New York State Assembly - 1999 Assembly Jobs Agenda

New York has had a history of being one of the most dynamic economies in the world. With a variety of businesses and industries populating every county in the State and our diverse workforce, New York should be the leader in high-technology job growth, small business start-ups, and economic opportunity, both Upstate and Downstate. This, however, has not been the case. New York’s overall economy continues to be fueled primarily by the Wall Street boom and has left the “Main Street” economy of New York wondering why they have been left behind.

The Assembly Majority understands that New York’s economy is as strong as its weakest link. With many Upstate communities, urban centers and numerous sections of the City of New York still struggling to grab their piece of the economic pie, the notion that all is well is merely a facade. In order to get the entire New York economy moving in the right direction, we need to make New York hospitable to businesses, give our small business owners the technical and financial support they need, and work to make New York’s workforce not simply competitive with the rest of the world, but the best in the world.

The Assembly Majority has taken steps to meet these challenges by cutting taxes over $3.8 billion, lowering workers’ compensation rates by 46 percent, and lowering utility rates for businesses through our “Power for Jobs” program. But more needs to be done.

Ensuring that the “Main Street” economy shares in the Wall Street boom means we need a plan that targets funding and assistance to emerging industries. We need a plan that assists small businesses, helps high-tech companies spin off new industry, and helps reduce business costs such as exorbitant airline fares. And most important we need workforce training so all individuals can participate in the economic expansion occurring across this country. The Assembly Majority “Plan to Grow the Main Street Economy” will revitalize the downtown areas and business districts of our cities, towns and villages.

Despite evidence of the growing contribution of small business to job growth, and the need to have local officials play a role in the economic well-being of their communities, State economic development agencies continue to emphasize a “top down” approach to economic development. This approach diminishes the overall impact that could be realized if economic development programs were targeted to small businesses and delivered on the local and regional level.

A plan to revitalize New York’s economy requires that the State provide a multi-year commitment to small businesses and emerging high-tech firms. New York’s small businesses constitute over 98% of all of the State’s employers. For New Yorker’s to benefit, the State needs to assist growing industries by providing access to loans and grants, particularly for high technology companies. In addition, New York needs to address the insufficient funding for industry/university collaboration so these industries can thrive.

To capitalize on strategic industries and assist all regions of the State, New York needs a plan for economic development that identifies emerging industries in regions of New York State that offer the greatest potential for growth and high wage job creation. State assistance targeted to the unique needs of specific industry clusters and regions is required, bringing manufacturers, suppliers, workers, and markets together to support and grow key sectors. The State needs a commitment to providing regionally based, comprehensive assistance to strategic industry groups.

The multi-year plan must also include a forum for addressing workforce needs. The State must enhance the Strategic Training Alliance program which the Legislature enacted last year, involve local businesses and business alliances, labor, educational institutions, economic developers and community leaders in an on-going effort to identify and meet the specific skills-training needs.

The Assembly Majority Plan to grow the Main Street economy is a five-year commitment that:

Currently, any business in need of State economic development services is required to apply at the nearest regional office of the Department of Economic Development. The decision to provide financial help, however, is made by a corporate board in mid-town Manhattan. This process presumes that, when it comes to business development, “one size fits all.” It is also time-consuming and inefficient. And, by directing State resources to favored businesses on a project by project basis, it fails to maximize the effect of limited taxpayer dollars. The Assembly proposal removes the heavy hand of a central bureaucracy and moves the decision-making out to local and regional economic developers. It is there, at the local and regional levels, that priorities are best identified and plans implemented. Specifically, the Assembly Majority plan would:

According to the New York State Business Council, “few issues are more important to New York employers than the need to establish an effective program to enhance the skills of existing and new workers.” According to Business Week magazine, the availability of well-trained workers features most prominently in a company’s decision to locate or expand their operations. The National Association of Manufacturers, the New York State Public Policy Institute, and the New York State AFL-CIO all echo this urgent refrain. The Governor’s policies, however, have seemingly ignored these voices. Competing states have chosen to expand their community college systems to play an integral role in workforce development, while New York’s support for its community colleges has remained stagnant.

