Lee S. Ainslie, IIIManaging Partner, Maverick CapitalAjay S. BangaPresident & CEO, MasterCard WorldwideDavid Barger, President & CEO,JetBlue Airways CorporationCandace K. BeineckeChair, Hughes Hubbard & Reed LLPFrank A. Bennack, Jr.Executive Vice Chairman & CEO,Hearst CorporationStephen Berger, Chairman,Odyssey Investment Partners, LLCWilliam H. BerkmanManaging Partner, Associated Partners, LPMark T. BertoliniChairman, CEO & President, Aetna Inc.Jeffrey L. BewkesChairman & CEO, Time Warner Inc.Leon BlackFounding Partner, Apollo Management, L.P.Michael W. BlairPresiding Partner, Debevoise & Plimpton LLPLloyd C. BlankfeinChairman & CEO, Goldman Sachs & Co.Jeff T. Blau, Chief Executive Officer,The Related Companies, L.P.Kathy Bloomgarden Chief Executive Officer, Ruder Finn, Inc.Glenn A. BrittChairman & CEO, Time Warner Cable Inc.Tory BurchChief Executive Officer, Tory Burch LLCKevin BurkeChairman, President & CEO, Con EdisonKenneth I. ChenaultChairman & CEO,American Express CompanyH. Rodgin CohenSenior Chairman, Sullivan & Cromwell LLPStephen J. Dannhauser, Former Chairman,Weil, Gotshal & Manges LLPPhilippe P. DaumanPresident & CEO, Viacom Inc.Anthony J. De Nicola, Co-President,Welsh, Carson, Anderson & StoweJames DimonChairman & CEO, JPMorgan Chase & Co.Irene M. DornerPresident & CEO, HSBC Bank USAJoseph J. Echevarria, Jr.Chief Executive Officer, Deloitte LLPRoger W. FergusonPresident & CEO, TIAA-CREFLaurence D. FinkChairman & CEO, BlackRock, Inc.Alan H. FishmanChairman, Ladder Capital Finance LLCJay S. FishmanChairman & CEO,The Travelers Companies, Inc.Mark T. GalloglyManaging Principal, Centerbridge PartnersJames P. GormanChairman & CEO, Morgan StanleyBarry M. GosinChief Executive Officer,Newmark Grubb Knight FrankJonathan N. GrayerPresident & CEO, Weld North LLCRobert GreifeldChief Executive Officer,The NASDAQ OMX Group, Inc.Gerald L. HassellChairman & CEO, BNY MellonGlenn H. Hutchins, Co-CEO, Silver LakeKenneth M. JacobsChairman & CEO, Lazard LtdJill KaplanPublisher, Crain’s New York BusinessGeorge S. KaufmanChairman, Kaufman OrganizationCharles R. KayeCo-President, Warburg Pincus LLCKlaus Kleinfeld, Chairman & CEO, Alcoa Inc.Henry R. Kravis, Co-Chairman & Co-CEO,Kohlberg Kravis Roberts & Co.William P. Lauder, Executive Chairman,The Estée Lauder Companies, Inc.Rochelle B. LazarusChairman Emeritus,Ogilvy & Mather WorldwideRichard S. LeFrakChairman & CEO, The LeFrak OrganizationMartin Lipton, Senior Partner,Wachtell, Lipton, Rosen & KatzTerry J. LundgrenChairman, President & CEO, Macy’s, Inc.Howard W. LutnickChairman & CEO, Cantor Fitzgerald L.P.Bridget A. Macaskill Chief Executive Officer, First EagleInvestment Management, LLCVikram MalhotraChairman of the Americas,McKinsey & Company, Inc.Joel S. MarcusChairman, CEO & Founder,Alexandria Real Estate Equities, Inc.Theodore MathasChairman, President & CEO,New York Life Insurance CompanySherilyn McCoyChief Executive Officer, Avon Products, Inc.Bill McDermottCo-Chief Executive Officer, SAP AGHarold McGraw, IIIChairman, President & CEO,The McGraw-Hill CompaniesEric M. MindichChairman & CEO, Eton Park CapitalManagement, L.P.Edward J. MinskoffPresident, Edward J. Minskoff Equities, Inc.Thomas MontagCo-Chief Operating Officer,Bank of America CorporationDeanna M. MulliganPresident & CEO, Guardian Life InsuranceCompany of AmericaK. Rupert MurdochChairman & CEO, News CorporationDuncan L. NiederauerChief Executive Officer, NYSE EuronextRichard D. ParsonsSenior Advisor, Providence Equity PartnersJohn Paulson, President, Paulson & Co., Inc.Charles E. Phillips, Jr.Chief Executive Officer, InforPeter J. Powers, Chairman & CEO,Powers Global Strategies, LLCIan C. ReadChairman of the Board &Chief Executive Officer, Pfizer Inc.James D. Robinson, IIICo-Founder & General Partner, RRE VenturesJulio E. Rojas, Chief Executive Officer,Americas, Standard Chartered BankWilbur L. Ross, Jr.Chairman & CEO, WL Ross & Co. LLCMichael I. RothChairman & CEO, Interpublic GroupSteven Roth, Chairman, Vornado Realty TrustHoward J. RubensteinPresident, Rubenstein Associates, Inc.Mitchell E. RudinPresident & CEO, U.S. CommercialOperations, Brookfield Office Properties Inc.William C. Rudin, CEO & Vice Chairman,Rudin Management Company, Inc.Pete RueggerPartner, Simpson Thacher & Bartlett LLPKevin P. Ryan, Chairman, Gilt GroupeLinda S. Sanford, Senior Vice President,Enterprise Transformation, IBM CorporationStephen A. SchwarzmanChairman, CEO & Co-Founder,The Blackstone GroupJerry I. SpeyerChairman & Co-CEO, Tishman SpeyerMark A. Standish, President & Co-CEO,RBC Capital Markets, LLCFrederick O. TerrellVice Chairman, Investment Banking,Credit SuisseMary Ann TigheChief Executive Officer,NY Tri-State Region, CBRE, Inc.James S. TischPresident & CEO, Loews CorporationJohn B. VeihmeyerChairman & CEO, KPMG LLPGeorge H. WalkerChairman & CEO,Neuberger Berman Group LLCChristopher J. Williams, Chairman & CEO,The Williams Capital Group, L.P.Robert WolfChief Executive Officer, 32 Advisors, LLCDeborah C. WrightChairman & CEO, Carver Bancorp Inc.Kathryn S. WyldePresident & CEO,Partnership for New York CityTim Zagat, CEO & Co-Chair, Zagat Survey LLCStrauss ZelnickChief Executive Officer,ZelnickMedia CorporationMortimer B. ZuckermanChairman & CEO, Boston PropertiesEx-OfficioWilliam C. Dudley, President & CEO,Federal Reserve Bank of New YorkDavid W. HeleniakSenior Advisor, Morgan StanleyStephen R. Howe, Jr.America’s Area Managing Partner,Ernst & Young LLPFounding chairmanDavid RockefellerPartnership for New York City — Board of Directors
2 Introduction 4 Executive Summary 10 Section 1 — New York City 2002–2012:Steady Growth in an Era of Turbulence 16 Section 2 — The Bloomberg Principles:Long-Term Vision and Data-Driven Management 24 Section 3 — The Decade Ahead:Vulnerabilities and Challenges 38 Section 4 — The Blueprint 58 Conclusion 61 Endnotes 68 Acknowledgements Contents
NYC Jobs Blueprint Partnership for New York City2Introduction
Partnership for New York City NYC Jobs Blueprint 3New York is the world’s premiere city of opportunity. It is the economic powerhouse thatsustains America’s position of leadership in the global economy and provides a universalgateway to the upward mobility that is uniquely possible in this country.Mike Bloomberg, New York’s first “businessman mayor” in more than a century, was unique-ly qualified to preside over the city’s successful transition to the New Millennium economy.No mayor of New York governs without any detractors. But Mike Bloomberg’s supportersand critics generally agree that his financial and political independence enabled his admin-istration to attract exceptional talent to city government, make decisions on the basis ofdata-driven analysis, and to undertake long-term, often visionary, planning and investment.At the end of this year, Bloomberg will leave the city far more energized and entrepreneurialthan he found it in 2001.This NYC Jobs Blueprint intends to lay the groundwork for the actions and partnerships thatlocal government, organized labor, the private sector and civic groups will need to under-take in order to maintain New York’s status as the pre-eminent city of opportunity over thenext decade. It focuses on the five pillars that support the contemporary urban platform foropportunity: more and better jobs; better educated and skilled workers; infrastructure thatprovides greater connectivity and accessibility; a safe and affordable living environment; andan efficient, disciplined and well-run city government.To prepare this Blueprint, the Partnership for New York City relied upon input from its mem-bers, who represent the city’s business leaders and private sector employers, as well as anumber of respected urban experts. It draws on information and analysis provided by theBrookings Metropolitan Policy Program and fact-based research and analytical support fromMcKinsey Company. Together, we took a deep dive into demographic and economic datathat has not been previously aggregated for comprehensive analysis. The result is a fresh lookat the trends and developments of the last decade and projections that suggest how thosewill play out over the next ten years.The incoming Mayor will encounter an economic and fiscal context that will be different and,in many respects, more challenging than the Bloomberg era. There will be more competitionfrom other cities and greater internal demands on City resources. There will likely be lessaid from Washington, DC and Albany. To cope with these pressures, the next generation ofmunicipal leaders will need to focus on what unites the diverse elements of the city, not whatdivides us.The aspirations of this plan are simple: a city economy that is growing in ways that generatemore high quality jobs and a broader tax base; an excellent, fully integrated system of edu-cation, workforce development and job placement; and a safe, affordable and productiveurban setting in which to live, work and build businesses.Terry J. LundgrenChairman, President CEOMacy’s, Inc.Co-ChairmanPartnership for New York CityLaurence D. FinkChairman CEOBlackRock, Inc.Co-ChairmanPartnership for New York CityKathryn S. WyldePresident CEOPartnership for New York City
NYC Jobs Blueprint Partnership for New York City4Executive Summary
Partnership for New York City NYC Jobs Blueprint 5A current snapshot of the New York City economy reveals a vibrant center ofcommercial activity, creative output, and innovation. Despite two recessions,a global financial crisis and the terrorist attack of 9/11, the economy isgrowing at an annual rate of 3%, outpacing that of the United States andmost developed countries. New York ranks as America’s safest big city, itstop tourist destination, and its second largest and fastest growing technologycluster outside of Silicon Valley. Population and private sector jobs numbersare at all time highs.The city has grown stronger as a result ofmore rigorous management of municipalservices and forward-looking investmentsin public infrastructure and amenities. Morethan 36% of the city’s land area has beenrezoned1and is ready to accommodatedevelopment of at least 80,0002newhousing units and 41 million square feet ofnew commercial space.3Columbia, NewYork and Cornell Universities are poised toinvest tens of billions of private capital insignificant institutional expansion, as aremany of the city’s nonprofit healthcare,research and smaller educational institutions.The financial services industry is still thecity’s economic engine and healthcare oneof its largest employers, but the economy isdiversifying at a fast pace. The most rapidlygrowing contributors to economic outputover the past decade are high-tech, creativeindustries and tourism, although their shareof the overall economy remains small. Thecity’s waterfront has been rediscoveredas an urban amenity. Neighborhoodsand secondary business districts acrossthe five boroughs are more vibrant andattractive than at any time in modern history,increasingly accessible by bikes, ferries andBus Rapid Transit. Brooklyn has emerged asthe borough of choice for a new generationof urbanites and both Lower Manhattan andthe Far West Side are being transformedinto model live-work communities.
