As I wrote here, one of New York City’s biggest economic problems is a shortage of jobs accessible to the unskilled, and thus its low level of employment and labor force participation. In many ways, Upstate New York is the city’s mirror image. It has a lower poverty rate and a higher employment rate, but it has a shortage of high-paid jobs and jobs for young college graduates, the very economic base New York City – primarily Manhattan – has in abundance. Among those growing up Upstate, the average person completing their education probably has more of it than the national average. It is migration – the type of people who move out, and the type of people who don’t move in – that is responsible for the fact that the share of Upstate residents with college diplomas is lower than in the rest of the state. Upstate college graduates, and those with exceptional non-scholastic skills, tend to leave, and few arrive from elsewhere. That is the real problem in Upstate New York.
For the past 30 years, the State of New York has tried a series of solutions. The first has been a drastic expansion of public employment, funded by taxes collected in New York City, primarily through over-funded schools. This has undoubtedly been a good deal for those who are fortunate enough to get one of the “jobs,” but it hasn’t done much for anyone else. In fact, since the local government expansion has been funded in part through higher local taxes, it has hurt everyone else.
The second is to subsidize older, high wage industrial employers that threaten to leave, with tax breaks and other benefits. This has undoubtedly helped those with high-wage, unionized jobs in declining industries, at least in the short run. Once again, however, others have had to pay more to make up the difference. And in the long run, the steel industry, the auto industry, and the chemical film industry are going to shrink no matter how much money is thrown at them.
The third is to have the politicians identify growth industries, and have the state subsidize “centers of excellence” and the construction of new branch plants in those industries. The theory is the plants and centers will generate spin-off economic activity. But it hasn’t happened. Instead, the State has once again subsidized a job for the fortunate few at great expense, even as the rest of the economy continues to shrink around it. That’s what politicians do.
What the state hasn’t done is made New York State an attractive place for new people, new companies, and new industries, and new ideas – whatever their type and origin. In fact, it has done just the opposite. Every attempt to favor the old, those declining, the existing, the powerful has been funded by new, creative and young. It happens in the state’s general policies, as property taxes crush young families and companies but pensions are exempted from state income taxes. And it happens at the individual scale, as the state’s corporate income tax revenues, as a percentage of the income of its residents, are about average overall, but the tax rate is far above average for those not benefiting from all the deals, favors and exemptions.
Every symbol of the state is backward looking. There was a dustup at the New York State fair a few years ago, about whether political candidates were willing to eat the Italian sausage. I couldn’t help but wonder if that sausage was made in New York State. Probably not. Why isn’t all the food for sale at the fair produced here, preferably by new, possibly growing companies? Weren’t state fairs originally a get together for those in the food industry, where business deals were actually done?
Just take a look at three successful Upstate organizations that have actually remained in Upstate New York. When their business empires were being created, what did the State of New York ever do for Tom Golisano’s Paychex and Rachael Ray’s one-woman media empire? How about Mapinfo, the mapping software based company in the Albany area? Tax them extra to pay for those who were cashing in, moving out, and dying off, that’s what. No encouragement, no respect, no identification of payroll processing, maps and food media as “strategic industries” worthy of “centers of excellence.” Upstate isn’t in decline because existing businesses are shrinking and closing. That happens all the time, everywhere. Upstate is in decline because, compared with 100 years ago when it was a dynamic place, it creates relatively few success stories like these.
And that’s the key to high-wage jobs, and jobs for college graduates. Government doesn’t create such jobs, entrepreneurs do, including their own. Competing for branch plants today means offering lower labor costs in an increasingly competitive world. The state with the highest level of unionization in the country is not in a good position to do so, and may not even want to. If branch plants are going to be the basis of your economy, average income Upstate has a long way to fall. The better jobs are the ones that people create themselves, starting with a local market open to new ideas, and moving on to a national or global market to generate growth. That’s what Paychex, Mapinfo and Rachael Ray have done.
Other declining places have figured this out, and are trying to come up with ways to attract entrepreneurs and young college graduates in general. But for the State of New York, where the “jobs,” debts and pensions of those who had far better deals from the past matter much more than those trying to find their way in the future, attracting the young means looking for suckers. The state is looking for someone to accept less for more to pay for it all.
The suckers continue to arrive in New York City, because while its state and local government sees them as cash cows, the city itself is a remarkably good place to be young and try something new – at least until you have school-aged children and need to educate them. Upstate New York, despite over-funded schools, is not. I worry that the state’s choices and political culture – both Democrats “creating” jobs for political insiders and Republicans “creating” jobs with well connected corporations — will kill off the economic vitality of New York City.
They certainly haven’t done Upstate any good. Upstaters continue to moan that the young people are moving away, but the state’s fiscal choices and political culture belie that concern. For decades, an easy present has been more important than a bright future. And what was the present is now the past.