The Assembly Majority hears the demand by both large and small businesses for skilled workers and proposes an expanded $110 million Strategic Training Alliance program that targets State funds on a local and regional basis to clusters or alliances of strategic industries in order to provide an on-going source of State support to meet the demand for a skilled workforce. Through this approach, workers would be trained to work in any of the businesses within an industrial cluster and individual firms would be ensured of a ready pool of qualified workers within their industries.

Consistent with the Assembly Majority’s commitment to small business growth, half of the State’s training dollars would be targeted to the workforce needs of small business owners who employ fewer than 100 workers. Those businesses that benefit from their participation in the Strategic Training Alliance program would be obliged to first consider unemployed and economically disadvantaged workers for any new jobs created as a result of State assistance. In addition, 25% of training opportunities would be made available to these emerging workers.

Recognizing that technology will transform the way workforce training is conducted, the Assembly Majority’s Strategic Training Alliance program encourages new, state-of-the-art education and training technology. The Assembly proposes that additional grants be made available to agricultural and technical schools, community colleges, and other higher education institutions to develop the computer and information technology infrastructure needed to provide employer-based skills training services to each region of the State.

Technological innovation has long been recognized as the driving force behind economic growth and high-value, high-wage job creation. New York State once led the nation in the growth of high technology industries. Today, however, inventors, entrepreneurs, and investors no longer look primarily to New York State when they seek to commercialize new ideas.

As New York enters the 21st Century, its performance in these critical sectors has lagged. Losing its leadership position in high-tech industries has cost New York State’s economy hundreds of thousands of high-paying jobs. The State’s high-technology economic strategy has focused too narrowly on the attraction of big businesses from outside the State. Not enough resources have been invested to nurture entrepreneurs and existing businesses in both high-technology and traditional manufacturing sectors.

The Assembly Majority’s proposal is aimed at fostering growth in the high-technology and emerging industry sectors. By restoring New York State’s leadership in these key industries, and correspondingly raising the job growth rate, New York State can add thousands of highly desirable jobs. Specifically, the Assembly Majority’s plan:

Small businesses make up over 98% of New York State’s businesses and employ over 44% of the State’s workforce. These companies often need help advancing to a level of profitability where they can move forward and create jobs. Small businesses that fail to grow often are unable to gain access to needed capital and other means of assistance. The Assembly Majority believes that the State must focus more attention on the sector of the business community that creates nearly 8 out of every 10 jobs. The Assembly Majority plan will:

The Pataki administration frequently cites its effort to reform State regulations as a key accomplishment. The administration first set out to streamline State government by creating an additional new State bureaucracy — the Governor’s Office of Regulatory Reform.

The Assembly Majority believes that real reform of State regulation is required to create jobs and grow our economy. Fundamental reforms can be achieved without the creation of new State agencies, additional paperwork and processes that are not subject to public oversight and review. The Assembly’s jobs plan includes a new “Regulatory Bill of Rights” and other reforms which:

Over the past several years, the Assembly Majority has adopted numerous tax policies to promote a better business climate in New York State. These business tax reductions began in 1994 and have continued every year since. The Assembly Majority has adopted tax relief in the form of elimination of sales tax on computer hardware used in the production of software, the deferral of taxation of capital gains if reinvested in an emerging technology company, reductions in the corporate franchise tax, elimination of the 5% hotel tax, and expansion of the investment tax credit to the financial services and banking industry for investments in high-tech equipment.

The Assembly Majority plan includes new and expanded tax incentives that will provide $28 million in relief to small businesses and high-tech firms during State Fiscal Year 1999-2000. In its first full year of implementation these incentives will provide $75 million in tax relief and will grow over time to help create more than 65,000 jobs and generate $4.1 billion in private investments. These initiatives continue our commitment to reducing the overall costs of doing business and will make New York a more hospitable place for companies to prosper. The plan will:

Virtually every analysis of the State’s economy points to the critical importance of new investment in the aging regional infrastructure. Although these analyses most frequently emphasize roads and bridges and other public services as areas in which increased use demands new investment, New York State must not neglect other vital regional resources and issues, such as an efficient high-speed rail system, telecommunication infrastructure, affordable air fares, and sustainable development.

III. Jobs And The State Economy

Employment and Wage Disparities

While the employment situation for the State as a whole has improved recently thanks to both the national expansion and four years of strong performances by Wall Street, a more detailed look at the job gains pattern shows much variation in the distribution of these benefits. First, the State lags well behind the nation in job creation. Second, much of the job gains have accrued to very select regions of the downstate area. Additionally, even within regions, there have been considerable differences in job growth. Finally, a significant proportion of net job creation has been in low-wage industries.