NYC Jobs Blueprint Partnership for New York City6Recent history and trends, however, suggestthat the city’s economic strength andforward momentum cannot be taken forgranted. Despite an uptick in the past twoyears, population growth over the decadehas been weak. Unemployment is too high,as is chronic poverty. Less than a third ofpublic high school graduates are deemedcollege or career ready. Productivity—longthe essence of the city’s value propositionfor business—is falling behind competingbusiness locations. The city is losing bothupper and middle class families because ofhigh taxes and the rising cost of housing.Although the city is a hotbed of digitalstartups, few young companies are scalingup to more than 30 or 40 jobs in the city. Infact, over the last decade, there was no netincrease in the number of businesses em-ploying more than 50 people locally.4Risingcosts of living and doing business and a dif-ficult regulatory and legal environment arewearing on residents and employers alike.The next decade will bring more intenseglobal and domestic competition. Industriesthat anchor the economy—financial andprofessional services, media and technology,health and education, fashion and retail—are undergoing dramatic, often disruptivechange. Federal and state aid to the city isbecoming less certain, while the demandsfor public infrastructure investment andmunicipal services are increasing, puttingextraordinary pressure on the local tax base.This NYC Jobs Blueprint summarizes howthe city economy has developed through thelast decade and how the policies employedby the Bloomberg Administration wereused to achieve job growth and diversifiedeconomic activity across the five boroughs; itoutlines the challenges to continued growththat will confront the next Mayor; and,finally, it outlines a set of recommendationsfor collaborative actions that the public andprivate sectors might take to insure thatNew York remains a strong, inclusive city ofopportunity.The NYC Jobs Blueprint outlines a set of recommendations forcollaborative actions that the public and private sectors might take toinsure that New York remains a strong, inclusive city of opportunity.
Partnership for New York City NYC Jobs Blueprint 7Measures of Success: What the City Must Strive to Achieve by 2020Real GDP GrowthProductivity GrowthMiddle-wage Job CreationUnemployment ReductionSupporting rationaleThe “modest” aspiration matches SiliconValley’s productivity growth of 2.7% overthe past decade (2002–2011); 3.0% is theproductivity growth necessary to reach realGDP growth of 3.8% while maintainingemployment growth relatively in line withhistorical norms (0.8% per year would beneeded; New York City had 0.6% per yearemployment growth from 2002–2011).Supporting rationale4.6% was the low during the lastbusiness cycle (12/07–6/09), both forNew York City and for the U.S. as awhole; 4.2% was Silicon Valley’s lowduring the last business cycle (thelowest among peer U.S. cities).Supporting rationale61,000 jobs would restorethe number of middle-wagejobs to 2005 levels, 101,000jobs would restore to thepeak of middle-wage jobsin 2008.Recent historical trendRecent historical trendRecent historical trendModestModestModest (4.3%)3.0%4.2%+101,0002.7%4.6%+61,0001.1%9.5%-2.3%AmbitiousAmbitiousAmbitious (7.2%)% CAGR from2002–2011as of January 2013% CAGR from 2008–2011, 101,000 jobsJobs TargetJobs TargetReal GDP GrowthSupporting rationaleInternational peer cities (Shanghai,Singapore, Hong Kong, London, Toronto,Sydney, Paris and Berlin) have grownreal GDP at 3.4% per year over the pastdecade (2002–2011), and have grown at4.3% since the Recession (2009–2011);3.8% is roughly the mid-point of thesegrowth rates.Recent historical trendModest3.8%3.4%3.1%Ambitious% CAGR per year sincethe recession (2009–2011), up from 1.7% peryear over the decade(2002–2011)
NYC Jobs Blueprint Partnership for New York City8Obstacles to Business and Job Growth• High costs and a tough regulatory and legalenvironment make New York City the mostexpensive place in the country to build abusiness. Overall costs are 1.5 times the nationalaverage; office rent and electricity are doublethe national average.• New York City firms are not scaling up. Between2003 and 2010, New York City saw no netgrowth in the number of firms with 50 or moreemployees. Of the 220,000+ businesses inthe city, 195,000 or 88%, have fewer than20 employees.Education/Jobs Mismatch• There is a growing shortage of qualified workersfor available jobs. There will be an estimated21% increase in NYC jobs that require anassociate degree or higher by 2020.• In 2012, only 28.6% of students graduatingfrom public high school were deemed ready forcollege or a career; almost 80% of those whowere admitted to community college requiredremedial education.• In 2011, there were twice as many graduates oflocal colleges and universities with degrees inthe humanities as in STEM majors, while the jobdemand is heavily weighted toward technologyand math skills.Infrastructure Modernization andMaintenance• There is an estimated $6.4 billion of additionalcapital work needed to achieve a state of goodrepair of infrastructure assets (exclusive of transitand public housing stock).• The city’s infrastructure and transportationsystems require significant investment toaddress vulnerabilities revealed by SuperstormSandy and to expand services to new centers ofemployment.Threat to the Middle Class• Job growth is primarily in high-wage and low-wage categories, with middle-wage jobs at riskdue to competitive pressures on employers andavailability of skilled workers at a lower cost inother regions.• Middle class households (annual income of$35,000–$75,000) cannot keep up with rapidlyrising housing costs.Structural Budget Deficit/ReducedFederal State Aid• In 2015, the City is projected to have a budgetshortfall of at least $2.4 billion.• Reduced Federal and State aid is likely toincrease pressure on the local tax base.• NYC’s tax burden is already the highest in thecountry.Challenges Ahead
Partnership for New York City NYC Jobs Blueprint 9NYC Jobs Blueprint: Key Proposals• Eliminate the Structural Budget Deficit• Recruit Strong, Tech-Savvy Managers• Reform Property Taxes• Evaluate City-Owned Property forRevenue Potential EconomicDevelopment• Redesign Community Service Deliveryfor “Collective Impact“• Mobilize Business-Labor-Citizen LobbyingEfforts to Support the City’s Agenda inWashington, DC Albany• Build Urban “Tech Campus”Developments in Every Borough• Replace Non-Strategic EconomicDevelopment Programs withJobs Tax Credits• Reinforce the Financial Services Sector• Accelerate Sector Diversity• Expand Export Intensity• Encourage New Manufacturing Artisan Enterprise• Promote Tech Startups• Champion Diversity in the Tech Sector• Establish Industry Partnershipsfor Economic Development• Create a Commercial Rent Tax Credit• Establish a Resource Centerfor Job Creators• Create a Permanent InnovationAdvocacy OrganizationBetter Educated Skilled Workers• Pursue Universal RedundantConnectivity• Advocate for Improved Airports• Redesign the Transportation Network• Tap Private Sector Resources• Optimize Existing Housing Resources• Reduce Costs of Housing Construction• Prioritize Long-Term Planning Sustainability• Improve Services in HighCrime CommunitiesMore Better JobsGreater Connectivity AccessibilitySafe Affordable Living EnvironmentEfficient, Disciplined Well-Run CITY Government• Launch NYC 2020 Jobs Challenge—A Partnership between Employers Educators• Establish Outcome-Based Criteriafor Education Funding• Coordinate Education, WorkforceDevelopment Job PlacementFunctions under a Chief Talent Officer
NYC Jobs Blueprint Partnership for New York City10NYC 2002–2012: Steady Growthin an Era of TurbulenceSection 1
Partnership for New York City NYC Jobs Blueprint 11During the past decade, the New York City economy has experienced steadygrowth, despite turbulence in the global and national economies. Innovationin core industries, effective marketing of the city and a burst of entrepreneurialstartup activity have been the driving forces.The city’s Gross Domestic Product (GDP oreconomic output) grew at an average annual rateof 1.7% over the past ten years and at over 3%annually for the past three years, outpacing thecountry’s 2.1% average rate of post-recessionGDP growth.5Today, at $583 billion, New York boasts thelargest city economy in the world.6Of threedomestic peers (Chicago, Los Angeles, SiliconValley) only California’s Silicon Valley, with itsconcentration of technology companies, grewfaster than New York during this period. The city’sprivate sector added 357,000 jobs since 2003and, in 2012, the total number of private sectorjobs reached 3.332 million, surpassing the 1969employment peak of 3.251 million.7The financial services industry dominates thecity economy. Over the decade, it experienced2.3% annual growth in terms of its contributionto the city’s GDP, although job numbers havebeen flat.8Recent growth has come from theasset management and insurance sectors, ratherthan the traditional mainstays of banking andsecurities. The asset management industrygrew annually by 6.2% over the last decade andemployment increased by 4.5%.9In contrast, thesecurities sector has experienced minimal growth(0.5%) and has seen a decline in jobs (-2%).10New York’s share of global IPO listings has nearlyhalved over the last decade (currently 22% of thetotal) as Asia has grown in importance.11The fastest growing sectors in terms of economicoutput are high-tech, creative industries (media,arts, fashion) and tourism. High-tech has led theway, with annual growth averaging 5.3% overthe past decade.12The city still accounts foronly 3% of national high-tech industry output,leaving considerable room for further growth.The centerpiece of local tech activity are internetcompanies, including digital media, e-commerce,social networking and ad tech, which accountfor 85% of the city’s high-tech startups.13Techentrepreneurs are attracted to New York becauseit is the center of the global advertising industry,it has a deep creative talent pool, and NewYork’s legacy industries—finance, media, retail,and professional services—represent the biggestmarket of first adapters of new technology.New York City now commands 13% of nationalmarket share for economic output in the creativesector.14Growth in creative industries (4.1% peryear) was led by a surge in the film and broad-casting sector, which grew 6.2% over the decade,thanks largely to a New York State 30% produc-tion tax credit and an aggressive marketing andservices program run by the Mayor’s Office ofMedia Entertainment.15Since 2002, televisionproduction activity has increased by 82%, ampli-fied by average industry salaries of $111,000.16Tourism has grown steadily at an average rateof 4.1% per year, with New York passing a newmilestone of 52 million visitors in 2012.17Visitorsto the city generated an estimated $55.3 billionin total economic impact, with direct spendingreaching $36.9 billion.18A record 33% share of allU.S. visitors from abroad came to New York City.19The volume of international visits from emergingmarkets has risen substantially since 2006 witha 447% increase from Brazil, 442% from China,and 258% from Argentina.20The MetropolitanMuseum of Art, for example, saw record breakingattendance for the second year in a row with6.28 million visitors in 2012.21High productivity, high salaries and multipliereffects are what make the tech, creative andtourism sectors such important contributors toeconomic growth.
