vaccinated and the tendency of mutations to decrease the effectiveness of vaccines as a prophylactic measure. Because the mutations that are likely to dominate are those with the greatest transmissibility, mutations are a challenge.

Masking has also proven to reduce the spread of COVID. Still, when required in public places indoors because of high transmission rates, it becomes a deterrent to returning to office work since many employees do not want to wear a mask for the entire workday when they could work from home without one.

As long as COVID continues to infect large numbers of people, the region can support small businesses with strategies that make people feel more comfortable patronizing them. Although unpopular among some residents, vaccine mandates can make people more comfortable dining and attending other entertainment venues and indoor shopping environments. Continued flexibility to allow restaurants and other businesses to use sidewalks and streets during the Spring, Summer and Fall can also help.

Declines in the Number of People in the Labor force have Led to Job Losses

The labor force consists of people aged 16 or older working or seeking work. Nationally, the labor force grew by 4.3% between 2011 and 2021. In New York, and most of the Northeast, Mid-Atlantic, and Midwest, the number of people in the labor force declined. In New York, the number decreased by 2.6%.

The Pandemic has contributed to a decline in the number of people nationally and New York in the labor force. Nationally, the labor force is 1.5% smaller than in 2019. In New York, the decrease is 2.3%.

Source – Bureau of Labor Statistics. Data is for October 2011 and 2021

The number of people working or seeking employment declined in all but four New York Counties – Saratoga, Bronx, Rockland, and Orange. Even in the best performing counties, growth was minimal – 1.4% in Saratoga and less than 1% in the other counties with labor force growth. The decline in the number of people in the labor force is the most critical constraint on employment growth. The State’s relatively weak performance reflects relatively slow population growth in the region and State, an aging population, with more people in retirement than in other places, and relatively low participation in the labor market by working-age adults.

In Most New York Counties, the Percentage of Adults Who Work Lower than in the Nation as a Whole

Source: Bureau of Labor Statistics, Data is for October 2021

Statewide, 60% of New Yorkers aged 16-75 worked in October 2021, well below the national number – 63%. Only 11 of 62 New York Counties had employment to population ratios equal to or greater than the national percentage. In Nassau and Suffolk Counties, 66% were employed. In 17 counties, less than 55% of the working-age population worked. In two counties, St. Lawrence and Franklin, less than half worked.

Most of the places where the percentage of adults with jobs is the lowest are rural counties in the Southern Tier and Northern New York. In small New York counties, the economy provides few work opportunities, resulting in high percentages of people who encounter difficulties providing necessities and require support from social service assistance programs. But even in metropolitan areas, some counties were well below the national number. Only half of the people between 16 and 75 have jobs in Bronx County. In Broome County (Binghamton), only 53% worked. In Brooklyn and Oneida County (Utica-Rome), 56% work, and Onondaga County (Syracuse) and Erie County (Buffalo) only 60% work.

In the New York City area, the employment to population ratio has been hard hit by the slow recovery from the COVID pandemic. A recent study by the Federal Bureau of Labor Statistics showed that labor underutilization in New York City increased sharply beginning in 2020. On the chart above, both U-3, the narrowest measure of unemployment, and U-6, the broadest, show a large gap opening between the unemployment rate in the United States and New York City that began in 2020. Before COVID, the ratio in the City was similar to the nation.

Several factors account for the differences in the percentage of people employed. In rural counties, low employment percentages can reflect the disadvantages to employers of small labor pools in fields requiring special skills, reflecting the small area populations and the relatively low rate of residents with college or university educations. Age is also a factor – most of Upstate, especially in rural counties, residents are older than the nation as a whole. Older residents have lower labor participation rates than younger people.

In the Bronx, on average, residents have relatively low educational levels. The county has a high percentage of Black residents, who, as a group, are less likely to be employed than Whites with the same level of educational attainment.