New York State Fails to Keep Pace with the Nation

The overall rate of job growth for New York State is an estimated 2.0 percent compared with the national average of 2.6 percent. Among the 50 states and the District of Columbia, New York ranks 37th in terms of overall employment growth. Specifically, among our set of key industries,1 only the computer industry outperformed the nation in job growth during the expansion period from 1992 to 1998 (see Figure 1). Within the State, however, not all regions experienced rapid growth in the number of computer industry jobs. Computer industry employment more than doubled in Manhattan, the Mid-Hudson, Southern Tier, North Country and Finger Lakes regions, while growing at a considerably slower pace in the Capital Region and Long Island. In Central New York, it actually lost jobs in this industry over this period.

Figure 1

* 1 These industries include computer software and hardware services, telecommunications, electronics, media, home care, tourism, automotive, metals, aircraft, temporary services, securities, and banking. Some of these represent “high-tech” industries; others have special regional significance in terms of share of employment.

Although growing, the State’s securities, media, metals, home care services, tourism, and temporary services industries all lagged well behind the nation. The electronics, telecommunications, and automotive industries each lost jobs in New York State while producing jobs for the nation as a whole. This is of particular interest since all three are high-wage industries.

In addition to job growth differences, a look at the unemployment rates shows a lower unemployment rate for the nation as compared to the State (see Figure 2). The unemployment rate for New York City was substantially higher than the national average. Further, the disparity within the City is even wider than between the State and the nation, with the Bronx and Brooklyn boroughs continuing to exhibit double-digit unemployment rates.

Figure 2

Select Downstate Regions Outpace the Remainder of the State

Job growth within the State also shows regional disparities. Downstate as a whole has seen substantially stronger employment growth in recent years than did Upstate (see Figure 3). Had Upstate New York been a separate state, its rank would have been 49th.

Figure 3

However, the distribution of Downstate job gains has been uneven. Within Downstate, Putnum, Rockland, Suffolk, Westchester, Queens, Richmond, and New York counties, all experienced strong job growth; Brooklyn, on the other hand, has not fared as well, and the Bronx actually lost jobs in 1998 (see Figure 4).

Figure 4

An additional concern that arises here is the decline in the size of the Upstate labor force. Of the 52 counties that constitute Upstate, 34 experienced a decline in labor force in 1998. Of particular concern are Onondaga, Erie, and Monroe counties, home to the cities of Syracuse, Buffalo, and Rochester, respectively. Slow in employment growth, these counties witnessed labor force declines of 1.5, 1.4, and 0.4 percent, respectively, during 1998.

Job Growth in Low Wage Industries

Among specific industries, the computer and the securities industries did indeed contribute significantly to employment growth for the State as a whole during the 1992-98 period. However, it is noteworthy that job gains in such high-wage industries were offset by job losses in other high-wage industries; at the same time, there was significant job growth among low-wage industries (see Figure 5). For instance, while the computer and the securities industries together produced 82,337 jobs between 1992 and 1998, the banking, aircraft, electronics, telecommunications and auto industries, each with an average wage of over $50,000, shed a combined total of 74,726 jobs during the same period, almost offsetting the gain. Additionally, some of the largest job producers were the temporary services and the home care services industries, both of which are low-wage industries, paying average wages of $22,579 and $18,006, respectively, in 1998.

Figure 5

In some regions the replacement of high-wage jobs with low-wage jobs is particularly apparent. For instance, the loss of about 9,000 jobs from Long Island’s aircraft industry alone between 1992 and 1998, more than offset the job gains in other high-wage industries such as the computer and securities industries. On the other hand, a substantial number of jobs were gained in the low-wage temporary services, home care and tourism industries.

During the same period, job losses in the Mid-Hudson high-wage telecommunications, electronics, and media industries more than offset job gains in the computer industry. There were fewer job gains in the low-wage, fast-growing temporary services and home care services industries combined than there were job losses in the relatively high-wage banking and automotive industries during the 1992-98 period in this region.

Similarly, the loss of electronics and banking jobs in the Finger Lakes region amounted to more than twice the job gains in the computer industry since 1992. Similar stories can be told for the Mohawk Valley and North Country regions, where the largest job producers were relatively low-paying industries.

