Wednesday, June 14, 2006

 

Northern Town Isn't Flat

A few months ago, I did a piece on the decline of Northern Town, and how it seems to refute the thesis that education plus internet equals prosperity. Last week I finished Tom Friedman’s The World is Flat, which claims precisely that education plus internet equals prosperity. Yesterday, the New York Times reported that census data confirms my suspicion. If you can access it, check the map. It’s quite striking. Most of New York State, and most of Pennsylvania, is losing 25-to-34-year-olds at an alarming rate. Worse, the more educated the young people, the more likely they are to leave. In fact, according to the article, the total declines for that age group would have been even more striking if not for a large influx of prisoners.

Replacing educated thirty-year-olds with inmates is not the path to success.

The major employers up there have been stagnating or declining for decades. (In the comments to the March post, I described living there as “like living in an afterthought.”) As one twentysomething was quoted in the article, “When you think Rochester, you think Kodak. But you also think layoffs.” Exactly. It’s similar in Buffalo. Quick quiz: what’s the largest employer in Buffalo? SUNY-Buffalo. Not exactly a growth industry, and not exactly a taxable property, either. You can get away with that if you’re an Oneonta or a Potsdam, but a Buffalo is much too big to rely on a university.

The median age of Binghamton residents is up five years since 1990. Absent an invasion or plague, that’s utterly breathtaking.

If Friedman is right, this region should be doing quite well. It has urban centers, surprisingly strong public schools, educated populations, and broadband. The housing is cheap, the cultural institutions stronger than you’d expect, and the infrastructure generally is already in place. If the world is flat, this place should be ready to boom. Yet the free-fall is, if anything, accelerating. (The article mentions that the exodus over the last five years is even greater than it was in the 1990’s, and that’s saying something.) The area is providing good educations to its young, then exporting them. The ones who stay behind are, with exceptions, the ones with nowhere to go.

My area is also losing young families, but for the opposite reason: here, property values have so thoroughly outstripped salaries that entry-level workers have simply been priced out. It’s a problem, but it’s a very different problem. In Syracuse, the housing is plenty cheap, but anybody with options gets the hell out.

Yes, the winters in the Northern Town region are unforgiving, but that’s true in Minneapolis, too. The winters were unforgiving fifty years ago, too, but the towns thrived then. I don’t think climate is the critical variable.

The social scientist in me, as well as the Northern Town expat in me, finds this fascinating (and frustrating). It’s as if there’s a big pile of dry kindling and newspaper sitting in the hot sun, and nothing is catching. For decades. And nobody knows why.

In the comments to March’s post, somebody raised the point about the Eries and Scrantons of the world not being transportation hubs. It’s a good point – the original impetus for the Buffalo-Albany corridor to develop was the old Erie Canal – but I suspect that if a big employer set up shop in one of those cities, people would find ways to get there. Besides, Baltimore and Newark are transportation hubs, but I wouldn’t describe either as thriving.

Business writers have plenty of clichés – tipping point, critical mass, event horizon – to convey the idea of change that happens first slowly, and then quickly. Upstate New York and most of Pennsylvania (except the Philadelphia area and, to a debatable degree, Pittsburgh) are performing natural experiments along these lines. At what point does decline inflect, and go from gradual/chronic to irreversible/catastrophic? At what point does a city (or region) cease to be viable?

Other places have gone through boom/bust cycles, and a few (Gary, Indiana, or Flint, Michigan) have simply flatlined. But this is a huge area (the article quotes its total population as 15 million, roughly twice New York City), and the decline has been going on for decades. This isn’t the Dust Bowl. It’s utterly invisible to most of the country, which imagines New York as New York City, plus its burbs, and Pennsylvania as Philly and Pittsburgh. Culturally, it’s a strange mix of Midwestern and Redneck, with traces of Canadian along Lake Ontario. Culturally, it’s farther from Manhattan than Chicago is.

Is there a culture that simply defeats initiative? It’s certainly possible to point to specific mistakes that specific companies made – if Xerox hadn’t handed the GUI over to Apple for free in the 1970’s, Rochester might be a very different place now – but it seems like, in a region of 15 million people, there would have to be at least a few with initiative.

If Friedman is right and the world is flat, this region is an unparalleled investment opportunity. If Richard Florida is right and economic growth will be based in big cosmopolitan cities with lots of creative young people, this area is circling the drain. With educated young people high-tailing it out of there, the errant entrepreneur with a great idea would have to leave to find the workforce she needs. At a certain point, there’s nothing to be done.