NYC Jobs Blueprint Partnership for New York City12In terms of jobs, these sectors together onlyrepresented 12.2%, or 462,000, of the city’sjobs at the end of 2011.22All these sectors offersalaries that exceed average local earnings,with tourism having the lowest average wage at$52,000, which is still roughly $7,000 more a yearthan the average city salary.23Creative industriesactually lost jobs over the decade at the rate of0.5% a year largely due to flat employment inthe media and publishing sector and continueddecline of traditional apparel manufacturing,which has fallen nearly 10% per year since 2002,24(mass manufacture of apparel has relocated tolower cost regions and is not coming back to thecity, as distinguished from fashion design andvery limited, high end or sample production thatis thriving in New York.)On the negative side, the last decade saw a4.5 pecentage point decline in contribution toGDP from several “traditional” sectors: construc-tion/real estate, government, and education. Thehealthcare sector, one of the city’s largest em-ployers, has seen its share of GDP rising at 2.3%annually over the last decade.25Growth has con-tinued despite hospital closures, with jobs shiftingto outpatient care, but is heavily dependent onfederal and state funding that is clearly at risk.Professional and business services, a significantcreator of new jobs in the past decade, shouldalso continue to grow, assuming their primarycustomers in financial services and other legacyindustries remain strong. While traditional manu-facturing has continued to decline, technology-enabled “new” manufacturing shows promise,with a number of entrepreneurial startups callingNew York City home.90120150International peers2NYC2002 03 04 05 06 07 08 09 10 11GDP 2002–20111Post 9/11RecoveryEconomicExpansionGreatRecession% CAGR, 2002–20114% CAGR, 2009–2011U.S.Domestic peers3EXHIBIT 1.1: NYC GDP Growth Has Outpaced Domestic Peersand the Nation, but Lagged International Competitors+3.4 +4.3+1.7 +3.1+1.6 +2.1+1.4 +2.2NOTES:1) Real GDP, Indexed to 20022) International peers: Shanghai, Singapore, Hong Kong, London, Toronto, Sydney, Paris, and Berlin3) Domestic peers: Chicago, Los Angeles, and Silicon Valley4) The Compound Annual Growth Rate (CAGR) is the average annual growth rate (positive or negative), or theyear-over-year growth rate, calculated by taking the nth root of the total percentage growth rate, where n is thenumber of years in the time period being considered.SOURCE:McKinsey analysis of data from the Canback Global Income Distribution Database (C-GIDD) Moody’s AnalyticsPost-recessionRecovery
Partnership for New York City NYC Jobs Blueprint 13TOTALEmployment, 2011ThousandsEXHIBIT 1.2A: NYC’s Economy Has Grown but Jobs in Major IndustriesHave Been Lost Over the Last DecadeFinance InsuranceHealthcareInformationBusiness ServicesLeisure HospitalityRetail% CAGR22002–2011% CAGR22002–2011583 3,783GovernmentConstructionEducationReal EstateManufacturingOther ServicesOtherNOTES:1) Nominal GDP2) Real GDPSOURCE:McKinsey analysis of data from the U.S. Bureau of Labor Statistics (BLS) Moody’s AnalyticsGDP1, 2011$ Billions126.96.36.199.188.8.131.52.302.11.71314052912421471210939124132359016959733831354811217611875164258-0.31.7-0.10.92.71.8-0.4-0.42.30.4-184.108.40.206.6-2.2-2.0-0.4GDP1, 2011$ BillionsTOTAL NYCEmployment, 2011ThousandsEXHIBIT 1.2B: New Economy and High-growth Sectors Saw a Greater Rate ofGDP and Jobs Growth Over the Decade than all Industries CombinedCreativeHigh-techTourism% CAGR22002–2011% CAGR22002–2011583 3,783NOTES:The creative, high-tech and tourism sectors were created through McKinsey’s analysis of traditional industrysectors to show the share of jobs and impact on GDP by aggregating 4 digit NCAIS codes.Creative includes relevant codes from the fashion, media and arts industries. Tourism includes codes from the arts,entertainment recreation industries as well as from accommodations, travel and sightseeing. High-tech includescodes from the information, technical services, computer manufacturing and telecommunications.1) Nominal GDP2) Real GDPSOURCE:McKinsey analysis of data from BLS Moody’s Analytics-0.51.41.44.220.127.116.11 0.658271222498120
NYC Jobs Blueprint Partnership for New York City14Resilience in the Face ofCrisis and CompetitionNew York has demonstrated remarkable resilienceduring a decade marked by terrorism, recession,financial crisis and a technological revolution thatis transforming the city’s anchor industries. Thedestruction of the World Trade Center inflictedmassive economic damage and accelerated afinancial downturn that, in 2001, was alreadyunderway. Yet New York’s economy bouncedback, and GDP grew 3.8% annually from 2003to 2007.26An ambitious and comprehensiverebuilding program, financed by a combinationof government and private investment, wasresponsible for this rapid recovery.After 9/11, there were indications that Londonwas surpassing New York as the global financialcapital. Fear of London’s competitive edge wasreinforced when that city won the 2012 SummerOlympics bid. But London failed to pull away inthe competitive stakes, despite far greater finan-cial and policy support from their national govern-ment than New York gets from Washington, DC.The 2012 Cities of Opportunity benchmarkingstudy, issued by the Partnership for New York Cityand PwC, ranks New York and London in a virtualtie for economic advantage, with the real threatto both cities coming from the emerging financialcenters of Asia and, in New York’s case, smallerdomestic cities like Austin and Seattle.27The 2008 financial crisis and the Great Reces-sion interrupted real estate development andconstruction activity across the city, delaying thefinancing, marketing and build out of importantprojects like the new World Trade Center site,Atlantic Yards, Hudson Yards, Alexandria Cen-ter (the city’s first science park) and hundredsof smaller residential and commercial projects,most of which are finally moving forward. Some100,000 New Yorkers lost their jobs during thenational 2008–2009 recession, the city lost severalFinance InsuranceThousandsThousandsFINANCE AND INSURANCE SUBSECTORS1Real Estate andRental Leasing2002 Employment 2011 EmploymentTOTAL EMPLOYMENT330.9322.4445.1440.692.688.1169.5170.158.318.104.22.16814.2118.2% Change, 2002–2011-1.01-2.57-4.86+0.35-5.49-23.17+3.5Funds, Trusts, andOther Financial VehiclesInsurance Carriers, Brokerages,and Related ActivitiesSecurities, Commodities andRelated ActivitiesCredit Intermediationand Related ActivitiesEXHIBIT 1.3: Financial Services Employment Was Nearly Flat Over theDecade, but Remains an Essential AssetNOTE:1) Numbers may not sum due to rounding.SOURCE: NYS Department of Labor
Partnership for New York City NYC Jobs Blueprint 15major financial institutions, and the brand of WallStreet was tarnished.28Although Wall Street wasthe epicenter of the financial system meltdown,New York rebounded faster than the rest of thecountry. The city gained 250,000 jobs between2009 and 2011, 150,000 more than were lost, andat twice the national rate of yearly job growth.29Today, unemployment remains high, nearlyfive percentage points more than its lowest levelsduring the last business cycle and 1.5 percentagepoints higher than the national average.30Some15.8% of New Yorkers are estimated to be unem-ployed or underemployed—an increase of nearly7% from 2007.31Residents who are ill-preparedfor the high-tech work environment, or lack otherskills required by employers, increasingly are intemporary and part-time jobs or freelance assign-ments, often earning less than is required to livein a high cost urban environment.In response to the seeming contradiction betweenrobust job creation and high unemployment, theIndependent Budget Office (IBO) identified theimpact of a growing labor force participation rate,driven by an increase of nearly 60,000 new cityresidents and re-entry of job seekers who hadpreviously dropped out of the market.32In short,employment grew, but not fast enough to absorball the new job seekers.Today New York is navigating a new round ofchallenges, both natural (Superstorm Sandy)and man-made (fiscal pressures at all levels ofgovernment). The city’s economic performance isgood, but not unaffected by national and globalforces that have increased economic inequalityand poverty across the United States and mostof the developed world. In 2011, roughly 20.9%of New Yorkers—or 1.73 million people—wereofficially classified as poor, an increase of 2.2%from two years earlier, compared to a nationalpoverty rate of 15.0% that grew 0.7% in the sameperiod.33New York has a lower poverty ratethan the nation’s five other largest cities, but itspoverty statistics are nonetheless troubling.34In sum, the city is in a position of strengthcompared to global and domestic competitors.But this could change quickly, and the next cityadministration must have a plan and a network ofpartnerships in place in order to respond quicklyand effectively to the inevitable challenges ahead,which are discussed in Section 3.The city is in a position of strength compared to global anddomestic competitors, but this could change quickly.22.214.171.124.97.6NYCSilicon ValleyLAChicagoU.S.Unemployment Rate (%) as of Jan 2013NOTE: NYC deﬁned as 5 boroughs; Silicon Valley deﬁned as San Jose MSA San Francisco MSA; Chicago and LA deﬁned as their respective MSAs.SOURCE: McKinsey analysis of BLS Moody’s Analytics2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20134681012EXHIBIT 1.4: NYC’s Unemployment Rate Remains High
NYC Jobs Blueprint Partnership for New York City16The Bloomberg Principles:Long-Term Vision andData-Driven ManagementSection 2
Partnership for New York City NYC Jobs Blueprint 17The Administration drew heavily upon ideas andresources from the private and nonprofit sectors,resulting in economic development activity farbeyond what city government could have accom-plished on its own. In the process, the City gained“stickiness” with industry leaders and emergingentrepreneurs that helped the local economyweather the turbulence of the past decade.Realizing the vision of New York City as a centerof global innovation and economic growth wasa shared mission of the whole Bloomberg team,not just the Economic Development Corporation(EDC). This was reinforced by having the DeputyMayor for Economic Development also overseethe Departments of City Planning, Finance, SmallBusiness Services (SBS), Transportation, andHousing.As the Bloomberg mayoralty ends, there isconcern in the business community that thenext Mayor will tip in the direction of one policyextreme, toward a more intrusive, higher costgovernment without an offsetting commitmentto quality of life and pro-growth policies. Ratherthan governing from the political right or the left,Bloomberg seemed to follow his instincts. Forexample:• The Administration toughened up on discre-tionary subsidies to business and insertedserious enforcement and clawback conditionsinto pre-existing tax incentive programs thatyielded $85 million in returns to the city fromcompanies that failed to meet their com-mitments.35At the same time, to encourageprivate investment and job creation, it in-vested heavily in infrastructure and communityimprovements associated with sports facilitiesand other redevelopment projects, which criticssuggest provide relatively modest economicbenefits for the city.• The Administration aggressively rezoned thecity’s land area and supported eminent domainactions to assemble sites for private develop-ment while carrying out down-zoning actions,imposing design criteria and expanding historicpreservation designations that have reduceddevelopment potential in communities acrossthe city.• In 2002, the Administration pushed throughan 18.49% property tax increase to deal withthe revenue shortfall and security needs con-fronting the city after 9/11.36As the economyimproved, it established budget reserves toavoid income tax increases and issued propertytax rebates to homeowners, but simultaneouslyallowed commercial property tax assessmentsand fines on small business to skyrocket.In short, the Administration has often strayedfrom laissez-faire, pro-business orthodoxy. But ithas maintained the confidence of job creators bychampioning the city’s key industries and greatinstitutions and by focusing on the safety andquality of life issues that are essential to a healthybusiness climate.The Bloomberg Administration governed with a long-term vision for the cityin a global context and an immediate focus on public safety and “livability”as the baseline conditions for economic growth. It advanced this agenda byleveraging the city’s many assets, including an extraordinary concentrationand diversity of talent, multiple global industry headquarters, and a cluster ofgreat universities, medical research and cultural institutions.