IV. The State’s Failed Approach To Economic Development

Clearly the “Main Street” economy has been left behind in the Wall Street boom. The Pataki administration’s failure to implement a regionally based plan for creating jobs, and reliance on a failed “one size fits all” approach ignores the unique needs and resources of each region. High wage jobs have been replaced with low wage jobs and job growth in high growth industries like biotechnology has declined in some regions of the State.

This year the Governor attempts to address New York’s economic disparities by providing support for the biotechnology industry in both Rochester and Buffalo, but there is still no plan to ensure that all of New York’s economy benefits from this industry and other emerging industries. Instead the Governor consolidates all the economic development programs into one fund. His policy threatens distressed areas in need of new businesses and ignores the needs of the New York’s cities, towns and villages.

Last year, the Assembly Majority focused attention on the plight of small businesses, emerging high-technology firms and the need to prepare New York’s workforce for the next century. But our calls for reform and targeted support fell on deaf ears in the Pataki administration. While small businesses are a key component to the State’s economic vitality, the Pataki administration allocates only 12% of its entire economic development budget to helping small businesses. Targeted support for high-technology initiatives and training fell victim to the Governor’s vetoes.

Small Businesses: Limited Access to Economic Development Funds

The failure of the Pataki administration to focus on the needs of small business is clear. State economic development agencies have continued to focus their attention on big business grants and loans at the expense of small businesses. Data collected from the State Department of Labor indicates that in 1998 small businesses made up 98% of the firms in New York and employed 44% of the State’s workforce. However, during the first three quarters of fiscal year 1998-99, the Urban Development Corporation committed only 17% of available funds to projects involving small businesses (see Figure 6).

Figure 6

Distressed Regions: Abandoning Local Communities

Over the past few decades, a movement of community development financial institutions (CDFIs) has grown quietly and steadily in communities across New York State. These community-based institutions help low and moderate income New Yorkers build savings, preserve the social fabric of their neighborhoods, and stimulate local economic activity. The demand for these institutions has surged in recent years as the trend toward consolidation of banks has absorbed neighborhood banks and eliminated hundreds of bank branches across the State.

In 1998, the Assembly Majority led the fight to address the capital needs of small businesses in low and moderate income communities by including $5 million in the State budget for the creation of CDFIs. Forty-five percent of New York State’s CDFIs serve Harlem, Brooklyn and the Bronx, communities that we know have experienced little or no employment growth in recent years and that would benefit greatly from an infusion of much needed capital. The Governor, however, continued to focus on the needs of big business by vetoing this and other critical items that would have helped to reinvigorate our entire economy.

Skills Training: Dulling New York’s Competitive Edge

A recent edition of Business Week featuring a study of Silicon Valley concluded that, among other advantages, it was brainpower that fueled the Valley’s growth. An earlier study reported in Fortune Magazine noted that 43% of the growth in jobs across the country is in those industries where knowledge counts.

The skills of the workforce provide the “new” competitive advantage. At a time when states are working hard to lower tax burdens and equalize access to technology, New York should be building its innovative capacity as a way to increase productivity. However, the opposite is true in New York State. In the first three quarters of State Fiscal Year 1998-99, UDC committed more than $79 million to economic development projects; however, only $11.7 million of those funds, or 15%, were dedicated to job training (see Figure 7). The forces of globalization and technical change, along with changes in the workplace brought about through restructuring, have required both employers and workers to focus on obtaining, maintaining, and improving job skills.

Figure 7

An educated workforce is the key to economic growth but the decline in State support for New York’s schools continues unchecked in the Governor’s budget. Even as broad consensus on the need to raise educational standards and graduation requirements among the business community, parents, and educators has been reached, the resources necessary to begin working toward those objectives have been left out of this budget. Board of Cooperative Educational Services (BOCES) aid, critical in many school districts to support occupational and career education for students, is being phased out. Technology support to districts is also cut. Without a commitment to schools, the Governor’s policies will weaken the foundation on which the New York workforce is built.