Can Northern Town be saved? Should it be?

Comments:
Your upstate-NY-focused entries always thrill me; I guess somebody from Binghamton never gets over the excitement of discovering somebody who knows where that is! I'm only 23, so it's really more recently that I've been interested in politics, taking the long view, all of that. But I have very, very clear memories of certain times in the Clinton administration when the economy, nationally, was supposed to be growing fantastically, and thinking to myself that that couldn't possibly be right. IBM was laying people off left & right, Lockheed/BAE was always praying for a new defense contract to come to the area, and all over the state, people were moving South.

I attended undergrad at, you guessed it, SUNY Buffalo, my boyfriend is from Rochester, and we both have family in Syracuse. We're in Ithaca now for grad school, and since I'm apparently such a big fan of upstate NY, people in my dept. come to me often for directions and such. Something I hear a lot is that this place is beautiful (the neighborhoods are nice, the schools are great) but there's no "here" here -- how on earth do people outside of academia feed their families? And how on earth do people *in* academia find a place for their spouse in this economy? I love Upstate, but I know I'm not going to be able to stay.
 
Maybe global warming will bring them back.
 
This is SUCH an interesting set of questions to me. Right now, I'm living in a STATE where 25-34 year olds are vanishing. Like your area, the schools (inc. universities) here are quite good, but/and the "brain drain" is astonishing. Sometimes I wonder if the entire middle of the country will be emptied out, as everyone moves to the coasts...
 
This is interesting to me, because I'm moving to a town that's much like the ones you describe--and yet when I was up there yesterday to sign my lease, I got excited about the city all over again.

Yes, the downtown is empty except for the big corporate buildings (lots of empty or reappropriated storefronts in what were apparently once department stores or big retailers). But there's still cultural life in the place; it's just shifted a bit out of the city center. In my neighborhood there are three great museums and two art-house theatres, along with good restaurants and funky little shops and cafes. I spent quite a bit of time in several different shops, looking over the wares and chatting with the owners--all of them long-time residents or natives of the city--who were very positive about the city and what it had to offer; in fact, they were all eager to tell me about other cultural venues and events that I might not have heard about. (But then, I guess I'm the kind of educated young person the city wants and needs!)

Then again, this particular city has TWO big universities in town, as well as several smaller ones (including mine) nearby, so it probably stands to reason that it's healthier than some of the other cities you mention.
 
There was a time, not too long ago, when tech jobs were thick on the ground in Rochester. A programmer could write his/her own ticket, and people moved from job to job as the offers became more extravagant. But then the dot.com bust occurred, a lot of these small companies went belly-up, and and the survivors are now outsourcing their code-writing to India. Manufacturing, too, is being outsourced, although the loss of manufacturing jobs in Rochester's case was largely Kodak's stubborn insistance on seeing the light as the end of the tunnel as film manufacturing instead of the digital imaging juggernaut that was headed their way. (Seriously, that was criminal fiduciary malfeasance, in my completely biased opinion.)

But outsourcing is a serious, serious drain on upstate jobs. My husband is a programmer, working on contract (good money, no benefits, zero security, which is the only way a programmer works in Rochester these days), and he's quite certain that if/when this job goes away, he won't be able to find another.

That said, my recent-college-graduate daughter is looking for a job in Albany. They're not all leaving.
 
I'm a native Rochestarian. My parents managed to raise (and are still raising) four kids. My father has managed to dodge the axe at Kodak numerous times. My mother went back to school and is now an RN. There are always jobs for nurses everywhere!

I love the area, but I wanted to escape after graduation. Not getting into Cornell's grad program helped spur my move out west. My sister is a recent college grad in the film industry. She was essentially forced to leave because of a complete dearth of that industry in the NE.

Sadly, I think upstate will continue declining. All the young people are leaving in droves. Without stable jobs available, can you blame them?
 
Same effect here in Iowa, for many of the same reasons; although I would guesst that our "get the hell out" mentality far surpasses New York's.

It's part of our curse, I think, that human desire moves in sine, never finding any kind of equilibrium. Right now, cities are what's appealing (courtesy of sewage systems and actual culture). As everybody empties out of the up-states (NY) and whole-states (IA) into the cities, they'll get overcrowded and miserable and people will start piling back into the countryside. Then the cities will start looking good again, and back we'll go.

