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For Release — Monday, May 17, 2004

NEW REPORT DOCUMENTS PROLONGED LAG IN UPSTATE NEW YORK ECONOMY; SUGGESTS PART OF THE SOLUTION MAY BE TO 'LET UPSTATE BE UPSTATE'

ALBANY—Upstate New York State's economy has been lagging for years behind the nation's growth rate and behind such "Rust Belt" competitors as Michigan and Ohio, according to a new analysis by the Public Policy Institute, the research affiliate of The Business Council of New York State, Inc.

From 1990 through 2003, total job growth in Upstate's Big Six metropolitan areas was only 2.3 percent, the report said. The nation as a whole grew jobs eight times as fast during that period -- and even "Rust Belt" states like Ohio, Michigan, Indiana, Wisconsin and Minnesota grew jobs four times as fast as Upstate, or more.

The 2000 Census showed that Upstate's population grew more slowly than all but two states -- North Dakota and West Virginia. Nearly 30 percent of Upstate's "new" population during the decade consisted of prisoners. And Upstate New York lost 370,000 in the count of its population aged 20 to 34.

Upstate suffers by comparison with its competitors because of high taxes and other costs, the report says -- and those costs, in turn, are often driven by decisions made in an Albany process that is largely dominated by what the report calls "the Downstate political culture."

Part of the solution, the report suggests, may be to "let Upstate be Upstate," giving its communities more flexibility to deal with state mandates on matters such as Medicaid, prevailing-wage rules, and other cost drivers.

"The last thing New York needs is some kind of destructive Upstate-Downstate showdown," the report says. "But given the prolonged lag in Upstate's economy, it is time to think seriously about whether there is a way of restructuring the relationship to give Upstate the opportunity -- indeed, the freedom -- to reduce some of the disadvantages that are smothering its economy."

The report, Could New York Let Upstate Be Upstate?, was researched and written by David Shaffer, the Institute's president. It analyzes demographic data from the 2000 Census, and recent jobs data from the six major Upstate metropolitan areas -- Albany-Schenectady Troy, Binghamton, Buffalo-Niagara, Syracuse, Rochester, and Utica-Rome.

Not only has job growth in the region been anemic, the report says, but every net new job created in the Upstate metros from 1990 through 2003 was funded by the taxpayers -- counting growth in government payrolls, plus growth in health care and social assistance jobs funded by Medicaid and other taxpayer-financed programs. A Public Policy Institute report that was released on April 28, New York State's economy in 2004: Which way out?, found a similar pattern in job growth statewide during that period -- something it warned is not sustainable over the long run.

Meanwhile the Upstate metros lost 31.8 percent, or nearly one-third, of their manufacturing jobs from 1990 to 2003 -- dropping from 18 percent of total jobs in the region, to 12 percent, in just 13 years. In the U.S. overall, manufacturing also lost ground -- but only 17.9 percent.

The new Upstate report praised the new efforts being made by state government to capitalize on the research and technology strengths of the higher education system in helping to grow the Upstate economy -- as well as the local economic development initiatives under way in Buffalo, Syracuse, Rochester, Albany and other locations.

But it argues that Upstate cannot be fully revived unless the state also addresses "the high cost of doing business." It adds that "in everything from taxes to energy costs, New York State is a high-cost location -- statewide. The single most important reason this is true is that the Downstate political culture is dominated by public-sector unions and other forces that want to keep it that way."

Those high costs, the report goes on, may be less important to Downstate, which has "a one-of-a-kind role in financial services, business services, corporate headquarters and other factors that go some way toward offsetting New York's cost disadvantages." But Upstate, the report said, "has to compete with regular places like Ohio, and Virginia.... That's the competitive game Upstate is in. If it isn't allowed to change, it can't compete, and it won't win."

"To compete and to succeed, Upstate needs to cut the cost of doing business in a host of ways -- from the size of government and Medicaid and property taxes, to the unlimited liability the trial lawayers' lobby imposes on construction work. But every attempt to do any of these is blocked in Albany."

The full text of the report is available (in Adobe Acrobat format) at: www.ppinys.org/reports/2004/letupstate.pdf.