Can you name the economic sectors in Upstate New York that added the most jobs during the last decade’s pre-pandemic growth cycle? It wasn’t advanced manufacturing, with all those state subsidies to lure business investment—that sector shed nearly 50,000. Instead, the strongest employment growth came in health care and social assistance, as the Affordable Care Act and an aging population brought a flood of federal spending. Accommodation and food services ranked second, as upstaters, like Americans across the country, dined out more and saw more tourist business.
This sobering picture may disappoint elected officials who dream of subsidizing their way to a revival of the region’s past role as the home of many of America’s most sophisticated, profitable manufacturers. But a better path would take advantage of upstate’s current assets rather than its past glories. It won’t be a powerhouse future—no new GE or Eastman Kodak looms on the horizon, employing tens of thousands. Rather, it would be a stable future of moderate growth, led by service businesses expanding across a revived network of well-connected upstate cities.
Upstate’s biggest assets are its dense network of public and private colleges and universities. Many of the private schools were endowed by past captains of industry and have long demonstrated excellence in science and engineering research and education. The state has fostered partnerships between higher-education institutions and local businesses, and several upstate metros boast a higher-than-average percentage of college graduates, perhaps indicating that these partnerships are attracting businesses that employ higher-trained workers.
What should the state do to build on these modest success stories? For starters, the governor and legislature need to pay serious attention to the tax and regulatory environment. New York’s state and local tax burden, relative to income, is the nation’s highest, and New York imposes other unusual and costly regulations on business that further deter investment. Businesses notice how much more they, their managers, and their employees will pay. The nearby states of Ohio and Pennsylvania, whose metro areas are similar to upstate metros in most respects but enjoy a lower tax burden, are competing for the companies New York politicians would like to attract—in some cases successfully.
To overcome upstate’s lack of competitiveness, New York effectively employs a strategy of redistributing via business subsidies a portion of the vast tax bonanza generated downstate. New York also takes another part of this surplus and redistributes it to relatively affluent households and communities downstate. That’s a bad strategy. Rather than using its wealth to maintain first-class infrastructure, institutions, and services, New York gets mediocrity at high cost. Other states tax and spend more sensibly and thereby attract business investment. Lawmakers should ameliorate the problem.
The state should also support efforts to make upstate’s cities more attractive both as locations for service businesses, which are more likely than manufacturing to grow in the future, and for higher-paid workers who want to live and work in urban settings. Once much more populous than today, upstate cities were severely damaged by ill-considered highway-building and urban renewal in the 1950s and 1960s. Today, many of the highways are redundant, and many areas cleared for urban renewal remain undeveloped, often used for parking. Removing highways and restoring urban streetscapes could garner widespread support. Governor Kathy Hochul has indicated support for some of these efforts, and the state should support more. Improvements to local transit services and plans to concentrate new housing along transit corridors can help reduce the need for downtown parking, also freeing land for more productive uses.
Restoring city centers and inducing more people and businesses to locate near downtown can help support, and justify, improvements to the Empire Corridor passenger rail service across upstate, currently hampered by slow, infrequent service and conflicts with freight trains. This can further help make upstate cities more competitive by facilitating linkages to workers and businesses in nearby metros.
None of these measures will restore upstate to its former economic significance, but they can generate moderate economic growth in the region’s major cities, helping them improve local services and retain more local graduates. Stronger nearby cities will make rural living more attractive, too. Moderate growth may be less exciting than spending lavishly in hopes of a dramatic turnaround, but setting realistic goals is more likely to bring success.
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