Either that, or we'll all end up living in megalopoli while the entire Midwest is farmed by three guys and an army of robots. Who doesn't love a good dystopian future?
 
I agree that the young people are just going where the jobs are. Given an educated workforce (at least until they leave) and low land costs, isn't the better question what regulatory and tax hurdles are preventing companies from relocating to Northern Town? Or put another way, are other states luring all the new businesses away, either with better business climates or targeted incentives?

State income and business tax rates that are acceptable in New York City might be too high in Buffalo and Rochester, for example.
 
DeanDad,
You said in the previous post:

“So why doesn't increased communication allow northern town to catch up?”

I think increased communication and easier transportation is a great force for concentration.
Look at sectors where cost of transporting the product has been low or zero:
finance, federal decision-making, movies – you can do those things in one place for the whole nation; you don’t have to spread then all over the country like, say, cement factories or hospitals.
So where do they go? Where the other people in that business are; because that is where it happens. The companies come to the concentration of skilled workforce; they won’t spread themselves over the many university-towns that each produce some. Then the workforce will concentrate around those companies....
Succesful areas will get even more so, less succesful areas even less.
Can a Northern Town create such a position for itself?
Well, Washington, D.C. happened for political reasons, Hollywood for the weather, New York City for geography......i don’t think there ever was a Master Plan behind it.
Maybe it is possible to create an environment that makes such things possible, but is whether it really happens just a matter of luck.
 
Couple observations for you, from someone who is part owner of a business in a NE state.

Everyone here thinks a business is a resource to milked or harvested. No one thinks it needs to be nourished, or even respected.

Taxes are high, far higher than services received. Medical costs for employees are enormous, well above national averages. Employees don't understand or appreciate that, they are never satisfied, and have an entitlement attitude. I can sympathize some days, their taxes are too high also.

I have competitors around the country, and those in the south have far lower cost structures. They can pay employees less, yet their employees are happier in their jobs. Their lower bids don't always win the jobs, and a good capitalist would argue that the added pressure on me to innovate, to overcome their pricing advantages with creativity and better solutions is part of the genius of our system.

Even though I accept that sentiment, if I could figure out a way to move to state where my contribution as an employer was given some credit, I would. I suspect that Northern Town is not where I'd go.
 
I'm in agreement with Mr. Soze. I believe the chart which can be viewed [url=http://www.forbes.com/global/2006/0522/032.html]here[/url] might contain a partial answer to your questions.

The tax burden in NY is so bad that in recent editions of the chart (before this year) the great state of NY actually outscored Germany with their tax misery score.

In past posts, you've pointed out a few obvious things that conservatives seem to excel at ignoring; here's my chance to give back and point out something that you libs tend to overlook: you can't tax a state (or a nation) into prosperity.
 
Drat, undermined by my ignorance of Blogger.com comment field tags!

Here is the URL which will take you to a summary of the chart in question:

http://www.forbes.com/business/forbes/2006/0605/044.html

Here is the URL to the full chart:

http://www.forbes.com/misery
 
Well - maybe this is old, but I'll leave it. Your point that the average age is 5 years older means nothing about people moving in or out but likely has more to do with the fact that the huge cohort of baby-boomers is getting older and the the younger generations are smaller - no one has to move - in fact there may even be an inflow of younger people, but if the older age group is that much bigger, then the average age is going to go up every year as they get older.
 
As a resident of an Even More Northern Village in the generally "upstate" area, and an economist, I think Keyser and the later anonymous have it right. Look at the business climate in NY state - lots of regulations, high business taxes, high personal income tax, and, of course, business's best friend Eliot Spitzer. You couldn't construct a worse climate for business than that. It's not surprising that the educational institutions continue to be the main source of jobs - as non-profits or as government entities, they are largely immune to many of the elements of a bad business climate.
 
I'll admit that I hadn't considered business taxes, so that's fair. There may be something to that, in the case of Upstate New York, but the argument falls apart when applied to the country as a whole. The young are flocking to the coasts and away from the middle, but, generally speaking, business taxes (and taxes generally) are lower in the middle and higher on the coasts. Northern Town is an anomaly.

Do taxes explain the anomaly? It's possible, I guess. But surely the lower cost of rent/property would more than offset a higher tax rate. In other words, I'll concede that taxes may be a contributing factor, but they strike me as far from decisive.
 
