Archive for July 2014

Where have all the good-paying jobs gone? – By George J. Marlin

July 25, 2014

The following appears in the July 18-24 2014 issue of the Long Island Business News:

If one listens to elected officials, especially Gov. Andrew Cuomo, one would think New York’s economy and job market are chugging along at high speed.

Sadly, this is not the case. In 2013, New York’s GDP ranked 46th among the 50 states, growing only 0.7 percent, the smallest rate of increase in four years. In 2010, the rate of growth was 2.7 percent; in 2011, it was 1.2 percent and in 2012 it was 1.7 percent.

And 2013’s anemic economic results also include billions of dollars in post-Sandy reconstruction spending, particularly on Long Island.

While the median income in the metropolitan region, which includes Long Island, is about $63,000, the Fiscal Policy Institute reported in December that median family income adjusting for inflation declined slightly in 2012 and is $3,800, or 6.5 percent, below the 2008 level. Wages for the state’s 9 million workers, after factoring inflation, declined 4.4 percent between 2010 and 2013.

Forbes economist Joel Kotkin has observed that while Wall Street and the investor class have been on a bull run, “the economy has been, at best, torpid for the vast majority of the population.”

The fact is that since the recovery began, a larger-than-usual portion of New York job growth has been in low-paying service sectors where annual salaries average $25,000. Higher-paying middle-class jobs, particularly in the finance sector, aren’t coming back to pre-2008 levels.

The Economic Policy Institute reported earlier this year that one in 10 New York City workers are now in low-wage jobs, with 37 percent of all wage-earners earning less than $15 an hour.

Nassau and Suffolk counties are, fundamentally, in the same employment boat.

Now, it’s true that Long Island’s recovery has been outpacing the rest of the state, and that this region has not only gained back all the jobs it lost in 2008 but has added about 40,000 more. Nevertheless, almost half the 30,000-plus jobs created on Long Island in 2013 were in the low-wage retail and dining sectors.

“The manufacturing and defense jobs that once defined the region,” according to The Wall Street Journal, “aren’t likely to return after being trimmed during the most recent recession.”

According to the L.I. Index, since 2008, the largest losses in employment are occurring in sectors with the highest average wages. Long Island has lost 10 percent of its manufacturing jobs and 16 percent of its construction jobs. During the same period, finance employment has dropped 4.3 percent, insurance employment has fallen 7 percent and communication service jobs have also declined 7 percent.

Another indication that all is not well is the 9 percent decline in Nassau’s sales tax revenues versus the first six months of 2013. If this trend continues, it could mean layoffs in the retail sector and severe cutbacks in county services and employment – not to mention significant tax increases.

Why do the best-paying jobs continue to decline? The president of the Business Council of New York State blames the state’s tax climate – universally recognized as a problem, but always contentious whenever someone suggests tax reform.

Brian McMahon, executive director of the state’s Economic Development Council, agrees.

“New Yorkers shoulder the highest state and local tax burden in the country,” McMahon says. “The states that are growing fastest are those states with relatively low taxes.”

Yes, contrary to the happy talk of our political class, New York’s economy, particularly on Long Island, remains very fragile. And the fault lays at the feet of these pols. Study after study indicates that high taxes, onerous regulations and other mandates they’ve imposed have frightened away industries that create higher-paying middle-class jobs.

Advertisements

Casinos, VLTs can’t fix unfunded mandates – By George J. Marlin

July 9, 2014

The following appears in the July 4-10, 2014 issue of the Long Island Business News:

In 2010, Gov. Andrew Cuomo promised taxpayers he would help municipalities and school districts lighten tax burdens by “undertaking a comprehensive review of [unfunded] state mandates and state laws that otherwise limit the ability of school districts and localities to contain costs.”

Mandates imposed by Albany have been driving many local governments to the brink of insolvency. For instance, Erie County officials told The New York Times their entire property tax levy goes to pay the most costly state mandate: Medicaid. All the revenue is gone, they complained, before the county pays for libraries or snow plows or roads.

Failing to fulfill his promise, Cuomo tried to change the subject by supporting a ballot measure approved by voters last November to permit casino gambling and legislation that expands video lottery terminals in Nassau and Suffolk counties. Approval of these measures, Cuomo insisted, would lower property taxes, create jobs and increase aid to public schools.

Despite the governor’s claims, there’s a consensus among economists that gambling emporiums will not be the panacea for all municipal ills.

Gambling competition in the region – New York, Pennsylvania, New Jersey, Connecticut and Massachusetts – has become so intense that casinos are failing. In New Jersey, the Atlantic Club closed its doors in January, the Revel has filed for bankruptcy and the Showboat, which employs 2,100 people, announced last week that it’s closing its doors Aug. 31.

New York faces serious problems before casino building plans get off the drawing boards. Recently, two developers canceled plans to bid for casino rights in economically depressed Sullivan County because the more affluent Orange County – which is closer to NYC – is also eligible to compete for a gambling license.

The New York Post reported that “the mere prospect of a casino in Orange County makes it impossible to get financing for a gambling resort in Sullivan County, which has been waiting 40 years for one.”

There’s more bad news. In May 2014, Comptroller Thomas DiNapoli released a 34-page report, “Trends in N.Y.S. Lottery Revenues and Gaming Expansions,” which concluded, “The projected new revenues from casinos, VLT expansions and payments by Native American [casinos] would add slightly less than half a percentage point to the state’s existing non-federal receipts. The permanent jobs projected to be created by new casinos constitute a small addition to the more encompassing broader strategy needed to [strengthen] the Empire State economy especially in struggling upstate communities.”

DiNapoli’s excellent analysis gives a slew of reasons why taxpayers should not have high hopes – the key one being that most gambling revenue will not come from out-of-state tourists but in-state residents.

Let’s face it; most rich people who fly to New York from London or Paris to shop on Fifth Avenue are not going to jump into a limo to travel to a Sullivan County Casino or a Suffolk County VLT.

If most gaming customers are local folks, then, “such activity primarily represents substitution of gambling losses for other consumer purchases rather than net new business,” according to DiNapoli’s report. In other words, instead of disposable income being spent in neighborhood restaurants or cinemas, it will be squandered at a betting parlor.

And then there are the social costs. Studies show that a significant number of locals who gamble at gaming parlors close to home can least afford it. They are seniors on fixed income and low-income workers risking their rent and food money.

Also, state and local governments will have to allocate more tax dollars to publicly funded problem gambling programs. Presently, about 5 percent of New Yorkers suffer from problem gambling and about 28 percent of them have experienced a substance abuse disorder. As casinos and VLTs become more accessible, expect these numbers to rise.

Don’t believe politicians who insist gambling – in whatever form – will be a fiscal game-changer for our local governments. Only genuine unfunded mandate relief will begin to help lessen the burden on New York’s taxpayers.