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In Big Projects, Where Do The Jobs Go?

by Hilary Russ, Apr 19, 2004
 

If Ikea has its way, the old maritime community of Red Hook will soon be home to the chain's largest store in the country. The massive furniture and housewares store could bring 9,000 cars a day to the area near the Gowanus Canal and will certainly change the character of the neighborhood. So as part of its pitch to sell throw pillows with Swedish names, meatballs in lingonberry sauce and birch veneer storage units on the Brooklyn waterfront, Ikea has promised jobs. On its Web site, Ikea pledges to create 500 to 600 new jobs, many filled by community residents. And the company says these are not dead-end, low-paying jobs but positions offering competitive salaries, health benefits and tuition reimbursements as well as training and growth opportunities.

The pitch has apparently convinced Dorothy Shields, a community activist and retired teacher's aide. "Hundreds of people need jobs," she told Newsday. "It will stop a lot of people doing things that are against the law."

The controversy over Ikea is being echoed throughout the city. With every new project put forth -- the West Side stadium for the Jets, waterfront development in Long Island City for the 2012 Olympics, the Nets arena in downtown Brooklyn -- the developers and the politicians that back them promise jobs. This is as it has always been, and, as in the past, it is an enticing prospect in a city with a current unemployment rate of 8 percent, more than two percentage points higher than the national level.

Such new projects are a linchpin of the Bloomberg administration's strategy to improve the city's economy and put its residents to work. Rather than focus on manufacturing or new industries such as biotechnology, the city has zeroed in on big events, such as the forthcoming Republican convention, and big projects. But do such projects really create jobs? If so, are local residents the ones who get them? And just how good are the jobs?

NEIGHBORHOODS TRANSFORMED, OR NEGLECTED IN A NEW WAY?

Seen from one perspective, East New York, the neighborhood in Brooklyn once called the murder capital of the city, was transformed into a kind of urban fairy tale, when 50 acres of rubbled wasteland became the site in 2000 of the Gateway Center, a new mall.

Related Companies and Blackacre Capital Partners spent $192 million to create the mall, which offers 640,000 square feet of stores, including Target, Old Navy, BJ's Wholesale Club and Babies R Us, as well as a new exit ramp off of the Belt Parkway. The mall, developers claimed, created 1,700 permanent jobs.

Supporters of this project and others like it say that they create revenue and provide a magnet that can lure potential customers to a neighborhood where they will patronize older businesses along with the new mall.

"It's a no-brainer. The city gets net new jobs without thinking twice about it," says Patty Noonan of the Partnership for New York City, a research and advocacy group composed of business leaders. While construction brings noise, dust, dirt and closed sidewalks, such inconveniences are "all signs that people want to live and work in these places. They're generally positive economic indicators," Noonan says. And she says some new projects can create prized office jobs as well as retail and food service position. They "provide the cutting-edge space that companies want," she says.

For others, however, the signs do not bode so well. Corporations get huge tax breaks, but do not always create all the jobs they claim they will. And while a new project might generate revenues, the money goes straight to the city, not necessarily to the neighborhood most affected. Many new big box stores and malls are occupied by out-of-town business that may offer the best jobs to suburbanites and give the poverty-wage work to city dwellers. All this can leave some residents feeling trampled.

New York City Councilmember Charles Barron, whose East New York district includes the new Gateway Center shopping mall, says the jobs created have hardly been worth the hype and inconvenience for area residents. "The jobs offered are entry-level, minimum-wage jobs," he says. "The management positions go to people outside of our community, to white people."

DO BUSINESSES DELIVER ON THE JOBS THEY PROMISED?

Statistics from other projects provide reason for skepticism about some of the businesses' claims. State Comptroller Alan Hevesi released an audit in March that showed businesses do not always deliver the jobs they say they will. The audit, which did not cover New York City, examined the effectiveness of the Empire Zone program, the state's plan to foster economic development in poor areas by giving businesses special tax breaks and other incentives. Hevesi's staff examined 375 businesses and found that they had created a total of 2,380 fewer jobs than they estimated they would when they applied for the program. In fact, almost a quarter of the businesses surveyed had actually cut workers. And in many cases, the companies received tax breaks that far exceeded the benefits, including new jobs, that they provided for their communities. In fact, the report said, 34 businesses that cut workers "apparently improperly claimed certain tax breaks totaling approximately $2.4 million."

Administrators of the Empire Zone program say that Hevesi's office ignores that fact that the size of the tax breaks is usually determined by the actual number of jobs created, not the projected figures. But some businesses made up numbers or did not report at all, and the state does not always check the figures, a 1995 state comptroller's report found. This means that numbers of estimated new jobs, as well as some accounts of actual jobs created, are as diaphanous as a spider's web before a raging rhino.

To address similar problems in New York City, the City Council in 1993 enacted a law that requires the Economic Development Corporation to report on the tax abatements, low-cost loans, and other financial incentives it gives businesses. Aimed more at companies that get benefits from the city for retaining, rather than creating, jobs, the law directed the development corporation to issue a report every year on deals that are worth over $250,000 or that cover preservation of at least 25 jobs.

In a 2001 analysis of seven such reports, the Independent Budget Office found that the reporting law had not accomplished what it set out to do. In fact, the annual reports regularly understated the cost to the city of job retention arrangements and exaggerated the positive effects. Although it did not mention specific companies, the budget office also found that some data was unreliable because it does not have to be verified. "Firms appear to be under no obligation to live up to their jobs created' projections in order to maintain the benefit received," the budget office found.

WHO GETS HIRED?

