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Regional economy shifts

The regional economy is shifting away from the production of goods and toward higher skilled jobs, increasing wage inequality.

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William C. Dudley, president, Federal Reserve Bank of New York

That was the take-away from an economic press briefing given by Federal Reserve Bank of New York president and CEO William Dudley this week. The New York Fed covers New York, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands.

“Since the early 1980s, wages have increased more rapidly for workers toward the top of the income distribution than for the median worker, and much more rapidly than for workers toward the bottom of the distribution,” Dudley said.

Demand has been particularly high for knowledge workers, resulting in strong wage growth in certain sectors, Dudley explained.

“All told, the forces of technological change and globalization have contributed to wage inequality by pushing up wages for those toward the top, and stifling wage growth for workers toward the middle and bottom of the wage distribution,” he added.

The good news is, when measured against metro areas nationwide, Rochester, Buffalo and Syracuse are among the most equal when it comes to wage distribution. The bad news? That lack of wage inequality likely is because job growth has been stagnant in the region for some time.

Job growth in the Fed’s second district has remained strongest in and around New York City, while there has been little growth in most of Upstate New York, said the Fed’s research officer Jaison Abel. Across New York, the health and education services sector has seen the most growth in employment, Abel noted.

Using 2013 regional employment as a base, Abel noted that nationally, total employment has increased some 2 percent annually. Downstate businesses have exceeded that pace, while upstate employment growth was roughly half the national average and this year has flattened.

Rochester, like Buffalo, has seen little or no growth in jobs over the last 12 months, Abel said.

“The least unequal places tend to have lackluster wage growth across the board, due in large part to weak demand,” Abel said, noting most metro areas in Upstate New York fall into this category.

He also pointed to that since the 1980s, skilled workers have increasingly moved to large metro areas that offer urban amenities and higher wages, changing the composition of the workforce in some areas.

“Inequality reflects impediments to people reaching their potential,” Dudley said at the briefing. “These include limits on access to education, credit, transportation and housing. Such impediments may discourage workers from investing in themselves and may lead some to drop out of the labor force.”

Dudley suggested an improvement in the quality of education for the most vulnerable citizens as a step toward wage equality.

“Children who attend better schools and attain higher levels of education have more favorable long-term outcomes, including better job prospects and higher earnings,” he said.

Workforce development is another key policy area that can improve economic mobility and reduce inequality, Dudley added.

“Because of the swift pace of economic change driven by advances in technology and globalization, we ought to step up efforts to help workers build the skills necessary to adapt to change,” Dudley said. “This means providing these types of services at the local level.”

Efforts should include innovative workforce development programs, coursework and certifications in key, in-demand skills and fostering partnerships between higher education institutions and local employers, he said.

“Here, I would point to Monroe Community College in Rochester as a model of successful collaboration with employers to create job-training programs that align with current employment opportunities,” Dudley said.

Follow Velvet Spicer on Twitter: @Velvet_Spicer

(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email madams@bridgetowermedia.com.

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