Despite appeal of NY,
job growth slumps

Just three years ago, Keith Wilson and his wife were living what most people would consider to be the good life in Hermosa Beach, Calif., a waterfront suburb of Los Angeles known for its exquisite sunsets.

He had a good job with a dynamic bank, a manageable commute by Southern California standards of about 40 minutes and, of course, warm, sunny weather 12 months a year.

Then he packed up and moved to the Rochester area to become the chief financial officer of PAETEC, a fast-growing telecommunications company.

"When I tell people back there that we had 10 feet of snow last year, but lost out on the Golden Snowball Award (for most snow for an upstate city) to Syracuse, they just shake their heads," Wilson said.

They are still no fans of upstate winters, but Wilson and his wife, Betsy, enjoy going to the Rochester Philharmonic Orchestra, snowshoeing and living in a 3,000-square foot house — double the size of what they had in California for less money — and a 10-minute commute from his Victor home to PAETEC's Fairport offices. They consider the area an ideal place to raise their two children, ages 2 and 5 months.

Wilson's tale qualifies as a man-bites-dog story because New York annually loses tens of thousands of people, many of them young professionals like Wilson, to Sun Belt locations and the companies, many of them refugees from upstate winters, that have relocated there.

Many of those who have stayed or moved to upstate New York in particular cite special circumstances — ties to a family, a pool of workers skilled in a specific area or a love for the outdoors. Few say they come because of the state's economic climate.

Some optimism

For the year that ended Sept. 30, New York's rate of job growth, 0.7 percent, was only half that of the nation as a whole. For upstate, jobs barely budged in that period, up just 6,500, or 0.2 percent.

Between 1990 and 2003, the figures are even more stark. New York added about 192,000 jobs in that period, a growth rate of 2.3 percent. That's only about one-eighth of the national growth rate in that period. In other words, if New York had added jobs at the same pace as the rest of the country in that period, 1.5 million more New Yorkers would be employed now.

But Wilson's experience, along with those of thousands of others, show why the economic landscape of the state is not all bleak, and that people who are optimistic about the state's economic future are not irrational.

Officials of PAETEC, whose sales are expected to top $500 million this year after only seven years of operation, and other companies that are doing well say they are thriving, despite what most see as the state's difficult economic climate — chiefly, high taxes and other costs of doing business, like workers' compensation, liability insurance and energy. To truly succeed, they say, the state needs to get those costs, now among the highest in the country, more in line with other states.

"We have to cut taxes and energy costs to create jobs," said Arunas Chesonis, president and founder of PAETEC.

Still, in the current climate, it's possible to find someone who has moved to New York for economic opportunity after working in, of all places, North Carolina, which has been luring away New York companies and workers for decades.

'More of a future'

Tom Biggart, 47, is the manufacturing supervisor for Fala Industries, a precision machine shop in Kingston that does between $5 million and $10 million in annual sales.

Biggart had worked in Sanford, N.C., for two years in a factory, repairing injection molds for plastics. But his company decided to close that operation and consolidate in another facility in the western part of the state, where costs are lower.

"The injection-mold industry is declining," he said. "I was looking to get into something more technical. There's more of a future here."

He figures it's about 12 percent more expensive to live in Kingston — everything from rent to fast food costs more, he said, but the salary increase more than makes up for it.

Fala, which has 48 workers, can afford to pay him more because "we have a really skilled work force," said Frank Falatyn, Fala's president. "We do all precision work. We can compete on technology and small-quantity production." Production workers are paid from $9 to $12 an hour, skilled workers from $19 to $22 an hour and engineers from $60,000 to $80,000 a year.

Fala has done well by finding market niches, including producing more resilient bearings that are used for robots that help assemble semiconductors.

To some degree, the state's economic problems are self-correcting.

For example, Falatyn said markets for his products increased dramatically because engineers laid off in the early 1990s by IBM dispersed across the country. Many were familiar with Fala's products, and persuaded their new employers to do business with the small Kingston outfit.

For PAETEC, a key reason it's in Rochester is all of the talent available because of layoffs at Eastman Kodak and other large companies, Chesonis said.

"Because of downsizing, we're getting people with five, 10, 20 years of experience at half the cost (of what they could command in salary elsewhere). And we don't have to put them through a lot of training," he said. "If it wasn't for the talent pool, we would not be here."