Lower housing costs are good - I certainly benefit from them where I am. But buying a cheap house is useless if there are no jobs. You asked why young people are leaving, and it is likely because there are few good jobs there. And one reason for that is business climate.

In larger cities in higher tax areas, firms can afford the higher taxes because the product and labor markets are large enough to overcome them. But if the question is how to revive small and mid-sized towns, making it easier and cheaper to operate a business there and to, thus, create job would sure help.
 
This post reaches into the depths of why I chose to leave Syracuse after finishing my undergrad degree this past May. I had a professor who was gung-ho on getting me a job working on a campaign or with a consulting firm, but for some reason it didn't feel right to me.

This is my observation from within the university. Syracuse is a nice city. Chancellor Cantor is trying incredibly hard to join SU and the downtown region with moving practically an entire college down to The Warehouse and buiding her multimillion dollar sidewalk, connecting SU to downtown. [Let me say here, I feel this sidewalk is pathetic, as most people don't feel safe walking around the neighborhood and their dorms at night -- why the hell would we feel safe walking on this sidewalk that cuts through a crime-ridden area?] Many students feel Cantor's actions are ridiculous and don't WANT to be connected to downtown; we are our own entity, and honestly, we could survive without the city. The University wasn't built to help the city prosper. It's pretty isolated on The Hill, which most students are fine with.

Now, to look at the demographics of the students at SU. Most students that I knew at SU were from better areas; NYC, great towns in NC, the west coast, Boston, Baltimore/DC. The demands for our degrees are higher in these areas. I checked it out -- unless you're one of the lucky few to get into PWhC in Rochester, there really aren't business/management jobs in the area. And MOST people at PWhC use Rochester as a jumping off point for NYC, etc.

I did have a professor who is from NYC, went to SU, left for a while, and then came back for a job and ended up staying. Joanie Mahoney also came to a class of mine to talk about what it takes to run for Mayor of Syracuse. Being a pretty liberal dem it was hard for me to believe that everything she was saying I understood and fully supported. She personally has been trying to figure out a way to keep the higher educated in the area. She claims that Syracuse is a shell of what it used to be and if a handful of people took the initiative to keep graduates from SU and LeMoyne around, the city would be better than ever. I don't feel I'm qualified to take up that task.

Syracuse is a great city -- hopefully with Cantor's connecting of SU to downtown, those who were there before her will be gone and those who have only known her, not crazy Buzz Shaw, will begin to see her POV and plan and consider staying.

As for Rochester, Buffalo, and Albany:: Rochester - seriously nothing is left. More than a few people I knew at SU had to move from the area when Kodak left, but returned for college. Buffalo - from what I hear Buffalo is practically drowning in it's own debt, which is causing the school and political systems to seriously suffer. Until they get their heads above water, I feel like that city will continue to decline. And Albany - after studying with an adjunct professor who actually works in politics full time, I've come to realize how RIDICULOUS NY state politics is. Elliott "Hobbitt" Spitzer basically has the AG in the bag; and let's not get started on everything Pataki has done that rubs me the wrong way.

I know this became very long and probably confusing, but I couldn't help it. Upstate has a very special place in my heart and it pains me to really see how crappy it is, once you get out of the bubble of Syracuse and really educate yourself.

I would love to hear your thoughts on DestiNY USA.
 
"But surely the lower cost of rent/property would more than offset a higher tax rate. In other words, I'll concede that taxes may be a contributing factor, but they strike me as far from decisive."

Generalizations can be problematic, but no, a dollar extra in taxes is not offset by a dollar reduction in property value, or ten or one hundred dollars. The purchase happens once; taxes are forever, they never go down.

Property values are low in Northern Town not because the property isn't valuable, or intrinsically attractive, but because no one wants the property. They don't want it because they buy a tax obligation with it. When the tax rate is high, the hope for property appreciation dies.

You are quite right, though, that taxes are not themselves the decisive factor as such. And I, at least, did not mean to imply as much--the cost of labor, the cost of benefits, the cost of regulation, and the attitudes of the employees will all enter the equation. Northern Town will not score well on these metrics either. But every small business person that I have ever met--even the Democrats--considers high taxes on businesses to be the reddest of red flags.

Here's the part I think that you are not quite getting. You are in academia. Your school pays no taxes-indeed, the taxpayers fund it. And that's right, because your institution is providing a public good, and those it employs are themselves paying taxes. And that's enough.

