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In the depths of the economic crisis, New Yorkers feared that New York City had forever lost its status as the financial center of the world.
In response, Mayor Bloomberg developed a long-term strategy to diversify and guide our city’s economy through the downturn. The strategy worked, leading to New York City being ranked first in job creation among the 10 largest U.S. cities in the three years following the recession, surpassing San Jose in Silicon Valley and even Houston during the oil boom. New York City recovered all of the local jobs it had lost in the recession at a much faster pace than did the United States as a whole.
Contrary to the fears of business and civic leaders, New York City has not sputtered under Mayor de Blasio. Quite the opposite; our economy is rather robust. Private sector jobs are at an all-time high and, in the first two years since de Blasio took office, approximately 250,000 private sector jobs have been created. Every industry sector has enjoyed job increases during this period. Even manufacturing, which had been in decline for years, showed a slight uptick.
But even with such growth across all job sectors, we cannot be complacent about the current strength of New York City’s economy. The areas of greatest job gains are still occurring at the high and low ends of the wage spectrum, and we still need to concentrate on growth of middle-class jobs.
At the high end, the professional services and tech sector enjoyed the greatest job gains, contributing over 37,000 new jobs since de Blasio came on the job. This sector supports jobs with average annual wages of over $120,000. Additionally, the finance sector, a mainstay of the city’s economy for decades, has added over 16,000 jobs at very high average annual wages of almost $300,000 (although this sector does include jobs across the entire wage spectrum).
During this same period, the low end of the wage spectrum saw significant job growth powered by two different sectors. Health care, which employs the most New Yorkers of any local industry, produced the most jobs of any sector overall, with about 47,000 new jobs, at an average annual wage of approximately $50,000. The food services sector was also a large job creator, contributing over 32,000 jobs at approximately $30,000 in average annual wages.
Job growth in lower-wage sectors is beneficial for the overall local economy, giving new opportunity to those joining the workforce or returning to it, and certainly placing many of these individuals above the current poverty line. But such jobs still face relative stagnation of real wages, compounded by a rising cost of living. These wages are inadequate to sustain a living for single-income families in New York City.
Despite the wide economic divide, there’s good news. Unlike the rest of the country, the city is starting to show positive gains in the type of jobs that more closely approximate much-needed middle class jobs. One example: the recent growth in the construction sector as a result of the ongoing residential and commercial boon.
Increasing middle-class jobs must remain a priority. In fact, with the recent momentum in the economy, it is time to double down on growing higher-paying middle-class jobs to add greater strength and diversity to the local economy.
This focus would provide greater mobility for those at the lower end to climb the pay scale in New York City. It could help buttress the local economy in the event that it starts to slow down after the longest period of growth in the city’s history. And it would help reverse the decades-long rise in inequality.
Understandably, middle-class jobs here have been constrained by quality of life challenges such as lack of affordable housing and quality of schools; employers are also reluctant to absorb higher costs here as opposed to placing these jobs elsewhere.
So, setting other important initiatives to benefit those at the lower end of the wage spectrum aside, here are 10 ideas (some of which are already being considered) to drive middle-class job growth in New York City:
Develop and attract smart entrepreneurial talent. With many unfilled area jobs, we need to work very closely with local businesses, paying particular attention to supporting women- and minority-owned businesses. While developing local talent, we also need to proactively encourage young, talented individuals to build their careers and businesses here.
Increasing venture capital investment here is a strong indicator of the growing talent pool living and working here, as venture capital dollars chase talent. In 2015, local companies received almost $6 billion in venture capital funding, marking a 62% increase over 2014. But even that growing amount is not sufficient; one West Coast company, Uber, has itself raised more than $8 billion.
One prominent local entrepreneur believes the tech sector alone could immediately absorb 10,000 talented software developers.
Partner with high-impact industries. The local and national backlash against Wall Street is evident. But the finance sector, representing about 9% of New York City jobs, accounts for about 30% of our payroll taxes. Such revenues cannot easily be found elsewhere, not even in the fast-growing tech sector, which currently contributes almost 11% of payroll taxes. And since finance leaders understand the long-term economic effects of current trends, instead of isolating them, we should include them in the conversation and enlist them in being part of the solution.