NYC Jobs Blueprint Partnership for New York City18Focus on Geographicand Sector DiversityThe 9/11 terrorist attack illustrated the needto make the city less vulnerable to the “boomand bust” cycles of Wall Street and to createnew centers of economic activity outside thehighly concentrated Manhattan central businessdistricts where an attack, a power failure, or theparalysis of growing traffic congestion couldinflict disproportionate damage on the entire five-borough economy.Geographic diversity initiatives were incorpo-rated in the vision for the city’s 2012 Olympicsbid, based on a plan for turning derelict sitesacross the five boroughs into Olympic venuesand permanent new hubs of economic activity.37The waterways that historically separated thecity’s boroughs were reconceived as connectorsand the waterfront as an asset to be reclaimed.The Olympic bid failed, but the ambitious plansfor building out the Far West Side, as well as theBrooklyn and Queens waterfronts, proceeded.City-initiated rezoning actions reversed decadesof inactivity on the formerly industrial waterfront.Long derelict sites such as Hudson Yards,Greenpoint-Williamsburg, Brooklyn, and HuntersPoint, Queens, attracted major private investmentin commercial and residential redevelopment andpublic amenities. Targeted public investmentssought to maintain manufacturing and shippinguses in select locations, such as the BrooklynNavy Yard, the new Brooklyn Cruise ShipTerminal, the Brooklyn Army Terminal and NewYork Container Terminal. In the process, ferryservices were expanded to provide connectivityto areas that were poorly served by public transit.Moving inland, there were also an unprecedentednumber of City-sponsored planning and rezoninginitiatives to stimulate redevelopment in placeslike Downtown Brooklyn, Jamaica Center, CentralHarlem and, most recently, Midtown East.The results of far-reaching planning, zoning andcapital investment activity have been substantial.Between 1992 and 2001, Brooklyn, Queens,the Bronx and Staten Island accounted for only18% of New York City’s real GDP growth.38By 2012, the “outer” borough contributionhad increased to 29% of GDP growth, drivenby growth in Brooklyn and Queens.39From2002–2011, job growth was greater outsideManhattan than within it, with the Bronx seeingmore than double (11.7%), and Brooklyn nearlytriple (16.4%) the rate of growth in Manhattan(5.7%) from 2002 to 2011.40The number of localBusiness Improvement Districts (BIDs) grew by50% since 2002 to 67, mostly outside Manhattan,investing over $100 million annually in services toneighborhood commercial strips.411992–20012002–2011ManhattanBrooklynQueensBronxStaten Island% of Change in GDP1-11+ 5+ 60-182717127133321EXHIBIT 2.1: Brooklyn Queens Have IncreasedTheir Contribution to NYC’s GDP Growth Over the Last DecadeNOTE:1) Real GDPSOURCE: McKinsey analysis of data from Moody’s Analytics% Contribution to GDP Growth,1992–2011
Partnership for New York City NYC Jobs Blueprint 19New York is home to the nation’s largest concentrationof world-class medical research institutions and top scien-tists, but this has never translated into development of alocal life sciences industry. A 2001 study by the Partner-ship Fund for New York City (Partnership Fund) identifiedonly about 2,000 local jobs in commercial life sciences, ascompared to 71,000 in Silicon Valley and 25,000 in GreaterBoston.45Discoveries by New York scientists were beingcommercialized elsewhere, largely because there had beenno commitment by government or the medical researchinstitutions to create a local industry cluster. The Partner-ship Fund study identified two obstacles to developmentof a life sciences cluster: the anti-commercial culture of thecity’s academic medical centers; and the lack of commer-cial lab space to accommodate life science companies.46The Bloomberg Administration, working with thePartnership Fund and leaders of medical researchinstitutions, set out to address both issues. The Cityand State provided incentives for development of thefirst commercial science park, the Alexandria Center, onthe City-owned Bellevue Hospital campus. In additionto a long-term lease and property tax abatements, theCity provided infrastructure funding to move sewers, anambulance entrance and make other site improvements.The State provided $33 million in grants and other taxincentives.47The private developer committed $700 millionto build and finance what will ultimately be a millionsquare foot facility.48At the same time, the PartnershipFund was working with the major research institutions toencourage industry partnerships, entrepreneurship andlocal commercialization.Alexandria’s first tower was completed in 2011 and thesecond tower is under construction, housing researchlabs of Pfizer, Eli Lilly, and Roche Pharmaceuticals andincluding both conference and incubator facilities. TheAlexandria Center represents the core of an emerging lifesciences cluster in the city that is reinforced by public andphilanthropic investments in nonprofit initiatives such asthe Structural Biology Center, the Stem Cell Foundation,and the Genome Center. Employment in the sectorreached more than 11,500 by 2010.49While still small, jobsin life sciences have a huge economic multiplier effect andcluster activity further strengthens New York’s educationaland healthcare institutions that employ 260,000 NewYorkers and attract more than $2.3 billion in federalresearch grants annually.50In addition to diversification of economic activ-ity across the five boroughs, there have beendeliberate efforts to support the growth of newindustries. To spur startup activity, the Cityprovided modest support for a dozen high-techbusiness incubators that have housed nearly 500startups.42It has launched “jump start” and “bootcamp” programs for entrepreneurs, promotionalcompetitions, and networking activities that haveadded a new dimension to New York’s tradition-ally corporate business culture. These programshave been synergistic with land use and publicinfrastructure investments on Manhattan’s WestSide, in Brooklyn, and Long Island City, helpingto generate “buzz” and creating clusters of neweconomy businesses in long stagnant areas.EDC has seen its staff and responsibilitiesexpanded significantly beyond the agency’shistoric configuration. They have establishedindustry desks and working relationships withbusiness leaders, hired consulting firms todevelop ideas for enhancing key sectors, andcreated hundreds of initiatives to demonstratesupport for core industries and to promote theemerging entrepreneurial ecosystem.43EDC hasinitiated outreach to foreign international marketsthat were likely sources of foreign investmentand turned a favorable spotlight on companiesfrom around the country and the world that wereexpanding in New York.44Creating a Life Sciences Cluster
NYC Jobs Blueprint Partnership for New York City20It is conventional wisdom that government is notgood at picking winners in the economic devel-opment arena and the record of direct govern-ment investment in business is unimpressive. Butthe experience of the past decade demonstrateshow government can invest intelligently in theinfrastructure and supportive environment thatencourages business formation and growth if itsdecisions are informed by private sector expertiseand rigorous market analysis, as opposed to wish-ful thinking or politics.Leveraging the City’sAssetsThe most successful economic developmentinitiatives are those that effectively reinforce andleverage the city’s economic assets. In New York,these assets include the concentration of globalheadquarters companies in multiple industries,world class educational, medical and cultural insti-tutions, the growing entrepreneurial community,and the city’s prominent global brand.The presence of 45 U.S. Fortune 500 financial andcorporate headquarters operations is the basis ofNew York’s global economic clout.51They are themagnetic force that attracts other job creators,such as professional and business services,software application developers, and foreigncompanies. Aside from federal “Liberty Bonds”that were used to reinforce the corporate andfinancial sector after the security risks generatedby 9/11, the Administration has relied largely oncultivation and advocacy as the preferred toolsfor corporate retention. While many politiciansbash big banks, Mayor Bloomberg has employedhis bully pulpit to argue that nothing can replacethe solid middle-income jobs and contributions tothe city tax rolls of the financial services industry.Mayoral attention and support has also been lav-ished on other key industries: media, informationservices, health, education, fashion and retail, artsand culture, hospitality and tourism. The busi-ness community appreciates this support and theresult is a much stronger commitment to stay andgrow in New York.4530221059867108EXHIBIT 2.2: NYC is Home to the Highest Concentrationof US Fortune 500 Companies in the CountryNumber of US Fortune 500 Headquarters by CityTop Cities by HQ Revenue$ Billions, 2011New York 1,234Silicon Valley 920Houston 500SOURCE: McKinsey analysis of data from Fortune magazineNew YorkLosAngelesChicagoDallasSt. LouisHoustonAtlantaMinneapolisCharlotteCincinnatiSilicon Valley
