New York, The Silicon City

By Michael Mandel, The New York Times |  Jan 07, 2014

The New York Times

For all the talk of New York’s “tale of two cities” economic divide, last week Mayor Bill de Blasio took charge of a local economy that has far outperformed the rest of the country since the financial collapse — and not just in a small corner of Manhattan, but across the city. Driven by the expansion of the technology and information sector, New York City today has more private-sector jobs than during the 2007-8 peak of the finance-driven boom years.

New York has, over the last decade, become a tech city to rival San Francisco, Boston and Seattle. And it has done so by moving away from its old reliance on the finance and legal sectors, and the industries like hospitality that rely on them. The challenge for Mr. de Blasio is continuing that trend, and making sure all New Yorkers benefit from it. Mr. de Blasio’s predecessor, Michael R. Bloomberg, can justifiably boast about New York’s rise to prominence as a “digital city.” On his watch, the technology and information sector has become the city’s second-most-powerful economic engine, after financial services. New York now has 10 percent of the country’s jobs in the “Internet publishing and web search portal” industry, up from just over 6 percent in 2007.

Surprisingly, over the past couple of years, the city’s minority populations have been among the main beneficiaries of this boom. Since 2010, the number of blacks working in computer and mathematical occupations — the Census Bureau’s term for tech-related jobs — in the city has risen by 19.7 percent, based on a preliminary analysis of new census data.

Over the same stretch, the number of Hispanics in such occupations in New York City has risen by 25.4 percent. By comparison, non-Hispanic whites in computer and mathematical occupations experienced just a 6.4 percent gain since 2010.

The rapid growth of minorities in New York tech jobs reflects, in part, the soaring number of tech degrees earned by minorities in recent years. For example, bachelor’s degrees in computer and information sciences granted to Hispanic students have risen by more than 40 percent nationally over the past three years, according to data from the National Center for Education Statistics. That supply is then sucked up by the tightness of the city’s technology and information labor markets, which has forced local employers to reach out beyond the usual sources.

The boom has also produced benefits across all five boroughs: Private-sector jobs in the outlying boroughs rose by 9 percent from mid-2008 to mid-2013, while private-sector jobs in Manhattan are up only 3 percent over the same stretch. This pattern is the reverse of the financial boom years, when Manhattan generated jobs at a much faster pace than the rest of the city.

Moreover, despite worries that the city has not yet spawned a Google or a Microsoft, New York’s strength as a digital city continues to grow. Based on data from the Conference Board, an analysis by the Progressive Policy Institute shows that ads for computer and mathematical jobs in New York rose by 6.8 percent in the first 11 months of 2013 compared with a year earlier, and compared with just 4.0 percent nationwide.

Instead, the true weakness in the city’s economy right now lies in the leisure and hospitality industry, which employs almost 400,000 workers in the city. The number of jobs has been rising, but real pay has fallen, perhaps because of continuing weakness in the financial and legal sector, which generates so much demand for hotels and restaurants. These real wage declines undercut gains in the rest of the local economy.

What lessons does this have for the new mayor? New York’s gains came, in part, from the aggressive efforts of the Bloomberg administration to stimulate the technology and information sector. These included funding tech incubators; the “Made in NY” marketing campaign to support small tech companies; the rapid extension of broadband access across the city; the city’s broad-reaching Open Data initiative, which makes city data available to the public and software developers; and the selection of Cornell and Technion, the Israel Institute of Technology, to open a huge new campus on Roosevelt Island.

To achieve the laudable objectives laid out in his inaugural speech, most notably narrowing the income gap, Mr. de Blasio should continue these policies. The technology and information boom needs to be encouraged: It is creating jobs for all corners of the city and helping to reduce the excessive dependence on finance and real estate. That should make the city’s economy — and tax revenues — less volatile in the future.

In his inaugural address, Mr. de Blasio correctly pointed to the need for better education for all New York children. That, too, needs to be part of a continued tech-centric agenda: to improve schools and maintain the city’s tech advantage, the new mayor also must ramp up the attention to tech and related fields in the city’s schools. The main path to reducing inequality and broadening the city’s prosperity will be better education and training to help New Yorkers prepare for the jobs of the future, and if Mr. de Blasio successfully addresses that issue, his legacy as a great mayor will be secure.

Michael Mandel is the chief economic strategist at the Progressive Policy Institute and president of South Mountain Economics, an economic analysis firm. This article originally appeared in The New York Times.

This article originally appeared in the New York Times publication. Content was produced by outside parties not affiliated with Bank of America. Opinions or ideas expressed are not necessarily those of Bank of America, Merrill Lynch Wealth Management, U.S. Trust or Bank of America Merrill Lynch, nor do they reflect their views or endorsement. These materials are for informational purposes only. Bank of America, Merrill Lynch Wealth Management, U.S. Trust and Bank of America Merrill Lynch do not assume liability for any loss or damage resulting from anyone's reliance on the information provided.

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