The Employer Rush To NY's Exits

Like a leaky faucet, New York state was drip-drip- dripping businesses and jobs to other states for all but one of the 15 years leading up to the official end of the last economic expansion in 2007.

In any one of those years, the loss might have looked like a drop in the bucket. But over time, the drops add up to a large and worrisome wave -- a wave whose full dimensions are only now becoming visible, thanks to a new database developed for the Manhattan Institute’s Empire Center.

New York-based firms picked up and moved at least 407,558 jobs to other states from 1993 to 2007, we found. Meanwhile, firms moving into New York from other states brought just 259,090 jobs with them.

Measured as a percentage of total jobs at the start of the period, New York’s net out-migration of 148,508 jobs was the biggest loss of any state. The industry sectors with the most net migration losses were management and public relations, down almost 10,000 jobs, and securities brokers and dealers, down more than 9,000.

Which states gained at New York’s expense? The answer begins with New Jersey, which attracted more than 60,000 jobs from former New York firms, roughly a third of that total in the immediate aftermath of the 9/11 attack, while Connecticut attracted roughly 20,000. New York firms also took 19,000 jobs with them to Florida -- nearly twice the number that moved to neighboring Pennsylvania.

Not surprisingly, the same states have been leading destinations for the 1.7 million people who moved out of New York in the past decade alone.

These numbers come from “EnterprisingNY,” an Empire Center project that takes a fresh look at economic growth using the National Establishment Time-Series (NETS) database from the proprietary Dun & Bradstreet Marketing Information file. Unlike standard government statistics on employment, NETS tracks business relocations, closures, openings, expansions and contractions down to the Zip Code level -- providing a fuller picture of job-creation dynamics than we have had in the past.

The migration of jobs was just one of several indications that New York is not nurturing a favorable climate for entrepreneurs. Consider these other statistics:

* New York lost 656,942 more jobs to firm closures, or “deaths,” than it gained from firm startups, or “births.” The Empire State’s negative ratio of job creation from start-ups was a key factor in its relatively weak overall employment growth during the period. Only five states performed worse in this category.

* Expansion of existing firms was the leading source of employment growth in New York, creating a net 900,564 more jobs than firm contractions. Yet this was largely offset by the state’s job-migration losses and its failure to nurture more start-ups.

* Small establishments, including the self-employed, accounted for a growing share of New York jobs -- but the Empire State nonetheless lagged behind most states in job creation by small firms.

The bottom line: Using the broad employment measures created by EnterprisingNY, which includes sole proprietors and independent contractors, New York’s total job base grew at just a tenth the national rate from 1993 through 2007. Only two states did worse by this measure.

These numbers tend to confirm what other studies have shown: Despite its vast advantages as the nation’s financial and communications capital, New York has done a poor job of nurturing the small and start-up firms that are crucial to future economic growth.

The continuing migration of business and jobs to other states, the negative ratio of firm births to deaths and the relatively low proportion of self-employed workers and small firms: These are all signs of trouble that New York policy-makers should not ignore.

By all means, New York needs to fix its tax and regulatory policies to retain and encourage expansion by its existing large employers. But the Empire State’s future growth prospects will hinge on the creation of a more favorable climate for small firms and entrepreneurs.

This piece originally appeared in New York Post

This piece originally appeared in New York Post