Ulster County’s economic future

It’s now over a quarter-century ago that the Hudson Valley was shaken to the core by the closing of several IBM plants and the disappearance of tens of thousands of well-paying jobs. IBM had been the largest single force sustaining the regional economy. Aware of how dependent the region was on the computer giant’s continued paternalistic presence, leaders had convinced themselves that such a departure was unthinkable. IBM would never, never leave. “Sure, we have a one-horse town,” Dutchess County executive Lucille Pattison famously said, “but our horse is a Thoroughbred.”

The region had a big surprise coming to it. The Thoroughbred, born and bred in upstate New York, bolted out of the barn and didn’t look back.

For a few years, the region’s savants persuaded themselves that entrepreneurial ex-IBMers would take up the slack and organize new businesses. That wasn’t ever going to happen. Without the benevolent protection of the Big Blue umbrella, the region’s IBM remainers and retirees were like fish out of water.

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Of the many dreams since then, some of the more practical have stemmed from the region’s beauty and its nearness to New York City.  Because of the high cost of living in the Big Apple and its dense urban character, because of the rise of the gig economy, and because of the continued evolution of digital technology, many have come to believe that an ever-increasing number of big-city knowledge workers, particularly young techies and creatives, would find their way to the Hudson Valley and create jobs here.  

Have they? Has this been happening over the past couple of decades? To look at that question, I chose to use this census category (NAICS 541) as a proxy for the increasing number of all knowledge workers. In famed management consultant Peter Drucker’s words, those employed in professional, scientific and technical services are among the folks “whose main capital is knowledge.” The geographic data, available monthly by geographic area and adjusted annually, assigns all employees according to each industry’s main line of business. 

Other proxies would have yielded different results, of course.

In April 2019, some 9,573,300 persons in the United States were recorded as employed in professional, scientific and technical services. When IBM departed Ulster County 26 years ago, there were half that many in the category nationally. As is true of most knowledge work, the number of persons in this category is today continuing its steep increase. Nationally, the number was up by 292,100, or three percent, over the previous year’s April.

According to the state Department of Labor, in April 1991 10,000 people were employed in professional and business services in Ulster County (a slightly larger category because Ulster’s too small for an exact monthly employment count). In April 2014, that post-IBM number was 4400. With the continued economic recovery, however, it increased to 4800 in April 2019.

Economist Enrico Moretti’s influential 2012 book “The Geography of Jobs” explained why. Moretti showed that knowledge work in the previous 20 or so years had been increasingly concentrated in certain large cities (agglomeration).  Knowledge workers clustered around places where there were other knowledge workers. The number of innovation hubs that resulted, Moretti’s data showed, did not support the view that geography no longer mattered in a high-tech, connected world.  It turned out that less advanced communities tended to fall further behind rather than catch up — exacerbating the ever-increasing social as well as geographic inequality in America.

Local data for the selected category failed to contradict Moretti’s findings. The annual growth rate of NAICS 541 employees in New York State for the past 18 years is less than one percent. Most of the state’s employment growth in this category, somewhere between two-thirds and three-quarters of the total, has been in New York City. Job growth in the inner suburbs (Long Island, Westchester and Rockland) has been low, and even lower in the outside exurban ring. Ulster County could boast 86 new jobs in 18 years out of the statewide total of 90,000.

Ulster County must put its thinking cap on if it is to be more than a service economy, a second-home community, or an outpost of long-distance commutation. The local culture, sleepy as it is, is not without its virtues. But it’s got a long way to go if it’s to latch on to the more dynamic entrepreneurial economy characteristic of many of the nation’s largest cities.

Moretti offers an interesting take. “Being around smart people tends to make us smarter, more creative, and ultimately more productive,” he writes. “And the smarter the people, the stronger the effect.”

What’s needed is broader than stealing jobs from other areas. It requires a culture attuned to innovation. Ulster County doesn’t have that. The pieces haven’t come together. There have been only the beginnings of sporadic efforts to grow an entrepreneurial ecosystem.

According to economic theory, the preconditions for successful agglomeration include the presence of skilled workers in a specific field, specialized service providers (including financial), and a positive atmosphere encouraging how knowledge travels among firms to facilitate innovation and growth. 

How to grow that culture will have to be the subject for another day.

There are 2 comments

  1. Steven

    Very accurate article. It does not seem possible IBM left the region shattered, but , growth slowed to near zero which has helped protect much of the forests and farmland of the Hudson Valley from development. Definitely not an Easter place to make a living especially with high costs of taxes and heating etc.

  2. Atlas Mugged

    Hercules was assigned seven tasks, one of which was to clean out the Augean stables.
    That’s why the horse bolted, real property taxes for the plutocracy are stable.

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