Why isn't that true for me? I pay my taxes, why must my business pay taxes again? Why don't we recognize the public good that private businesses provide--jobs--by exempting them from taxes, or at least taxing them at much lower rates? On the contrary, we are always taxing businesses at much higher rates. Like Rodney Dangerfield, we can't get no respect. We'd like a word of appreciation once in a while.

But, you argue, by being a business owner I have the chance to become rich! Maybe so, but it sure hasn't happened yet. I'm among those whose income has dropped steadily under George Bush, but my financial burdens have not. We've dropped some employees already, and we'll be forced to drop more soon. Medical insurance is the biggest bear right now, but taxes are not that far behind.

To answer your question, can Northern Town be saved, and should it be, I think that the answer has to be no. Northern Town has too much baggage to attract small employers. To attract large employers--the way that South Dakota lured Citibank--requires a commitment at the state level that Northern Town will never receive.
 
The Forbes chart only tells part of the story, as it does not contain information on states other than Texas and NY. If you're inclined to look, see how NY ranks on some of the lists available here:

http://www.taxfoundation.org/research/topic/9.html

One simple measure of how bad residents of various states have it is based on "tax freedom day," which is the day when the average worker has satisfied their tax obligations and begins to work for their own direct benefit:

http://www.taxfoundation.org/research/show/387.html

You can see: for the nation as a whole, tax freedom day in 2006 was April 26. But for residents of NY (ranked number 2 on the list), it was May 09.
 
Just a note. I agree that onerous tax burden is one of the problems affecting rural and non-coastal/rust belt/old industrial heartland areas from attracting and retaining younger working families. But let's not get carried away.

Firstly, the Tax Foundation's Freedom chart is interesting, but I would like to demur from Anonymous and his/her claim that taxpayers "begins to work for their own direct benefit." The principle behind taxes are that the taxpayer, through contributing to the commonweal (remember that?), is benefitting from the taxes paid to the government. How far this is from reality is open to debate, but I think we should be careful not to ape some of the Right's more polemic assessments of taxation.

Secondly, and perhaps more to the point, "how are ya gonna keep 'em down on the farm." Americans have historically been an unsettled people, and our media and information technologies have only accelerated this trend. While I can attest to the beauty and richness of life in upstate New York, as I have lived there as well, in a previous life, if you aren't working for government or education, what is the point? Specifically, we can't legislate desire, and people move not only for money but for weather, diversity, excitement, adventure, sophistication, and a host of other less tangible ideas which are hard to encapsulate and deeply resistant to analysis.

The major difference I would gesture towards between before and now is that today more people have a greater idea of the world outside of wherever it is they may be (however right or wrong those ideas may indeed be), and as our economy contracts and soldifies into post-industrial forms (which themselves, if I were to believe everything I read online, are temporary and endangered even as they rise), the regions that were powerhouses of old industrialism (or indeed before that of agriculture) will indeed see a super-depopulation which is depressing. Witness North Dakota, the subject of a recent article in the New York Times, as well as upstate New York, Detroit, Cleveland, et al.

The only hope for these places is an adjustment, an orderly and aesthetic contraction, and the significant and painful shifts that, at least at this point, seem inevitable. Syracuse, Rochester, and Buffalo, to keep with the upstate theme, should consider a planned deconstruction of the urban area. Now, that would be an interesting and radical project to consider. What would it mean to scale down a mid-sized city into a small one, or back into a town? Devolution as art, as practical science. Devolution is so un-American, but ironically confronts those who occupy the older, abandoned stages of the American Dream, while hyper-evolution and growth deformation grow like cancer in the boom areas. But I find the challenge intriguing, even as it may speak to the end of certain local knowledges and histories, it is not necessarily the end of those places.

But the need for change is what is paramount here, no? And it is the refusal to change, or the hallucinogenic fantasy of some return to previous economic robustness *in the same manner* as the old industrialisms, that makes these places so positively and utterly depressing.
 
I wouldn't say that high taxes drive people out of the rural areas or midsized towns. I agree that other attractions pull them toward the coasts.

But one of those attractions is the prospect of employment, and I do think the high taxes drive employers away. Or help to explain the long tailspin of places such as Northern Town. And something of a death spiral has set in as a result, in upstate New York and other parts of the "heartland." I wonder if an equilibrium can be found at a smaller size, or if they are inevitably going to become ghost towns?
 
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