Transition and Renewal: The Emergence of a Diverse Upstate Economy

Findings

An analysis of economic trends in Upstate New York finds that:

  • The economy of Upstate New York, by nearly all major measures, worsened in the 1990s, lagging both the nation and its own performance in the 1980s. After growing 26 percent in the 1980s, for example, Upstate's total real personal income in the 1990s increased by only 9 percent, compared to 29 percent nationwide. Upstate's earnings and employment growth also slipped in the 1990s, and overall growth rates for each were considerably lower over the two decades than those experienced by U.S. as a whole. All this came despite significant improvements in the share of Upstate residents with college educations.

  • Upstate's economy is diversifying as its information sector grows, but the region still depends heavily upon manufacturing. After dropping considerably since 1980, the goods producing and distribution sector now contributes 30 percent of Upstate's overall earnings—compared to 26 percent nationwide—while earnings from the information sector have climbed to 28 percent. This diversification will provide a more stable employment base, but at a cost: Upstate's information jobs pay much less than Upstate's goods-producing jobs and less even than information jobs on average nationwide.

  • Higher education is a key contributor to Upstate's economy, but many students leave when they graduate. Upstate's ratio of educational institutions to residents is 24 percent higher than the nation's, and 27 percent higher than downstate. But while Upstate attracts substantial numbers of college students from elsewhere, many more young working-age adults leave the state.

  • Health care is the fastest growing sector in Upstate and now employs a larger share of Upstate residents than the national average; however, average wage growth in this sector lags the nation. Private sector employment in the region's healthcare sector increased 75 percent between 1980. In 2000 over 9 percent of its jobs were in health services, compared to 7 percent nationwide. Average annual wages per job in this sector are only three-quarters of the national average, however.

  • Upstate's regional economies do better when they are based upon diverse economic activities and when major employers have incentives to offer wages high enough to attract and retain highly skilled workers. Only when these conditions are in place will Upstate get both more jobs and improvement in wages per job, both of which are critical to Upstate's prosperity.

In sum, long-term structural changes in the Upstate economy have weakened the region's economic health, and necessitate policy changes to ensure the region renews its drifting economy. Such adjustments offer good promise of the region leveraging its strengths in higher education, health care, and manufacturing into long-term growth and job-creation in both established and emerging industries.