Partnership for New York City NYC Jobs Blueprint 21The Administration has also effectively exploitedand enhanced New York City’s iconic brand.NYC Company was restructured and receivedserious resources to launch an internationaltourism marketing campaign. They helped carryout high profile events, such as The Gates exhibitin Central Park and Fashion’s Night Out, andto develop new international destinations suchas the High Line and Times Square. A retentionpartnership featured a marketing alliance withJetBlue, “New York’s Hometown Airline.”Spurred by these creative efforts, the tourismindustry has grown from 320,000 jobs in 2011 toan estimated 356,000 jobs today.52The pursuit of big ideasThe Bloomberg Administration has pursued—and largely achieved—a series of big, audaciousgoals: topping 50 million tourists, establishingNew York as a high-tech innovation capital, andmaking credible claims that New York City isthe greenest, healthiest and safest big city inAmerica, if not the world.Big ideas started early with introduction of the311 system, where a live person responds toquestions and complaints about city services(and just about anything else). Nearly 22 millionannual calls are logged by 311, allowing Cityagencies to anticipate and respond to issues farmore effectively.53Along with other tools, suchas Citywide Performance Reporting Online, 311resulted in a better managed city, where resourceallocation and performance evaluation can belargely data-driven.PlaNYC 2030 was another ambitious undertaking,engaging representatives of industry, labor,environmental groups and communities tohelp develop and implement a long-term planfor the city’s future as a sustainable urbanenvironment.54The plan proposed to reduceEXHIBIT 2.3: High-tech and Other New Sectors on the Rise WhileAnchor Industries Remain Vital AssetsChange in GDP Growth% CAGR, 2002–2011High GrowthLow GrowthAssetsLegacy0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.676543210-1-2-3-4Construction Real EstateCreativeU.S. GDP Growth RateFinance InsuranceFoodGovernmentHealthcareEducationHigh-techOtherProfessional Engineering servicesRetailTourismWholesaleAdministrative servicesSize of the Bubble = 2011 Contribution to NYC GDP2011 Degree of SpecializationNOTE: Degree of specialization is calculated by dividing the % of NYC sector employment by the % ofU.S. sector employment; value 1 indicates higher NYC job concentration than the U.S.SOURCE: McKinsey analysis of data from BLS Moody’s Analytics
NYC Jobs Blueprint Partnership for New York City22the city’s 2005 carbon footprint by 30% by 2030, through avariety of long-term initiatives that range from building codereform to upgrading wastewater treatment plants. Morethan 15% reduction in emissions has already been achieved,representing the lowest per capita greenhouse gas emissionsamong major U.S. cities.55Ultimately, this will translate intoreduced energy costs and a more globally competitive city. Animportant aspect of this effort was the creation, by local law, ofthe Mayor’s Office of Long Term Planning and Sustainability,which is charged with the pursuit of objectives that transcendshort-term thinking.56Quality of life initiatives have done much to transform thestereotype of New York from a dense, cold urban center to ahighly livable city. The City has created more than 300 milesof bike lanes57, as well as pedestrian-friendly streetscapesand new public spaces. Since 2002, the City has added morethan 730 acres of new parkland and over 75% of New Yorkersnow live within a ten-minute of walk of a park.58New Yorkershave a record high life expectancy rate, 2.2 years longer thanthe national average.59Improvements in the public educationsystem and expanded school choice have made the city morefamily-friendly. Major crimes have been cut in half.60For manyemployers, overall livability and the desire of talent to be herehave supplanted business needs as the primary reason forkeeping jobs in the city.There has been a record $88 billion of improvements to roads,sewers and public space and buildings.61Through the NewHousing Marketplace Plan, the city is building or preserving165,000 affordable housing units (15,000 to 18,000 annually).62Private, market-rate housing production is slowly reboundingfrom the recession, with the Buildings Department issuingabout 10,600 residential construction permits in 2012, or 31%of the 2008 peak of 33,910.63Lower Manhattan has been transformed into a world class live-work community and the city’s fastest growing neighborhood,with population doubling in the decade after 9/11.64Througha novel tax increment financing scheme, the City capturedbenefits from the value created by the Hudson Yards rezoningon the Far West Side, and is using proceeds to help financethe $2 billion extension of the #7 subway line—the transitinvestment with the largest projected economic return of anythat is underway in the city.65In the business community, no current set of projects areconsidered more important than those launched underthe Applied Sciences initiative, through which the City hasestablished partnerships with great universities that will morethan double the number of engineering graduate students andfaculty in the city, insuring its future status as a global center ofinnovation.The Administration has also taken substantial ownership ofworkforce development and training, moving beyond thecity’s traditional role as a passive conduit for state and federalfunding. Through SBS, it established eighteen Workforce1Career Centers that, working with nonprofit and privatecontractors, have placed more than 160,000 New Yorkers injobs––more than half in the last three years.66With privatephilanthropic funding, the Mayor created the Center forEconomic Opportunity, to explore innovative solutions to theeducation, health and employment issues confronting the city’spoorest residents. When it comes to public and undergraduateeducation, there has been a greater focus on preparingstudents for employment in growth sectors where there is anunmet demand for skilled labor. The City has partnered withthe City University of New York (CUNY) and the private sectorto launch several 9–14 schools and is also rolling out a softwareengineering pilot program in 20 schools modeled after theAcademy for Software Engineering that opened in 2012.67In sum, the Bloomberg Administration will leave a solidfoundation of industry relationships, greater geographic andsector diversity, and “innovation economy” initiatives for thenext Mayor to build on. It has invested heavily in infrastructureand amenities, parks and streetscape improvements, and haslaunched sustainability initiatives that will define the param-eters of the city’s physical and economic growth for decades tocome. But changing demographics, increasing fiscal challengesand global competition will require a new blueprint for jobs,the outline of which is suggested in the final section.
Partnership for New York City NYC Jobs Blueprint 23Applied Sciences NYC is a “game-changing”investment to insure that the city has sufficientengineering talent to be a global center ofinnovation in the 21stCentury. Silicon Valley hasnearly four times the concentration of engineeringjobs as a percentage of its workforce than New YorkCity does.68In December 2010, the city issued a challenge totop institutions from around the world to build anew or expanded applied sciences and engineeringcampus in New York City. The competition winnerwould be awarded a package of city-owned land,up to $100 million of City capital, and the fullsupport of the City to make the project a reality.The City received seven qualifying responses from17 world-class institutions and selected threewinners:• Cornell Tech: A partnership of Cornell Universityand the Technion University of Israel will invest$2 billion in a two million square foot campuson Roosevelt Island that will house hundreds offaculty and staff and 2,000 full-time graduatestudents. Over the next three decades, CornellTech is projected to create 20,000 constructionjobs, 8,000 permanent jobs, and generate nearly600 spin-off companies resulting in tens ofthousands of additional jobs. The campus willalso create a $150 million venture fund for NewYork startups.69Classes are already underway intemporary quarters at the Google offices.• NYU-Center for Urban Science Progress(CUSP)70: New York University leads aninternational consortium that will convert an oldMetropolitan Transportation Authority (MTA)building in Downtown Brooklyn into 150,000square feet of classrooms, offices and lab space,with another 40,000 square feet dedicated asan incubator for businesses spun off by CUSP-related research. CUSP is projected to create2,200 construction jobs, 900 permanent jobsand generate 200 spin-off companies––creatinganother 4,600 permanent jobs.• Columbia Institute for Data Sciences Engineering: Columbia University will expandits engineering space by 44,000 square feet andcreate 75 new faculty positions, and create fivenew areas of study and research which will becrucial to New York City’s innovation economy inthe 21stcentury, including a New Media Center,a Smart Cities Center, a Health Analytics Center,a Cyber Security Center, and a Financial AnalyticsCenter.Over the next three decades, these projects willcollectively generate more than $33 billion inoverall economic impact, 48,000 Jobs, and nearly1,000 spin-off companies. Additionally, the newfacilities will more than double the existing numberof full-time graduate engineering students in NewYork City to over 5,600 and more than doubleengineering faculty in New York City to over 700.71Applied Sciences NYC
NYC Jobs Blueprint Partnership for New York City24The Decade Ahead:Vulnerabilities and ChallengesSection 3
Partnership for New York City NYC Jobs Blueprint 25Like any front runner, New York City is vulnerable to internal threats and toexternal competitors that are hungry for the talent, jobs and headquarterscompanies that make New York a global leader. Cuts in federal and state aidand a growing structural budget deficit will make it harder for the next mayor todeliver on the city’s promise of opportunity for residents and businesses alike.Key threats to the economy could come from several sources: slowdown ingrowth of the city’s most productive sectors (especially financial services);accelerated loss of mid-level jobs and middle class households; failure ofsmall and startup businesses to scale and become major job creators and taxrevenue producers; and deterioration in city services and public infrastructure.The factors that increase the city’s vulnerability to these threats includethe high cost of living and doing business; failure of the educational andimmigration systems to produce an adequate supply of skilled labor; and anuncompetitive tax and regulatory environment.
