From a statewide perspective, New York’s economic performance since the end of the Great Recession hasn’t been especially outstanding, roughly equaling the U.S. averages for growth in private employment and GDP, while slightly trailing the national rate of increase in personal income since early 2009. But a closer look at the numbers reveals a tale of two New Yorks. The 12-county metropolitan district that includes New York City, with a population of 13.3 million, has gained jobs and grown personal income much faster than the nation as a whole during the recovery. The other New York—comprising the 50 counties north and west of Dutchess and Orange Counties in the mid-Hudson Valley, and home to 6.2 million—has trailed far behind most of the country. In some key respects, much of upstate New York has yet to recover from the downturn.

Since the recession ended, upstate New York has gained private-sector jobs at one-third the national rate and less than one-quarter the downstate rate. During the same period, only three states—Connecticut, West Virginia, and Wyoming—had lower private job-creation rates than the upstate region. Twenty New York counties, all upstate, still lagged their prerecession private-sector employment levels in the spring of 2019. Upstate’s once-mighty manufacturing sector has been especially weak over the past decade, losing jobs even as manufacturing employment rose nationally for the first time in 50 years.

After peaking at nearly 9 percent in January 2011, the unemployment rate throughout New York State has dropped by more than half, and it has reached near-historical lows in some areas. But the underlying reason for the trend varies sharply by region. In New York City and its suburbs, the unemployment rate dropped even as the labor force expanded because more people were finding jobs. Upstate, by contrast, unemployment has declined because fewer people are looking for work, not because more are working. In fact, as measured by the household survey used to calculate the jobless rate, resident employment upstate is lower than before the recession.

From 2009 to 2018, the latest available federal data show, only five states experienced lower personal-income growth than upstate New York. Some of the state’s weakest income-growth rates were in Southern Tier counties that would have had the most to gain from shale-gas production, via hydrofracking, before Governor Andrew Cuomo banned it in late 2014. Downstate, meantime, personal income increased faster than the national average, at a rate exceeded by only 11 states.

Upstate trends are consistent with a broader national pattern of rural and small-city decline. In New York, however, the cycle of decline dates back earlier—at least to the 1980s. Why is upstate New York notably weaker than comparable areas in the Midwest? Higher taxes—driven by the exceptionally high costs of public-employee compensation and Medicaid in New York—are part of it. Upstate employers also must deal with (among other things) some of the nation’s highest workers’ compensation insurance rates, a uniquely expensive liability standard on construction projects, a state “environmental quality” law that makes it easier to slow down development, mandated union preferences for all public works, and—most recently—a virtual ban on expansion of natural gas pipelines.

The region can point to some relative bright spots, including the Albany-Schenectady-Troy area—where, over a 20-year period, the state spent billions to establish a nanotechnology program and public-private tech partnerships at the State University of New York’s Albany campus and to subsidize a Global Foundries computer-chip factory that has grown into a $15 billion facility employing 3,000 people. But Cuomo’s efforts to replicate the Albany approach elsewhere has produced notable flops, ranging from a vacant $15 million film-production “hub” near Syracuse to the massive Tesla solar-panel factory on a former steel-mill site in Buffalo, which has yet to begin full production. Built and equipped at a cost to New York taxpayers of nearly $1 billion, the state-owned Tesla plant has seen its book value written down to zero on the balance sheet of the SUNY nonprofit subsidiary that developed it.

Entering the 2020s, upstate’s outlook is further clouded by the changing political landscape in Albany. In the November 2018 legislative elections, Democrats took control of the state senate for only the third time since World War II—with their largest majority (40 out of 63 seats) in more than 100 years. As a result, both state legislative houses are now dominated to a historic degree by members from New York City and its suburbs. Compounding that regional lopsidedness is a sharp ideological shift: more Albany lawmakers than ever, in both the assembly and senate, are committed progressives.

During his more moderate, first-term incarnation, Governor Cuomo initiated some pro-growth policies beneficial to upstate, including a statewide 2 percent cap on local property-tax increases and a business-tax reform that eliminated state corporate taxes on upstate manufacturing operations. But he undermined upstate growth prospects with the 2014 fracking ban and his 2016 push for a statewide $15 minimum wage—though the then-Republican working majority in the Senate secured a regionally differential schedule, imposing lower, slower increases in the upstate minimum (pegged at $11.80 as of 2020 and rising to $12.50 next year).

Cuomo more recently has veered aggressively leftward, signing virtually every major piece of progressive legislation that made it to his desk in 2019. These included the Climate Leadership and Community Protection Act, which will embolden the governor’s war on fossil-fuel infrastructure, along with his aggressive push for greater reliance on solar panels and offshore wind-turbine projects. One inevitable result of this deep-green agenda will be higher electricity costs upstate, where—for now, at least—utility rates remain roughly in line with or even below national norms. Cuomo also signed the Housing Stability and Tenant Protection Act, which permanently extends New York City–style rent regulations (including a local rent-control option) to upstate communities that already have ample affordable housing.

In yet another blow to upstate, the legislature passed a Cuomo-supported farm-labor rights and unionization bill, even as the New York Farm Bureau and other agriculture groups denounced it as costly and unbalanced in its treatment of family farms. As if to underscore upstate’s marginalized status, Cuomo staged the bill’s signing ceremony in the lower Manhattan city room of the New York Daily News.

New York’s regional economic divide is paralleled by a sharp regional difference in political preferences. In 2016, Hillary Clinton won downstate by a large margin (including 76 percent of the vote in New York City)—but Donald Trump carried 41 of 50 upstate counties, outpolling Clinton 47 percent to 45 percent in the region as a whole. Cuomo prevailed upstate when first elected governor in 2010, but he was outpolled there by underfunded Republican challengers in 2014 and 2018. In a recent Siena College poll, nearly two-thirds of upstate voters rated the governor unfavorably.

Electorally, as the governor and other downstate Democrats surely have noticed, upstaters are losing clout. The region’s share of New York’s statewide vote has dropped steadily, from 43 percent in the 1994 gubernatorial election to just 37 percent in 2018, reflecting a broader demographic trend. Both upstate and downstate New York have experienced large net migration outflows of residents to other states—but downstate, foreign immigration and higher birthrates have offset these losses. According to preliminary 2018 census estimates, upstate has lost 103,000 residents since 2010, a period in which downstate gained 267,226. After ranging from 33 percent to 35 percent in every decennial census of the post–World War II era, the upstate share of New York’s population has dropped to just below 32 percent in the latest preliminary census estimates. New York could lose two more seats in the next congressional reapportionment—and both will be carved mainly out of upstate. Likewise, more state legislative districts will shift downstate.

Upstate’s political, demographic, and economic decline isn’t good news for New York City or its suburbs, though. Thanks to New York’s redistributive income-tax and aid formulas, the poorer and less self-sufficient the region gets, the more it will depend on subsidies from higher-income households and businesses in the New York City region. Instead of exploiting their political dominance, downstate Democrats would better serve their own interests by giving upstate a break from their version of “progress.”

© 2019 City Journal

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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