Then there's Con Med, a Utica-based manufacturer of medical devices that employs 1,200 people in Oneida County. The area has been depressed for years, but that has driven down the cost of both labor and space, said Joseph Corisanti, Con Med's chief executive officer.

"There's a strong work force in the Oneida County area," Corisanti said. "They have been trained by GE and Lockheed Martin. Now we're getting these people."

The company also employs about 300 recent immigrants from Bosnia, Russia and Cambodia who make between $7 and $14 an hour.

"We have good quality employees at good labor rates — it's cheaper than Denver, Santa Barbara or Tampa," he said, referring to other areas where the firm has manufacturing facilities. And real estate is much cheaper.

Success despite climate

Maybe an even more important factor for the successful New York companies is home-grown leadership that has decided to accept the fact that it's expensive to do business in this state, but stay anyway.

John Sammon is a Buffalo native, but came to love the Adirondacks while stationed at Rome Labs in Oneida County during his tour of duty in the Air Force in the 1960s. Now he is an avid kayaker and downhill skier, as well as president of Par Technology, a $140-million-a-year business that employs about 550 people in Oneida County that he helped launch more than 35 years ago.

"I get phone calls and letters all the time" from recruiters from other states, he said, but he's not been tempted to move.

"We could squeeze out a few more bucks elsewhere, but it's not worth it," he said, as an early season snow squall whitened cars in the company parking lot. "At the end of the day, it was a family thing."

His company manufactures electronic cash registers in use at fast-food outlets. The quality work force is the key to making reliable machines, Sammon said, and that helps to offset New York's handicaps.

"We put up with the taxes and other high costs," he said. "We don't enjoy it. We endure it."

"We do business in spite of the economic climate, not because of it," echoed Richard Kaplan, president of Pictometry, an 87-employee Rochester-area firm that provides three-dimensional aerial photographs to governments, fire departments and real estate brokers, among other clients. He predicted it would grow to 1,000 workers in five years.

Kaplan said he has also frequently been approached by three or four states in the past two years to move to where costs are lower.

"The reason we don't is this is home," he said. "I love Rochester and New York state. To me, it's the quality of life."

A tug to come home

Such homegrown loyalty is less important in New York City's northern suburbs, where the continued dominance of New York City in the securities, media and fashion industries, as well as the dispersal of some businesses out of Manhattan after the Sept. 11, 2001, terrorist attacks, has kept the economy strong.

For example, Intercos, an Italy-based cosmetics manufacturer, moved into a vacant Sony factory in Congers three years ago, mostly to be close to its customers in Manhattan.

"We decided about five years ago that the only way to increase our penetration in the New York market was to be here," company spokesman Ann Hayden said.

Hayden said the Rockland County location is close enough to Manhattan so customers, who work with Intercos to develop new cosmetics, can easily get to the plant.

Still, the company required a batch of tax breaks, including reductions on property taxes, to clinch the deal.

Hayden said there have also been "challenges," including finding manufacturing workers (whose salaries she wouldn't disclose) who can afford to live close to the plant. She said the company has leaned heavily on temporary-labor agencies.

That's not a concern through most of upstate, where rents and real estate are often a small fraction of what they are in the metropolitan area while jobs are far more scarce.

The charm of upstate can prove irresistible, even to those who earn a living elsewhere.

In 1988, Martin Babinec, a native of the small Herkimer County city of Little Falls, started a business in California, TriNet, that provides payroll, personnel and other services to high-tech companies, many of them in the Silicon Valley. It has since grown to a $40 million business with 200 employees.

Yet even as his business was prospering, he felt a tug to move back home. He now lives with his wife and three children in a restored Victorian home overlooking a park in downtown Little Falls, and does much of his work long distance, traveling between nine and 11 days a month to tend to his business in person.

"There's just not much sense of community in the Bay Area," he said. More people are transients, most families have two full-time wage earners, and commutes as long as two hours give many people little time for interaction with others outside of work, he said.

He would like to have a life more like that of Keith Wilson, the PAETEC official who used to live and work in California but now lives and works upstate.

"Would I like to do business in upstate New York?" Babinec said. "Absolutely."

But in Babinec's situation, he knows that's not likely to happen soon, and that government policies have to change to make the state friendlier to business.

Otherwise, he said, children will continue to grow up, go to school — and then leave New York.

"No parent wants to see that happen," he said.