NYC Jobs Blueprint Partnership for New York City26EXHIBIT 3.1: Population Has Been Driven by Lower InternationalImmigration and Shifting Domestic Migration PatternsNYC Population Change, 2002–2012NOTE: Sample error is less than 1.2% in each yearSOURCE: McKinsey analysis of data from the U.S. Census Bureau Moody’s AnalyticsNet International MigrationNet Domestic Migration-167-142 -138 -144 -140-128 -121 --119-129-165-196-226-244-219-59-71-55 -63-71-157-145Pre 9/11 Post 9/11 Economic ExpansionRecession RecoveryNet Births (births-deaths)1992 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 2012147 139716064596054676563849011214314714213913214963 5959 56 56 57 5843 6653 51 53 54 7359776255612359 60 62 60 62 66-22-65-102-119-91-3664 60 64 6753 6057 72576559Thousands2002 2003 2004 2005 2006 2007 2008 2009 2010 2011% CAGR,2002–2011NYCChicagoLASilicon ValleyU.S.EXHIBIT 3.2: NYC’s Productivity Growth Has Been Outpacedby Peer Cities Lagged the U.S.Productivity, 2002–201190120150+2.7+1.1+2.1+1.1+1.5NOTES: NYC is deﬁned as the5 boroughs; Silicon Valley isdeﬁned as San Jose MSA andSan Francisco MSA; Chicagoand LA are deﬁned as theirrespective MSAs1) In 2005 dollarsSOURCE: McKinsey analysisof data from BLS Moody’sAnalytics$ Thousands/Employee1Post 9/11RecoveryEconomicExpansionGreatRecessionPost-recessionRecovery
Partnership for New York City NYC Jobs Blueprint 27Lagging Population andProductivity GrowthEconomic growth is highly dependent on bothworkforce growth and increased productivity.Workforce growth has been handicapped by slowpopulation growth, which was just 2.1% over thepast decade compared to 9.4% between 1990and 2000.72Badly designed federal immigrationand visa policies are largely responsible forreducing the inflow of skilled foreign talentinto the city. Ironically, the Great Recessionkept population numbers up by slowing ahistoric pattern of outward domestic migration,a phenomenon that is likely to reverse as thenational economy recovers and job mobilityincreases.73The latest census estimate puts New York City’spopulation at an all-time high of 8,336,697 in2012.74Importantly, there were increases inall five boroughs, with the largest in Brooklyn.The question is whether this trend will continueas middle-income households struggle withaffordability issues and federal immigrationreform remains deadlocked.In terms of productivity, defined as outputper worker, the city has historically performedwell because of the dominance of the highlyproductive financial services industry. But NewYork’s overall rate of productivity growth hasbeen slowed by the size of the city’s healthcare,education and government sectors, which arethe nation’s least productive sectors. With annualgrowth of 1.1%, the city’s productivity growth ratehas fallen behind the national rate of 1.5% andpeer cities such as Los Angeles (2.1%) and SiliconValley (2.7%).75This matters because productivitygrowth is typically responsible for 65 to 70% ofNew York’s overall GDP growth.76Loss of Middle Class Jobs HouseholdsThe city is experiencing a loss of middle-wagejobs and middle class households. This is partlydue to the rising cost of living—driven by the costof housing—and partly to advances in globaliza-tion and automation that allow companies toeither eliminate or easily move business sup-port and other mid-level functions to lower costlocations. The consequences of this trend, if itaccelerates, could be the destabilization of neigh-borhoods, weakening of the city’s labor pool, andfurther narrowing of the tax base.During the past decade, the city lost middle-income jobs, while high and low-wage jobsincreased. The biggest job increases were inpredominantly low-skill, low-wage categoriessuch as food, wholesale and retail trade, andhealthcare. Since 2005, the occupation ofExecutive Administrative Assistant lost the mostjobs (31,000 jobs lost at a median hourly wageof $30) while the occupation of Personal CareAide added the most jobs (38,000 at a medianRecession2Recovery2Higher-wage($75,000)Mid-wage($35,000–$75,000)Lower-wage($35,000)-101,730-91,80043,36029,32051,050-9,380Jobs Lost Jobs GainedEXHIBIT 3.3: Mid-wage Jobs Have Not Returned to Pre-recession LevelsNet Change in NYC Metro Occupational Employment1NOTES:1) New York City Metropolitan Division2) Recession is 2008 to 2010; recovery is 2010 to 2011SOURCE: McKinsey analysis of data from BLS, Occupational Employment Statistics• Technology has displaced a range ofmid-wage jobs, primarily those thatwere composed of routine tasks (e.g.,administrative assistants)• Globalization has also contributed tothis trend, driving many mid-wagejobs that cannot be automated outof the country (e.g., manufacturing)• Many low-wage industries areinsulated from the impact of bothtechnology and globalization becausethey require personal contact
NYC Jobs Blueprint Partnership for New York City28900,000950,000850,000800,0002000 2005 2006 2007 2008 2009 2010EXHIBIT 3.4: Middle-income HouseholdsHave Decreased in NYCNumber of Households in Middle-income Segment¹NOTE: 1) “Middle-income” is deﬁned as households with incomes between$35,000 and $75,000SOURCE: McKinsey analysis of data from the U.S. Census Bureau, AmericanCommunity Survey1001502001001502002503003502007 2008 2009 2010 2011 2007 2008 2009 2010 2011Averagecost ofliving inthe U.S. Averagecost ofhousing inthe U.S.+7-8-12+4+18-9-55+5Index Point Change (2007–2011)NYC¹ Silicon Valley²LA ChicagoEXHIBIT 3.5: NYC’s Cost of Living Continues to Rise, Primarily Driven by the Cost of HousingNOTES:1) NYC includes Brooklyn, Manhattan Queens; Bronx share of cost-burdened rental households (58% in 2011) is higher and risenthe fastest than other NYC boroughs; Staten Island share of cost-burdened owner households (42% in 2011) have risen quicklyas well (4.2% from 2005–2011)2) Silicon Valley includes Oakland, San Francisco, and San Jose urban areas, except in 2009 when San Jose data was not available3) Values index to 100 for U.S. average.SOURCE: McKinsey analysis of data from ACCRA Cost of Living Index Moody’s Economy.comCost of Living Index3Cost of Housing Index3
Partnership for New York City NYC Jobs Blueprint 29hourly wage of $10).77The gap between higher-wage occupations and lower-wage occupationsalso widened: the average median wage forhigher-end occupations increased by 17%while medium- and low-wage occupations sawa decline in median wages of -4% and -6%respectively.78The middle class in New York City is statisticallydefined as the 60% of all residents earningbetween $35,000 and $75,000 a year.79Almosthalf of this group cannot afford the median rent inthe city, which was $1,300 in 2010, based on thestandard of 30% of gross income as the definitionof what is affordable.80With average home orapartment sales prices reaching $775,000 in2012, the middle class is also priced out of homeownership in the city.81In 2011, housing madeup 50% of the city’s cost of living as comparedto 34% in Chicago and 46% in Silicon Valley.82Rental affordability in the city has declineddramatically in the past decade, with the numberof cost-burdened households growing from 41%to nearly 50%.83Unaffordable housing costs are a function ofstrong market demand, limited availability ofland for new development (only ~6% of the City’sland was deemed “vacant” in 2010, much ofit not suitable for development) 84and costs ofresidential construction that are twice the nationalaverage. 85The “premium” one pays to live inNew York is rising at a time when lower cost cit-ies—Austin, Miami, Shanghai, and Toronto—arecompeting fiercely for talent and mid-level jobs. 86New York has the nation’s largest subsidizedhousing inventory, with over 300,000 units and$3.3 billion in annual federal aid, but are mostlyrestricted to low-income tenancy.87The majorityof federal aid goes to the New York City HousingAuthority (NYCHA) which is no longer the optionfor lower middle-income households that it oncewas.Obstacles to Business Job GrowthNew York City is the most expensive place inthe country to build a business, with costs thatare 1.5 times the national average.88Officerent and electricity costs, up to 30% of whichare attributable to taxes, are twice the national2-9-7.3-9.6-15-5.43.422.714.48.422.224-6.6-9.9-17.4-2.414.2-25EXHIBIT 3.6: Small, Tradable Firms in NYC Have Not Scaled at theSame Rate as Competing Regions% Change, 2003–2010Silicon ValleyNYCAustin1-45-910-4950-499500-9991,000 or moreEstablishments by# of EmployeesNOTE: Tradable sectors includeAdministrative services, Finance insurance, Forestry agriculture support, Information,Management of companies,Manufacturing, Mining,Professional technical services,Wholesale tradeSOURCE: McKinsey analysis ofCounty Business Patterns, U.S.Census Bureau
NYC Jobs Blueprint Partnership for New York City30average.89Because companies in a high-growthmode need all available resources to investin people, New York is less attractive as a jobexpansion location than lower cost alternatives.As a result, too few of the city’s startup and smallbusinesses are growing into major employers.Of the 220,000 businesses in the city, 195,000 or88%, have fewer than 20 employees.90Between2003 and 2010, New York City experienced a 9%increase in the number of firms with one to fouremployees, but no net increase in the number offirms with 50 or more employees.91Looking onlyat firms in tradable sectors (defined as those firmsthat can sell their goods and services beyond thefive boroughs), the statistics are worse. The cityhas experienced significant losses in the numberof tradable sector firms with five or more em-ployees over the past decade.92This is a worryingtrend, since the firms most likely to scale in the fu-ture are those that serve markets outside the city.According to a recent report from the MilkenInstitute, America’s most successful cities in 2012were characterized by expansion in the manu-facturing (tradable goods) sector.93The BrooklynNavy Yard stands out as the city’s manufacturingsuccess story. The City launched a short-livedMayor’s Office of Industrial and ManufacturingBusinesses and several Industrial Business Zones(IBZs), but the number of manufacturing jobs hasdeclined by 47% over the past decade.94EDC hasmade low cost manufacturing and distributionspace available in the City-owned Brooklyn ArmyTerminal and other sites, but while this has raisedsome revenues for the city it has not significantlyaffected job growth. The city’s cost structuremakes it highly unlikely that traditional manufac-turing will occupy more than a small niche in theeconomy, but one that is an important sourceof opportunity for entrepreneurs, artisans andsemi-skilled workers. New, technology-enabledmanufacturing, on the other hand, has potentialto grow but will require access to support servicesand low cost space that does not exist today insufficient quantity to support a cluster.In a 2012 Kauffman Foundation survey of 6,000small business owners nationwide, New YorkCity was ranked among the least friendly placesto start a business.95The business communityis broadly dissatisfied with the city and state’spunitive regulatory and legal environment thatadds to direct costs as well as litigation risk.In 2010, the Administration and City Councillaunched the New Business Acceleration Team(NBAT), an initiative that has helped over 1,000small food and beverage businesses run thehoops of opening a business in the city. Thisinitiative has shaved months off of the time forgetting new business approvals, but its target istoo narrow for meaningful economic impact.96More recently, the Administration has workedto get permits and applications online for easierprocessing, but the city remains a very difficultplace for small businesses to navigate.NYCBoston2Washington DCNJ Corridor3Silicon ValleyHoustonMiamiChicagoLATotal Rent Electricity Taxes Labor Cost11212212510711610911010995128100891171056987941042161838414214113711294143151135123118117112111107106179140151115105115131102119NOTES:1) U.S. Average: 100; All data at the MSA level, 20092) Boston includes Boston and Cambridge3) NJ corridor includes Trenton, Newark and EdisonSOURCE: McKinsey analysis of data from Moody’s Economy.comEXHIBIT 3.7: NYC Cost of Doing Business is the Highest in the CountryCost of Doing Business Index1
