The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal CONDITIONS AND PROSPECTS IN THE UPSTATE ECONOMY Richard Deitz, Federal Reserve Bank of New York [email protected]June 25, 2009
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The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
CONDITIONS AND PROSPECTS IN THE UPSTATE ECONOMY
Richard Deitz, Federal Reserve Bank of New [email protected] 25, 2009
Employment Trends
2FEDERAL RESERVE BANK OF NEW YORK Source: U.S. Bureau of Labor Statistics and Moody’s Economy.com
9Source: Federal Housing Finance Agency and Moody’s Economy.comFEDERAL RESERVE BANK OF NEW YORK
3.2% #4
4th Highest Growthin the Country
Summary
• Upstate New York, like many mid-sized economies, has fared reasonably well during the recession
• Risks going forward: Renewed manufacturing weakness Public sector job loss, particularly in Albany State and local budget cuts
• Growth likely to remain slow in upstate New York; human capital is very important to the region’s long-term prospects
10FEDERAL RESERVE BANK OF NEW YORK
The Importance of Regional Human Capital and
the Higher Education Industry
Why is Human Capital Important to a Region?
• Higher levels of human capital increase the productivity of individuals
• Individuals with the same levels of human capital are more productive in regions where their peers have more human capital
• Higher levels of human capital are associated with faster regional growth Between 1980 & 2000, metro areas where:
- less than 10% had college degrees, population growth averaged 13%- more than 25% had college degrees, population growth averaged 45%
12FEDERAL RESERVE BANK OF NEW YORK
0%
10%
20%
30%
40%
50%
60%
13Source: 2006 American Community Survey
Boston (45%)
Rochester (32%)
Buffalo (28%)
Flint (15%)
Per
cen
t (2
5+)
wit
h B
ach
elo
r’s
Deg
ree
or
Hig
her
60%
50%
40%
30%
20%
10%
0% MSA Rank
Albany (35%)
Syracuse (29%)
FEDERAL RESERVE BANK OF NEW YORK
Variation in Human Capital StockDistribution of Human Capital Stock in U.S. Metro Areas, 2006
Percent
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
0 10 20 30 40 50 60
Source: U.S. Bureau of Economic Analysis, U.S. Bureau of the Census and Moody’s Economy.comNote: The BEA and Census data are both for the 2007 year. 14FEDERAL RESERVE BANK OF NEW YORK
Higher Levels of Education Associated with Greater WealthCorrelation Between Human Capital and Income Per Capita
Per Capita Personal Income
College Degree (% of 25+)
BuffaloSyracuse
New York CityBoston
AlbanyRochester
El Centro CA
Boulder CO
The Higher Education Industry
16Source: IPEDS
Boston
Dallas
San Francisco
Minneapolis
Los Angeles
Chicago
Washington D.C.
Philadelphia
San Diego
59,032
30,603
31,604
31,315
89,311
68,321
48,525
45,986
25,905
New York 143,971
Rank Metro Area Degrees
4.
9.
7.
8.
2.
3.
5.
6.
10.
1.
Syracuse
Glens Falls
Albany
Rochester
Binghamton
Utica
9,736
0
12,771
11,836
3,507
1,658
Buffalo 13,927
51.
267.
32.
36.
123.
176.
26.
Rank Metro Area Degrees
Jamestown 1,240193.
54,675Upstate Metro Areas
FEDERAL RESERVE BANK OF NEW YORK
Top Producers of Human CapitalDegrees Produced (BA or higher), Top 10 and Upstate NY, 2006
0
10
20
30
40
50
60
70
80
90
-15 -10 -5 0 5 10 15
17
Hu
man
Cap
ital
Pro
du
ctio
n R
ate
State College PA
Bloomington IL
Bryan-College Station TX
Iowa City IAGainesville FL
Athens GA
Austin TX
Wilmington
Sante Fe NM
Syracuse
New York
Albany
Rochester
Buffalo
Net ImportersNet Importers
Albany
New YorkRochester
-15 -10 -5 0 5 10 15
Change in Human Capital Stock Rate
80
70
60
50
40
30
20
10
Glens Falls
Net ExportersNet Exporters
90
0
FEDERAL RESERVE BANK OF NEW YORK
Human Capital is Highly MobileRegional Flow of Human Capital, 2000 - 2006
Percent
Source: Unpublished Paper, “The Higher Education Industry and the Stock of Local Human Capital,” Jaison Abel and Richard Deitz, Federal Reserve Bank of New York
18
Local Human Capital Production
National Human Capital Production
NationalLabor Market
LocalLabor Market
Local Human Capital Stock
LocalGrads
Non LocalGrads
Labor Supply Labor Supply
Labor DemandLabor Demand
Stayers
In-Migrants
Out-Migrants
External
Knowledge
Spillovers Local human capital stock reflects local labor market
structure
FEDERAL RESERVE BANK OF NEW YORK
How Does the Higher Education IndustryRaise Human Capital Levels in a Region?