Development projects spawn temporary construction jobs as well as permanent positions. Rebuilding Lower Manhattan, for example, is expected to generate 10,000 construction jobs each year for the next 13 years. World Trade Center leaseholder Larry Silverstein has pledged to make sure that construction contracts go to minority- and women-owned businesses, which have long been underrepresented in their contracts with the city.

But not everyone takes special steps to ensure that those who need jobs wind up getting them. National chains often bring in outside workers for construction jobs and some management positions, says Perry Winston, architectural director at Pratt Institute Center for Community and Environmental Development. "National firms have national constituencies, or regional firms have regional constituencies, for hiring retail as well as construction. It's hard for them to come in and determine who is a good local contractor," explains Winston.

And many of the businesses at Gateway are from outside the area. The center had three spaces for family-style restaurants. But owners of the local 280-seat Lindenwood Diner (where John Gotti used to confab) felt left out. "All of these big restaurants are going in and we were never offered anything," owner Nick Tsakonas told the Daily News. "We've been in this community 32 years. We have over 60 employees. Everybody knows us. We're very upset. We've been trying to contact them, but we can't seem to get anywhere." Instead, the restaurants in the mall, such as Olive Garden and Red Lobster, are nationally owned chains that can fork out high rents of $30 per square foot.

LOCAL JOBS FOR LOCAL PEOPLE

But even when national chains operate the businesses, local residents can get the jobs. In 2002, the construction of the Time Warner Center, a glass and steel behemoth on Columbus Circle, was wreaking havoc with 3,000 construction workers raising noise and dust.

So New York City Councilmember Gale Brewer thought her constituents should get some jobs in return. Every week for six months, city and state officials, as well as general contractors, building management and shop owners met regularly to coordinate outreach and hiring procedures.

As chair of the City Council's technology committee, Brewer helped put together a web site that job-seekers could use to find jobs in the building. Time Warner Center's managers, Related Management Companies (subsidiary of Related Companies, developers of both the Time Warner Center and the Gateway Center), footed the bill for the web site.

The businesses were hesitant at first. "They were scared," Brewer says. "The private sector doesn't trust the government. . . They thought, "Why should we work with them?'"

One reason was that the city offers consulting services on regulations mandated by Equal Employment Opportunity, the Disability Act and other laws. The luxury Mandarin Oriental Hotel, for example, canceled its contract with a private company that advised them on these issues, says Brewer, "when they found out the city could do it for free."

Much of the effort focused on the Mandarin Oriental Hotel, which had been bombarded with job seekers. The city Department of Small Business Services narrowed down the 6,000 applications to about four for each open position and passed them on to the hotel's human resources department, which did the hiring.

In the end, nearly 70 percent of the 389 new hires at the five-star hotel were from New York City: 90 Manhattanites got jobs. Brewer estimates that her constituents from the West Side made up 20 percent of all those hired. Mandarin also brought on hotel and restaurant workers, including former Windows on the World staff, who had been displaced by the September 11 terrorist attacks.

The entire process was a first for the city, and the city hopes to replicate it in all five boroughs. With the Fulton Fish Market slated to relocate to Hunt's Point by the end of the year, the Department of Small Business Services is working with the area's economic development corporation, community-based organizations and other parties on outreach, hiring and training of new employees.

THE QUALITY OF JOBS

The lowest paying hotel job at the Mandarin pulls in about $16 per hour, plus benefits. That is because in New York's hotel industry, workers are unionized.

Early on, Mandarin signed a neutrality agreement with the Hotel Trades Council, an umbrella group for the city's nine hotel workers' unions. "Management was very cooperative. It is an agreement, and they kept their end," says union spokesperson John Turchiano. "Rather than getting into any types of fights, they said it's smart business." In return, workers got full medical coverage, pension plans, family benefits, access to scholarships and a legal fund, and salaries ranging from $30,000 to over $100,000 a year.

Not all the jobs at the Time Warner Center are as good. Whole Foods, for example, opposes having a union represent its employees.

And whatever the success of the effort at the Time Warner Center, other communities have had a more difficult time. In 2002, for example, residents of Canarsie, another neighborhood near Gateway, complained that they were not being notified of job openings at the center. "My impression is that Canarsie is being left out and shut out again," Reverend Matteo Rizzo of the Informed Voices Civic Association said at a community meeting.

And Barron says that what happened on the West Side of Manhattan, he says, is "not what happens in communities of color. We do meet with everybody, we make those demands," but still do not get good jobs. “I’m not demeaning anybody’s labor, but these are entry-level jobs,” says Barron. It might be more tolerable if at least the store was owned by a local entrepreneur. But when the owners are out of state millionaires, it raises his ire.

"There's a difference between economic development and economic exploitation," he continues. "When you give a corporation a tax break to hire us on a minimum wage basis, that's straight up exploitation."

Workers in some Home Depots have complained of salaries of only $10 to $12 an hour and say they do not get overtime pay that they are entitled to.

Whatever their failings, the big corporations may offer better salaries and benefits than small neighborhood businesses. One assistant manager at the Home Depot in Gateway Center told the New York Times, "It's a good thing to be able to get a job right here in the neighborhood, a job with benefits, not some mom and pop place way off in the city." His boss told the Times that of the 248 jobs filled at Home Depot, 200 hailed from around East New York.

But the question is whether government and business can do more to create better opportunities for the residents. "Of course [the new projects] are going to create jobs," says Bettina Damiani, project director of Good Jobs New York, which tracks corporations receiving tax breaks. "The real issue is what's the quality of those jobs. Do you create job ladders and training? There's not a citywide policy that would guarantee those things would happen."


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