Partnership for New York City NYC Jobs Blueprint 31Structural Budget DeficitBy 2015, the next mayor will have to deal witha large and growing structural budget deficit.The $11 billion surplus that was accumulatedduring the past decade will be exhausted and theshortfall will be at least $2.4 billion.97BetweenFY2013 and FY2017, City-funded expendituresare projected to grow at an annualized rate of4.5%, against a 4% annual increase in city taxrevenues.98 There will likely be losses in federalaid, which represents about 18% of City fundexpenditures in fiscal year 2013, including bothfederal stimulus funding and aid for SuperstormSandy-related damages. Federal categoricalgrants will decrease to $6.5 billion in fiscal year2014, and are projected to continue to decreaseslightly over the next four years.99On the expenditure side, the City’s publicemployee union contracts have expired andthere are worker expectations of a retroactivepay increase that could cost the city an additional$4 to $8 billion in 2014.100The City payroll isprojected to decline between 2013 and 2017 by1.5%, but payroll will still comprise 29% of thebudget in 2017.101This figure does not includehealth and pension benefits, which are projectedto be 20% of total City expenditures by 2017 if noadjustments are made.102Solving the budget crisis will be particularlydifficult because New York City is, to a largeextent, a captive of state government, withlimited control over its revenue or expenditurebudget. Any reasonable resolution of thestructural deficit will depend on cooperationfrom the state with respect to increasing citygovernment’s flexibility to manage its budget andthe terms of its pensions, procurement and civilservice requirements.RevenuesFY2013$ MillionsFY2015$ MillionsProperty Taxes 18,440 20,176Personal Income Taxes 8,488 9,030Sales Tax 6,061 6,594Business Taxes 5,617 5,973Other Taxes 5,465 5,751MiscellaneousRevenues6,586 6,758Federal Grants 8,655 6,361State Grants 11,301 11,685Other CategoricalGrants Aid966 892Net Surplus Interfund Revenues***1,917 517Retiree Health BenefitsTrust Fund1,000 -Total 74,496 73,737Remaining Gap 0 -2,373ExpendituresFY2013$ MillionsFY2015$ MillionsSalaries Wages 22,031 21,902Pensions 8,062 8,203Active RetireeHealth Insurance*5,186 6,047Other Fringe 3,314 3,353Medical Assistance 6,314 6,447Public Assistance 1,274 1,273Debt Service** 6,010 7,183Other OTPS 22,305 21,702Total 74,496 76,110NOTES: * For FY2013, includes $1 billion drawdown from the RHBTF ** Adjusted for the Impact of Prepayments *** Only FY2013 includes a net surplus of $1.346 billionSource: Citizens Budget Commission, based on January 2013 Financial Plan;includes intra-city revenuesExhibit 3.8: NYC’s Budget FacesGrowing Out-year Gaps
NYC Jobs Blueprint Partnership for New York City32The city’s tax base is increasingly dependent on arelatively small number of high earners, who tendto be highly mobile people.The city’s tax base is overly dependent on arelatively small number of high earners whotend to be highly mobile people. Only 34,598tax filers who earn over $493,439 represent 1%of all tax filers and account for 43% of the city’stotal income tax revenues.103In 2013, those NewYork City tax filers earning over $1 million whoare subject to the state’s income tax surchargeand the NYC Unincorporated Business Tax willsee their combined effective marginal tax raterise from 48% to 54% of earnings. Federal capson deductions, if enacted, would likely increasethis burden to at least 60%. States like Texas,Florida and Utah are aggressively luring thesehigh earners away from New York. The businesscommunity sees no constructive options forraising city or state income tax revenues to closethe budget deficit.$0 – $20,554$20,555 – $49,508$49,509 – $105,367$105,368 – $493,438$493,439 and aboveTax Paying New Yorkers Tax Paying New Yorkers90% 10%$1.7 billion $4.3 billionEXHIBIT 3.9: NYC’s Personal Income TaxCollections Rely on Too Few for Too Much= 10,000 Tax PayersINCOMENOTE: Derived from analysis bythe NYC Independent BudgetOfﬁce. Based on 2009 PIT Sample;income measure is NY adjustedgross income and data is forfull-year city residents who cannotbe claimed as dependents onothers tax returns.SOURCE: The New York CityIndependent Budget Ofﬁce in aletter to Councilmember James S.Oddo dated December 6, 2011
Partnership for New York City NYC Jobs Blueprint 33Education Is Not Keepingup with New EconomyDemandsNew York City employers in high-growth sectorsare increasingly experiencing a shortage ofqualified candidates for available jobs. Post-recession levels and duration of unemploymentappears to reflect a skills gap in the U.S. labormarket. CUNY’s Labor Market Information Serviceestimated nearly 190,000 job openings in NewYork City were posted online in January 2013,the highest volume since 2009.104Job openingswere concentrated in the professional, scientificand technical services sector (30% of ads) and thefinance and insurance sector (with 22% of ads).105Among major occupation groups, the three withthe highest demand were management (62,000ads), computer and mathematical (54,500 ads),and sales and related services (50,000 ads).106In the absence of sufficient qualified local jobcandidates, employers will increasingly locatesupport functions outside of the city.Despite gains in graduation rates and othereducation accomplishments, the performanceof the city’s education system continues todisappoint employers. In 2012, only 28.6% ofthe city’s public high school graduates weredeemed ready for higher education or careers.107Nearly 80% of admissions to CUNY’s communitycolleges from the city system required remedialwork in math, reading, or writing.108The demandsof remediation have left CUNY with limitedresources to invest in career-oriented programs,equipment, student internships and professionalfaculty development that are necessary toproduce a predictable pipeline of the excellentjob candidates that employers need.EXHIBIT 3.10: NYC Lags its Peers on Measures of Educational AttainmentPopulation Age 25 and Over by Educational Attainment%, 201102040608010034 42.6 29 2 33 28687 56.215 2120 1817.82529202316.620 1424 2016.7% of NYC’s population withgreater than HS education% of NYC’s population withBachelor’s degree or higherBachelor’sdegree or higherAssociate’sdegreeSome college,no degreeHS diploma Less than aHS diplomaSOURCE: McKinsey analysis of data from U.S. Census Bureau, 2010 American Community SurveyNYC SiliconValleyLA Chicago U.S.
NYC Jobs Blueprint Partnership for New York City34The three-year average graduation rate forCUNY’s six community colleges is only 13.1%,slightly lower than the national average.109CUNYhas demonstrated the capacity to bring three-year graduation rates up to 55% through anaccelerated study program, but this programcan currently accommodate only 1,150 ofCUNY’s 96,500 degree-credit community collegestudents.110CUNY plans to expand this programto 4,000 students by 2014. 111Students attending New York City institutions,public and private, are also not focused onsubjects that are most relevant to opportunities inthe job market. In 2011, colleges and universitiesin the city awarded only 13,000 bachelor andgraduate degrees in Science, Technology,Engineering or Math (STEM), versus 26,000 inthe humanities.112The average STEM degreeattainment for innovation center cities (Austin,Boston, San Jose, San Francisco and Seattle) in2011 was 16% of all degrees vs. New York City’s11%. San Jose is the top performer with 24% oftotal degrees being STEM degrees.113InfrastructureModernization MaintenanceAggressive investment in major capital projectsto upgrade the city’s aging infrastructure haspushed City debt to more than $100 billion.114Outstanding debt has increased by 86% since2002, partly to catch up with historic under-investment in infrastructure; and, debt service isforecast to rise by 28% over the next five years to$7.8 billion in annual expenditures.115CUNY Total 13.1LaGuardiaHostosBronxBMCCQueensboroughKingsborough10.57.58.522.013.812.0NOTES:1) CUNY community college 3-year graduation rates are for the Fall 2004 Cohort.2) Large city is deﬁned as a central city with a population greater than 250,000.SOURCE: CUNY; Integrated Postsecondary Education Data System Graduate RateSurvey, 2011–2012 the National Center for Education Statistics (NCES)EXHIBIT 3.11: CUNY’s Community College 3-year GraduationRates are Below National AverageCUNY 3-year Graduation RateNational average forlarge city public 2-yearsystems2: 15.3%
Partnership for New York City NYC Jobs Blueprint 35Students attending New York City institutions, public and private, are notfocused on subjects that are most relevant to opportunities in the job market.BusinessHumanitiesSocial ScienceHealthcareSTEMEducationOther12,64311,5304,10713,33832,38325,63418,011% CAGR, 2002–20112011 Degrees Awarded in NYC Schoolsby Specialization¹2.6126.96.36.199.87.9NOTE: 1) Data includes all completed post-secondary degreesSOURCE: McKinsey analysis of data from the National Center for Education StatisticsEXHIBIT 3.12: The Number of Degrees Awarded inHigh-demand Fields such as Healthcare and STEMis Low Relative to Other Fields of Study
NYC Jobs Blueprint Partnership for New York City36Debt service is a key driver of the out-yearbudget deficits. The Office of Management andBudget estimates that $6.4 billion of additionalcapital work is needed just to bring essential cityinfrastructure assets to a state of good repair(equal to 45% of the City’s capital commitmentplan for the current fiscal year).116This is exclusiveof the transit system and the public housing stock.Additional capital needs for the coming decadewill require significant upgrades to deal withrising sea levels and other effects of climatechange; completion of redevelopment in areaslike Willets Point, Jamaica Center, North Shore ofStaten Island, Long Island City and Greenpoint-Williamsburg; and expansion of renewal intoareas such as East New York, Red Hook, SunsetPark, the South Bronx and Astoria.Two particular infrastructure priorities for thebusiness community are airports and broadbandconnectivity. The region’s airports are respon-sible for nearly half a million jobs and more than$60 billion in annual economic activity,117yetthey have been underinvested when it comes toessential capital improvements. LaGuardia, JFKand Newark were ranked the 1st, 4thand 5thworstairports in the nation, respectively, by Travel andLeisure magazine citing dilapidated buildings,cleanliness, and substandard Wi-Fi signals.118 Debt Servicing$ Billions, FY2008–FY2012GO1MWFA2TFA3Other4.7 188.8.131.52FY2008FY2002 FY2007 FY2012FY2009 FY2010 FY2012NYC Government Debt Growth$ Billions, FY2002, FY2007, FY2012EXHIBIT 3.13: High Debt Service Has Been Driven by Capital Expansion56.474.7105.128.5184.108.40.206.813.317.134.513.621.028.242.36.4%p.a.NOTES:1) General Obligation bonds (GO)2) Municipal Water Finance Authority bonds (MWFA)3) Transitional Finance and Authority bonds (TFA)SOURCE: Citizens Budget Commission NYC Independent Budget Ofﬁce analyses
Partnership for New York City NYC Jobs Blueprint 37Adequate “new economy” infrastructure is apre-condition for continued growth of the city’stech sector. A City partnership with Google toinstall a free wireless network in Chelsea and theConnectNYC Fiber Challenge to bring wirelessservices to several underserved, low-incomecommunities are only a start to what must bea much larger undertaking.119Throughout thecity, there is a need to upgrade wireless servicesand increase redundancy, while keeping costsas low as possible. Established and new serviceproviders require access to public property andeasements in order to install the systems requiredto insure that the city, and its transit system,remain competitive.Increasing GlobalCompetitionThe Partnership for New York City-PwC 2012Cities of Opportunity report identified newcompetitive pressures that will result from theincreased economic clout of developing nations,as well as shifting consumption and lifestylepreferences that allow more cities to competefor talent and businesses. The global shift ofpopulations from rural areas to urban centers inthe developing world is creating unprecedentedopportunity in 440 emerging market cities thatare expected to generate almost half of globalGDP growth by 2025.120New York will have toup its game to maintain its status in a new worldeconomy.EXHIBIT 3.14: Necessary Infrastructure Maintenance Investments in NYCPreliminary Capital Plan, FY2014–2023NOTE: 1) Includes administration of Justice, Housing development, technology, parks, publicbuildings, health hospitals, ﬁre, culturals and libraries, social servicesSOURCE: New York City Preliminary Ten-Year Capital Strategy, Fiscal Years 2014–2023Schools ($19.7 Billion)Environmental Protection ($12.2 Billion)Bridges Highways ($7.4 Billion)Sanitation ($1.3 Billion)Mass Transit ($0.5 Billion)Government Operations1 ($9.8 Billion)19%3%14%24%39%1%100% = $50.9 billion
NYC Jobs Blueprint Partnership for New York City38The BlueprintSection 4
Partnership for New York City NYC Jobs Blueprint 39To remain the world’s leading city of opportunity for business and residents,New York must maintain a solid rate of economic growth. To some extent,the pace of growth will be determined by macroeconomic forces andfederal policies over which municipal government has little or no control. Inpartnership with the business community, organized labor and educationalinstitutions, however, local government can anticipate and leverage marketforces and apply municipal resources in ways that work to the city’s advantageand sharpen its competitive edge.This will require the City to identify and support those industries andemployers that can generate new jobs and those educational institutionsthat are best preparing the students who aspire to them. It will also requirekeeping the city’s “livability quotient” high by maintaining quality municipalinfrastructure and services in the face of severe fiscal constraints.The NYC Jobs Blueprint suggests benchmarksthat the next Mayor could use to pursuereasonable aspirations for growth andopportunity in five key areas:• More Better Jobs• Better Educated Skilled Workers• Greater Connectivity Accessibility• Safe Affordable Living Environment• Efficient, Disciplined Well-Run CityGovernmentThe Blueprint also suggests the creation oforganizational structures for advancing theopportunity agenda, reflecting the need formore robust public-private and business-laborpartnerships.