19
% with BA 76.376.173.566.963.260.258.854.451.348.8
23.619.415.512.3
8.86.86.26.15.95.45.1
26.4
Life, Physical, and Social Science Legal Education, Training and Library Community and Social Services Computer and Mathematical Architecture and Engineering Business and Financial Operations Healthcare Practitioners and TechniciansArts, Design, Entertainment, Sports, & Media Management
Sales and Related Protective Service Office and Administrative Support Personal Care and Service Healthcare Support Installation, Maintenance, and Repair Production Transportation and Material Moving Food Preparation and Serving Related Construction and Extraction Building & Grounds Cleaning, Maintenance
TOTAL AMONG ALL OCCUPATIONS
High Human Capital
Low Human Capital
FEDERAL RESERVE BANK OF NEW YORK
What are the High Human Capital Occupations?
20
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
Production
Business & Financial OperationsLegal
Management
Office and Administrative SupportBuilding & Grounds Maintenance
Community & Social ServicesPersonal Care & Services
Food Preparation & ServingArts & Entertainment
Computer & MathEducation (Teaching) & LibraryLife, Physical, & Social Science
Healthcare Practitioner & Technical
Architecture & EngineeringTransportation & Material MovingProtective ServicesInstallation, Maintenance, & RepairConstruction & ExtractionSalesHealthcare Support
FEDERAL RESERVE BANK OF NEW YORK
Change in the Share of Jobs in Each Occupation Group (Percent)
Greater Higher Education ActivityAssociated With More High Human Capital Jobs
Source: Unpublished Paper, “The Higher Education Industry and the Stock of Local Human Capital,” Jaison Abel and Richard Deitz, Federal Reserve Bank of New York
An Increase in Higher Education Activity Leads to . . .
Personal Care & ServicesCommunity & Social Services
Business & Financial OperationsArts & Entertainment
Life, Physical, & Social ScienceManagement
LegalArchitecture & Engineering
Computer & Math
FEDERAL RESERVE BANK OF NEW YORK
Change in the Share of Jobs in Each Occupation Group (Percent)
Source: Unpublished Paper, “The Higher Education Industry and the Stock of Local Human Capital,” Jaison Abel and Richard Deitz, Federal Reserve Bank of New York
Producing More MajorsHas Largest Impact in Technical Fields
Producing More Majors in Each of These Fields Leads to . . .
22
-20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0%
ProductionHealthcare SupportFood Preparation & ServingCommunity & Social Services
Transportation & Material MovingHealthcare Practitioner & TechnicalInstallation, Maintenance, & RepairSales
Office and Administrative SupportProtective Services
Management Arts & Entertainment
Architecture & EngineeringLegal
Business & Financial OperationsLife, Physical, & Social Science
Computer & Math
FEDERAL RESERVE BANK OF NEW YORK
Higher Research Expenditures AssociatedWith Increase In Technical Fields
Change in the Share of Jobs in Each Occupation Group (Percent)
Source: Unpublished Paper, “The Higher Education Industry and the Stock of Local Human Capital,” Jaison Abel and Richard Deitz, Federal Reserve Bank of New York
Higher Research and Development Spending Leads to . . .
Our Research Findings Suggest:
• In contrast to conventional wisdom, locally produced graduates are not a likely source of differences in human capital levels across regions
• The positive relationship between higher education activity and a region’s human capital stock is driven more by demand (via knowledge spillovers) than supply (via local graduates)
• The presence of colleges and universities tends to tilt a metro area’s occupational structure toward higher human capital activities
• Knowledge created at universities and spread into the local economy fosters development in technical sectors
23FEDERAL RESERVE BANK OF NEW YORK
What These Results Imply for Policy
• Generic supply-side retention strategies unlikely to be effective at increasing local human capital levels
• Targeting the demand side of labor market can increase human capital stock through both attraction and retention
• Higher education research activity, particularly in technical fields, provides a promising pathway to increase local human capital and foster long-term economic development