Reduce regulatory burdens. New York City remains a difficult and expensive place to start and grow a business, particularly for entrepreneurs who lack access to venture capital.
We can level the playing field by streamlining our complex local regulatory environment. For example, eliminate conflicting regulations from multiple agencies and consider a change to procurement rules to help small- and mid-size businesses compete more effectively for government contracts.
Respected policy institutes, such as the Kauffman Foundation, have long advocated for reduced regulations. This would not only benefit lower-income entrepreneurs struggling to grow a business but also serve as an important signal to attract greater talent to New York City.
Invest in infrastructure. New York City lags behind other global cities with respect to investments in 21st century infrastructure. Among other areas, we need to prioritize access and availability to high-speed broadband. Infrastructure investments have always been a net job creator, especially if coupled with streamlined regulations in the construction field.
Tax incentives for job creation. Local and state tax incentive programs already subsidize both commercial and residential development. In particular, these programs seek to spur industrial development in certain areas or create more affordable housing. Given our willingness to influence economic behavior in these ways, we should devise similar programs that focus on job creation or growth in certain industries and provide incentives to companies to hire and train employees.
Build an export economy. New York must redouble its export-oriented economy to compete in an increasingly global economy. As such, we should identify and support New York City-based sectors or businesses that can sell items outside of the tri-state area. For example, many small and mid-sized businesses in food manufacturing are well positioned to increase exports of their products. A large-scale program to support small businesses in exporting their products would be beneficial.
Invest in emerging industries. New York City must continuously reinvent itself in an ever-changing world. We need to identify, incubate and support new industries here, such as life sciences, health-care tech, design, advanced manufacturing and film and television post-production. The investment in applied sciences at Cornell-Technion, the remarkable new campus taking shape on Roosevelt Island, will bring an estimated $30 billion in economic development over the next several decades. As an example to follow, Chicago is investing (with the assistance of the federal government) in advancing the next generation of battery and energy storage technologies.
Leverage our local anchor institutions. New York City’s anchor institutions, such as museums, universities, hospitals and medical schools, can more fully support local economic development. Possessing great scale and located in or adjacent to many economically distressed areas, they share a long-term perspective on our community. While they face their own internal constraints and priorities, they play multiple community roles as purchaser, employer, workforce developer, infrastructure builder and real estate developer.
In 2014, Chicago established the CASE model (Chicago Anchors for a Strong Economy) to build connections between anchors and local businesses. This model can also serve New York City.
Embrace the gig economy. Technology is fueling an emerging “on demand” economy that has profound implications for society, from work to pay to social contracts. Tens of thousands of New Yorkers are performing freelance work, and large companies here increasingly view freelancers as a way to tap people with the necessary skills for specific projects without the financial obligations of adding employees to their permanent payroll.
This disruption includes the rise of “sharing” companies, such as Uber or Airbnb, which have become integrated into the fabric of society. Some of this work can pay decent wages; Uber drivers, for example, reportedly earn over $20 per hour.
We should embrace these companies but also determine how they can best co-exist fairly and safely in New York City.
Adopt a fiscally conservative city budget. In the face of greater mobility and a seemingly slowing global economy, we cannot assume that tax revenues, particularly payroll taxes, will remain unusually robust. The city should be cautious when adding costly new programs that may be difficult to eliminate if we face a downturn. We should look to preserve greater cash reserves so that government has additional tools and flexibility to weather any economic fluctuations.
As we face even greater convergence of technological capabilities (e.g., job killers like automation and machine learning) and a rate of change whose speed eclipses our capacity to adapt, we need all constituencies to collaborate. New York City can take advantage of the moment and find ways to create ever more middle-class and higher-wage jobs – by collaborating, exploring and experimenting as a community.
Gertler is chief executive officer of Ulysses Ventures, a private investment fund in New York City. He previously served as an executive vice president for the New York City Economic Development Corporation and managing director of its Center for Economic Transformation.