Higher education fares no better under the Governor’s budget. Job opportunities requiring some level of post-secondary education are growing much faster than those for other types of jobs. The shortage of engineers is widely reported not only in New York but across the country. During a period when the national decline in enrollment in undergraduate engineering programs was around 6%, New York experienced over a 15% decline. Skilled engineers, technicians, and machinists are graduated through New York’s four year and community colleges. Yet rather than promoting their growth and creating opportunity, under the Governor’s budget New York will shrink capacity by reducing funding and making a college education more difficult to obtain for many through changes in the Tuition Assistance Program (TAP) and aid for part-time adult students. These cuts are short-sighted but will inflict long term harm on the State’s economy.

Ten million dollars in funding for the Strategic Training Alliance program, an Assembly initiative enacted last year, was vetoed by the Governor. Although the program remains in law, the Governor has not budgeted funds for any industry-wide training that would be accessible to smaller and medium-sized firms.

Research and Development: No Real Commitment

For much of this century, New York’s premiere private sector laboratories played a major role in the advancement of new technologies in their early stages. Today, however, competitive pressures have driven many companies to emphasize near-term product development and process improvement that support their market strategies and their bottom lines. This kind of research and development focus has proven successful for many companies in the short term; however, it comes at the expense of basic and applied research, and threatens to reduce the pool of enabling and emerging technologies from which our State must draw in the future to remain competitive.

Yet, the Pataki administration continues to focus on the short-term needs of big business at the expense of future high-technology growth. Last year, the Governor vetoed investments in the Small Business Innovative Research grant program, a program that provides funds to small businesses in need of support as they seek additional federal funding for their research. The Governor vetoed additional funding for technology transfer and commercialization grants, emerging industry grants and matching grants for Technology Development Organizations. These investments would have created valuable public/private partnerships with high-technology industries and would have ensured that New York has a rich base of key technologies to serve as building blocks for new products and services, new industries, and technology-driven productivity gains for the next century.

Sustainable Economic Development: Still Remains to Be Seen

In the next three decades, the population of the United States will grow by 60 million people, and our economy is expected to more than double in size during this same period. Given these trends, we must develop a new generation of technologies capable of supplying the goods and services that society needs with less energy, fewer materials, and far less environmental damage.

States are now becoming active participants in the sustainable development debate. The State of New Jersey created the Office of Sustainability which encourages sustainable business development by offering small business loans to help establish new, environmentally-friendly businesses, and promotes the adoption of sustainable practices among existing businesses. The Office provides technical assistance to help state government agencies procure goods and services from local, environmentally-sound firms. The states of Pennsylvania, California, Maryland, Washington, Oregon, Tennessee and others are also participating in the sustainability discussion. However, New York State has failed to make any substantive commitment to a sustainable economic development policy. This lack of attention to what has significant State and global implications, is evidence of the narrowly focused approach the Governor takes to New York’s economy, environment and long-term economic stability.

The Assembly Majority realizes that to achieve energy efficiency, provide for less environmental damage and advance the capabilities of creating products with fewer materials, we need to promote collaboration among industry, academia and local communities. The Assembly Majority continues to support initiatives such as remanufacturing, fuel cell development, and efforts to advance pollution prevention.

V. Conclusion

New York’s Main Street economy continues to lag behind the Wall Street boom and the growing economies of a majority of other states. The Pataki administration’s continued focus on “winners” and “losers” has failed to carry the entire State economy into this country’s longest sustained economic expansion.

The State’s commitment to small business assistance is headed in the wrong direction. Without a commitment to training at all levels, the Governor’s policies will continue to weaken the foundation on which the New York workforce is built. Real regulatory reform will not be accomplished in the present piece-meal fashion but must be addressed through a comprehensive “Regulatory Bill of Rights.” State support for high-tech research and development initiatives must be expanded if New York is to compete in a increasingly global economy. Finally, our distressed communities lack the attention and resources they need to become vibrant contributors to our economy.

The Assembly Majority offers an economic development plan that will address the needs of our Main Street economy. Our plan will infuse small businesses with the capital and technical assistance they need to prosper, direct more than $158 million to the State’s high-tech sector, provide targeted tax incentives to reduce the overall cost of doing business, restore $246 million in State funds to maintain the State’s transportation infrastructure and create high-paying construction jobs and spearhead an aggressive $110 million campaign to improve the skills of the State’s workforce.

New York State must become the leader it once was and not the follower it has become. The current system of priorities and delivery of services will not reverse this trend any time soon. The Assembly Majority plan is a true statewide commitment to the economic future of New York State.

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