Lady Liberty in New York harbor looking outwards from New York. Is she welcoming the world to New York, or pointing the direction to greater freedom for New Yorkers?
Wikimedia Commons / Elcobbola

Any survey of progressive blue states  losing people and companies to other, predominantly red states would be incomplete, even for a partial list, without a look at New York State. Since we have already examined the exodus from the blue states of Illinois and California, it is New York’s turn to be in the dock.

A Growing Exodus of People From New York State

The absolute size of New York state’s population  since 2014 has remained roughly static at around 19.7 million, as can be seen from the time plot from the Federal Reserve Economic Database (FRED), which obtained its data from the U.S. Census Bureau. The blue curve is the population amplitude,

while the red curve is its percent change from a year earlier. As you can see from the red curve, the population growth rate has been decreasing roughly linearly since 2011 and reached essentially zero in 2016. (Its 2016 growth rate was actually negative at -0.010 percent.)

Nevertheless, the state has been able to avoid actual population decline since 2010 only because of births and international migration. Actual net in-migration from other states has been negative, i.e. there have more New Yorkers leaving for other states than arriving from them. Earlier this year, Politifact New York demonstrated this with the following plot of net New York migration. Note from the last bar on the graph that the cumulative outmigration from April 2010 to July 2016 was approximately 800,000.

Notice also the trend of out-migration — and therefore of future absolute population loss — is accelerating. A December 2015 article in the American Interest quoted an outfit called the Empire Center, which keeps track of New York State spending and taxation.

During the 12 months ending last July 1, 153,921 more residents moved out of New York than moved into it from other states, according to the U.S. Census Bureau’s annual update of population estimates. The Census Bureau also slightly increased its estimate of New York’s prior year (2013-14) outflow to other states, to a new total of 160,329.

The latest estimates bring New York’s total “net domestic migration” loss since the 2010 census to 653,071 people [from 2010 to 2015]—the largest such decrease of any state, both in absolute terms and as a percentage of estimated population as of the start of the decade.

The reasons for the accelerating out-migration are not hard to find, being essentially the same as for the blue states of California and Illinois: Heavy taxes and economic regulation. The ALEC-Laffer state economic outlook rankings for 2017 rank New York state dead last in promise for growth, although it is ranked right in the middle (number 24, just ahead of Kentucky) in terms of its cumulative performance in the decade between 2005 and 2015. The state was ranked dead last in the top marginal corporate income tax rate and next to dead last for its top marginal personal income tax rate. The state’s debt service was 8.9 percent of its revenue.

A July 2015 Forbes Magazine post, States Where Regulations Harm Small Businesses The Most, ranked New York among the ten worst states for business regulation. The essay credits the following policies for the poor regulatory environment: lack of right-to-work laws; excessive family leave mandates; greater energy regulatory burdens (New York prohibits fracking techniques for getting oil, which have been an important driver of the economy since 2009); stricter land use regulations; more expensive worker compensation regulations; and higher unemployment insurance costs.

Concerning people’s motivations for leaving the state, the American Interest article speculates,

The Empire Center doesn’t say why residents are leaving, but we can think of several possible reasons: high taxes, high unemployment upstate, high housing costs in the City, and a large (and corrupt) bureaucracy—for starters.

. . . When the blue model succeeded, it did so because the private-public partnership delivered a stable income and safety net to millions of people. That system hasn’t worked for years, and residents of the bluest states are realizing it’s time to try something new.

Other information that is very difficult to find is the economic status of New York state refugees. Nevertheless, one strongly suspects that like California, they are comprised mostly of New York’s erstwhile poor and middle class. Over the last five years, the incomes of the Empire State’s middle class households grew by 4.4 percent, or 0.88 percent per year. With an inflation rate of around two percent according to the CPI, the middle class have actually been losing income in real terms. With a very high cost of living (USA Today rates New York as the third most expensive state. Hawaii is number one, and Washington, D.C. is number two.), the middle class and poor must flee to survive.

It is hugely ironic that progressive state governments such as in New York, California, and Illinois, supposedly dedicated to the welfare of the poor and the middle class, are actually causing those demographics to flee for their economic survival.

No Great Exodus of Companies from New York Yet!

“There is a great deal of ruin in a nation,”  opined Adam Smith in 1777 to a young friend worried about British reverses during the Revolutionary War. Ever since then this quote has usually been taken to mean a country’s political leaders must bungle affairs greatly to bring down a powerful and prosperous state.

This observation is certainly relevant for New York state, which if it were an independent  country would have the 17th largest world economy, and an army made up of the New York City Police Department would be the twentieth best funded army in the world. For much more than a century, New York City and New York state have been the financial capitols of the United States.

This is the only explanation that occurs to me as to why no real evidence for an exodus of companies out of New York à la California can be found yet. Nevertheless, as New York loses its middle class, and as New York taxes continue to rise, eventually the state must reach a breaking point at which companies themselves must begin to take flight.

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