Household Income

Household income disparities at the county level are very substantial. Bronx County had a median income of $40,088, which was only slightly more than one-third of the median income in Nassau County – $116,100. Only 17 of the State’s 62 counties had household incomes higher than the nation. Almost all of upstate New York other than the Hudson Valley had median incomes that were lower than for the nation. Eight counties – Fulton, Franklin, Delaware, Montgomery, Cattaraugus, Allegany, Chautauqua, and Bronx Counties had median incomes at least 20% less than the nation.
Source – U. S. Census Bureau – American Community Survey

Substantial disparities at the regional level are also present. The New York metropolitan area and the Hudson Valley are the most prosperous parts of the State. The fifteen counties with the highest median incomes are all within these regions. The poorest counties are mostly within Northern New York and the Southern Tier.

Household incomes are strongly related to the educational levels of county residents. In counties with the lowest percentage of residents 25 years old or older with Bachelor’s degrees or higher levels of education, median household incomes are only half that of the highest county.

Lower percentages of residents of counties with small populations in New York state have Bachelor’s Degrees or more than those in metropolitan areas. Six of the ten counties with the highest percentage of residents with Bachelor’s degrees or higher are in the New York metropolitan area – Manhattan, Brooklyn, Nassau, Rockland, and Putnam Counties. Others in the top ten are Albany and Saratoga in the Capital Region, Monroe County, and Tompkins County.

Source: Census Bureau – Current Population Series – 2015-2019

People with higher levels of education typically earn more in counties that have high percentages of highly educated residents. The chart above shows that the median income of people with Bachelor’s Degrees or more in the county with the highest level of education was more than $80,000, compared with between $30,000 and $30,000 in the counties with low percentages of residents with a bachelor’s degree or more. Rural areas are disadvantaged because many of the young people raised and educated within them move away for employment, cultural and social opportunities. Young people with Bachelor’s degrees or higher have the most opportunity to increase incomes by moving to urban areas, while those with less education have less economic incentive to leave.

Poverty

Source – Census Bureau, American Community Survey – 2019 – five-year average.

In New York State, 41 of 62 counties have a higher percentage of children in poverty than the nation. Nationally, 16% of children under 18 live in poverty. Most of Northern, Central, and Western New York performed more poorly than the nation. Poverty among children varied sharply, ranging from 4% in Putnam County to 39% in the Bronx. Three counties in the New York City metropolitan area – Bronx, Kings, and Richmond – were among the ten highest counties in the percentage of residents under 18 years old in poverty, while four – Putnam, Nassau, Suffolk, and Westchester were among the lowest. Seven were small, relatively rural counties. The remaining counties with relatively low poverty levels were a mix of metropolitan and rural counties in upstate New York.

Solutions

Several factors have contributed to the economic weakness of much of the State. New York is in the region where employment performance has been weak for the past decade. The Northeast is increasingly far from the nation’s population center and is not well located to produce and distribute goods to the national market. The impact of the COVID pandemic hit the New York metropolitan area harder than the rest of the nation and continues to have a significant effect on job losses.

The State’s performance has been relatively strong in larger metropolitan areas. In them, concentrations of well-educated workers who provide the talent needed in growing high-value-added service industries. In the New York metropolitan area, the benefits of a large, specialized labor pool have outweighed its transportation issues. The New York metro area and the Hudson Valley have relatively high labor participation and employment rates, household incomes, and low poverty levels.

But, in the metropolitan area, inequality is high. Bronx County is characterized by very low income levels and high levels of poverty. Kings County (Brooklyn) and Rockland County are also among the 10 counties with the largest percentage of children in poverty. Paradoxically, Rockland County is also among the counties with highest median household incomes. A study, Why are Some Place So Much More Unequal than Others, but Federal Reserve Bank economists Jason Able and Richard Dietz, ranked the New York Metropolitan area as having the seventh highest income inequality in the nation in 2015.

In upstate New York, except for the Hudson Valley, employment is declining, household incomes are relatively low, and poverty is high. The size of the workforce in upstate New York and the number of people working declined over the past decade. The region’s weakness is associated with an aging population. Young people, particularly those with relatively high education levels, have moved from the area to larger population centers that offer more economic opportunities.