NYC Jobs Blueprint Partnership for New York City40Measures of Success: What the City Must Strive to Achieve by 2020Real GDP GrowthProductivity GrowthUnemployment ReductionSupporting rationaleThe “modest” aspiration matches SiliconValley’s productivity growth of 2.7% overthe past decade (2002–2011); 3.0% is theproductivity growth necessary to reach realGDP growth of 3.8% while maintainingemployment growth relatively in line withhistorical norms (0.8% per year would beneeded; New York City had 0.6% per yearemployment growth from 2002–2011).Supporting rationale4.6% was the low during the lastbusiness cycle (12/07–6/09), both forNew York City and for the U.S. as awhole; 4.2% was Silicon Valley’s lowduring the last business cycle (thelowest among peer U.S. cities).Recent historical trendRecent historical trendModestModest3.0%4.2%2.7%4.6%1.1%9.5%AmbitiousAmbitious% CAGR from2002–2011as of January 2013Real GDP GrowthSupporting rationaleInternational peer cities (Shanghai,Singapore, Hong Kong, London, Toronto,Sydney, Paris and Berlin) have grownreal GDP at 3.4% per year over the pastdecade (2002–2011), and have grown at4.3% since the Recession (2009–2011);3.8% is roughly the mid-point of thesegrowth rates.Recent historical trendModest3.8%3.4%3.1%Ambitious% CAGR per year sincethe recession (2009–2011), up from 1.7% peryear over the decade(2002–2011)Middle-wage Job CreationSupporting rationale61,000 jobs would restorethe number of middle-wagejobs to 2005 levels, 101,000jobs would restore to thepeak of middle-wage jobsin 2008.Modest (4.3%)+101,000+61,000Ambitious (7.2%)Jobs TargetJobs TargetRecent historical trend-2.3%% CAGR from 2008–2011, 101,000 jobs
Partnership for New York City NYC Jobs Blueprint 41More Better JobsEconomic growth and accelerated job creation inthe decade ahead will depend on the ability ofstartups and middle market firms to reach biggerscale, particularly those in technology and other“tradable” sectors that export goods and servicesto markets beyond the five boroughs. It will alsodepend on increased productivity growth in thehealthcare, education and government sectorsand, finally, on stabilizing legacy industries thatanchor the city economy. The following areproposals for how the next Mayor could pursuethese objectives in order to achieve benchmarkaspirations for real GDP growth, productivitygrowth, middle-wage job creation, and reductionin unemployment.Build Urban “Tech Campus” Developmentsin Every BoroughNew York City offers no urban version of theWest Coast tech campus environments thatinnovators and millennials find compelling.Cornell-Technion’s campus on Roosevelt Islandis designed with this atmosphere in mind, butthis will only accommodate their faculty andaffiliates—a small fraction of the demand that willaccompany growth of the city’s tech sector. Withthe expansion of the Tech Triangle surroundingMetrotech and NYU/Poly’s CUSP, DowntownBrooklyn is a likely place to foster a live-workcampus environment as are the Sunset Park andLong Island City waterfronts, Staten Island’sNorth Shore and the Port Morris and Eastchestersections of the Bronx.Opportunities for tech campuses includeunderutilized properties that require adaptivereuse—such as obsolete hospitals, armories,and Class B office and manufacturing space.The Urban Tech Campus would include verticallive-work communities and “flex” work spacefor the growing creative, tech, health andadvanced manufacturing sectors. The conceptof inclusionary zoning, that has helped stimulateprivate development of affordable housing,should be expanded to incentivize developmentof commercial and industrial space in mixed usezones that is affordable to growing companies.The Partnership Fund is prepared to invest$20 million in the commercial component of acampus for entrepreneurs and tech startups.A good model is Las Vegas, where Zapposis leading development of a campus on thegrounds of the old City Hall.121The projectwill be anchored by the Zappos’ companyheadquarters and will include work-life integrationwith housing, education, and technologyincubation. These developments will need to belong-term commitments, but an initial projectwould reinforce the city’s brand as a center oftechnology and innovation.Replace Non-Strategic Economic Develop-ment Programs with Jobs Tax CreditsFor the state and city to compete effectively toattract job creators, there must be an overhaulof obsolete economic development incentives,most of which were created long ago bystate legislation. The City currently offers nodiscretionary incentives that encourage creationof middle-income jobs, such as New York State’sExcelsior Program. Instead, the City administerstax and bond financing incentives that arepoorly targeted, have little multiplier value inthe economy, and are not sufficiently robustto make New York competitive in high-growthsectors. To accelerate business expansion andmiddle-income job creation, the city needs anew Jobs Tax Credit, similar to Excelsior, whereincentives are tied to creation of high qualityThe Partnership Fund is prepared to invest $20 million in thecommercial component of a campus for entrepreneurs and techstartups, including access to affordable housing.
NYC Jobs Blueprint Partnership for New York City42jobs, rather than geography, and limited totradable sectors that advance the city’s goals foreconomic growth. This will require legislation byState government to curtail or redirect existingprograms and authorize new ones.Reinforce the Financial Services SectorThe financial services sector accounts for 13.8%of private sector jobs in the city, but with averagesalaries of $213,000 it represents 35% of thecity’s total private sector payroll.122It is essentialto achieve stability or modest growth in financialservices jobs over the next decade. This canbe accomplished through retention of currentfirms, attraction of new firms from Europe andthe developing world, and growth in financialtechnology businesses. It will require a proactivemarketing program and supportive business,regulatory and tax environment in the cityand state. The declining business climate andescalating regulatory pressures in Europe willcause many European-based firms to relocateoperations in the next decade. New York is themost likely beneficiary of these relocations, unlessthe regulatory and tax environment is too harsh,in which case Asia’s accelerated dominance ofglobal finance is almost assured.Accelerate Sector DiversityTraditional sectors (finance, construction,government, healthcare, professional services,education, retail and food) make up 66% of thelocal economy, while emerging sectors contributejust 17%.123In the last decade, emerging sectorsincreased their share of the city’s GDP by almost3%, so a goal of reaching 20% of GDP in thenext decade is in line with current trends.124Technological transformation of legacy industriessuch as financial technology, health informationtechnology, and big data applied to marketingand advertising, is driving diversification which thecity can support through marketing, promotionaland programming activities.EXHIBIT 4.1: NYC Has a Lower International Export Intensity than its PeersInternational Exports of Goods and Services$ Billions, 2010% of GDP% Goods% Services5.5 13.3 12.3 11.1NYC SiliconValleyLA Chicago• All other cities have roughly doublethe level of NYC’s export intensity• However, NYC SMEs1 perform wellboth internationally and domestically• In New York State SMEs account for47.6% of all exports (2005)• ~34% of all food manufactured inNYC is sold to markets outside theﬁve boroughs and is predominantlyhigher-value specialty foods (e.g.,chocolate, ethnic foods, spices andgourmet jam)• Promoting international exports canbe expensive (e.g., representatives ininternational markets) but was themajor source of growth during thepast few years as domestic marketscontinue to be sluggishNOTES:MSA level data1) Small and Medium-Sized Enterprises (SMEs)SOURCE: McKinsey analysis of data from Brookings; U.S. Census Bureau; New York Industrial Retention Networkand Fiscal Policy Institute; Small and Medium-Sized Enterprises and the Global Economy, edited by Gerald Susman$31.28734413513665965$54.6$88.7$54.9