Rural areas in New York, particularly those in the Southern Tier and Northern New York, suffer from decreasing populations, relatively low percentages of working-age people participating in the labor market, low household incomes, and high poverty rates. Educational levels, in most cases below the nation as a whole. The closure of rural medical facilities creates challenges for health care, particularly for elderly residents. Historically, many rural areas depended on agriculture, which is no longer a significant employer. In the Adirondack Park preserve, the State severely limits economic activity within its boundaries.

There are no silver bullets for Upstate’s economic woes. Strategies to improve access to higher education for area residents can help younger people enhance their competitiveness in the job market but may facilitate their departure to more attractive locations. Community college-based training programs can help ensure that the needs of local employers are met.

There are some effective strategies to attract people to rural areas. People migrate to these areas because of amenities like scenic vistas and recreational opportunities. Localities can build on these resources to stimulate population growth. Other studies have shown that increases in public school quality are related to rural in-migration. New York could also assist rural localities in creating better linkages between high school vocational training and local jobs. The expansion of broadband into rural areas can increase the opportunity for remote work, educational and health services.

New York’s economic development strategy primarily focuses on attracting and retaining businesses by incentivizing capital investments. But in today’s less capital-intensive service-dominated economy, the availability of workers with appropriate skills, site availability, transportation access, and information is more critical.

Although New York has tools to address employment and income inequalities, the public focus of the state efforts has been on the annual competition for Regional Economic Development Partnership Council dollars, which this year is to make available more than $750 million in assistance. But the funding through the program is overwhelmingly focused on capital project assistance. Almost half the listed funding is low-cost borrowing for manufacturing facilities, for Section 501(c)(3) non-profit organizations, for certain “exempt facilities,” and in Enterprise Zones through Federal tax-exempt private activity bonds.  Two-hundred twenty-five million is capital funding and tax incentives made available through Empire State Development. The rest of the available funding is through existing planning and capital grant and loan programs from other state agencies.

Regions are required to develop and update strategic plans to compete for funding. The plans are relatively comprehensive, including programmatic initiatives to support worker competitiveness and address inequalities of opportunity. But the funding made available through the program and the focus of annual reports has been on capital projects funded through the partnerships, prioritizing capital investment over other elements. All of the voting members of the councils are gubernatorial appointees. The State determines the plans’ overall structures, focusing on targeting specific industries for development. State agency ratings are weighted at 80% in project selection decisions. A so-called “Upstate Revitalization Initiative” offered $500 million primarily for high technology initiatives. Despite committing half a billion dollars, the State’s efforts yielded relatively few jobs.

Regional reporting, primarily determined by the State, is particularly weak. Annual reports are mainly a catalog of projects. Regional initiatives are not evaluated with specific outcome metrics tied to strategic elements other than the number of project completions and an overall statement of jobs supposedly created. However, the reports do not indicate whether the job numbers reflect the number of jobs promised by project sponsors or the actual number of jobs created.

Successful development strategies focus on the needs of a broad portfolio of local industries based on an understanding of their needs. Rather than imposing a top-down strategic planning process, New York should encourage and support regions, counties, and localities efforts to identify issues in critical areas, like labor skills, transportation, and site availability, and should provide support for initiatives that address regional and local problems. The State should emphasize comprehensive approaches, focusing as much on delivering services to enhance people’s competitiveness in the job market as on capital investment.

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  1. New York State Government is so out of touch with the majority of the state. Every agency seems to be about oppression from the Executive branch (Cuomo and Hochul) with COVID policies to the DEC and their control over public land. Tax paying, law abiding citizens are taken for granted while watching the State continuously waste our tax money providing little benefit back to those who pay. Wake up! there is a reason good people are leaving this state for states with solid economic policies. Start managing the entire state instead of just taking care of down state voters. work to provide benefits and incentives to living in this state (not financial necessarily ) to those who pay the bills. AND above all be fiscally responsible! The cost of living is high in NY which is a major strike against it so catering to the tax paying base would help to keep more tax payers in the state. if the current trend of NY government continues I will be leaving the state……