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We know the story well. Some sweeping disruptive force—an economic crisis, a policy shift, a new technology, or a combination thereof—leads to regional disparities in economic fortunes. Certain locales blossom into vibrant economic hubs while others are left languishing behind.
This easily reads as the story of Rochester’s past. Our region began transforming into a trade and manufacturing hub with the completion of the Erie Canal 200 years ago, benefiting further generations as homegrown tech companies like Eastman Kodak, Xerox, and Bausch & Lomb drove decades of growth. Then came the disruption of automation technology and globalized supply chains in the late 20th century, which led to outsourcing, offshoring, and the hollowing-out of the workforce that was the lifeblood of our local economy.
But read again, and the story above could just as easily be that of our future. The rapid rise of artificial intelligence and large language models like OpenAI’s ChatGPT is poised to create significant upheaval in the labor market, and at least one academic paper asserts that the Rochester region may be the beneficiary of disruption.
Analyzing the impacts of AI disruption
LLMs stand to alter the economic geography of the United States, just as technology and globalization sent Rochester and other rust belt cities into recession and spurred outmigration of workers from our region.
The manufacturing shock of the late 20th century primarily impacted blue-collar workers whose functions could most readily be replaced by automation and cheap foreign labor. At risk of being left behind, many of these workers adapted to pursue opportunities. Some sought college degrees to qualify for knowledge-based occupations that were in greater demand. But also, importantly, many migrated from hard-hit inland cities in the Northeast and Midwest to urban coastal regions less adversely affected by the manufacturing decline.
The result was a population shift that led to significant regional economic disparities. The “rusting” of former manufacturing powerhouse cities like Rochester was mirrored by the flourishing of traditional coastal white-collar strongholds like New York, Boston, and San Francisco, as well as the emergence of vibrant new technology hubs like San Jose in California’s Silicon Valley.
In a recently published study, labor economists Scott Abrahams and Frank Levy use lessons from the rust belt experience to analyze the potential downstream effects of the technological transformation posed by the adoption of LLMs. Their paper considers how the adaptation of displaced manufacturing workers in the past can inform how workers threatened by LLM disruption can adapt in the future.
Abrahams and Levy predict that LLMs will impact nearly 20 percent of the workforce, particularly white-collar, college educated workers in occupations like accounting, legal research, and administration. AI is expected to disproportionately impact urban coastal regions with large concentrations of highly educated workers.
Education and training can equip these workers with skills that complement AI rather than compete with it. Those who experience a loss in income and job opportunities will seek such human capital development. The study also predicts workers will follow patterns of the past and adapt by pulling up stakes and migrating to where opportunity lies.
Where will the workers go? Abrahams and Levy present the following factors for consideration:
■ The displaced workers will find more opportunities in cities whose workforce has lower direct exposure to LLM disruption—diverse local economies composed of industries that rely on specialized technical knowledge and AI-complementary skills.
■ Highly educated white-collar migrants can be expected to gravitate toward cities inhabited by others with college degrees, as research demonstrates college graduates’ preference for living among others with similar levels of education attainment.
■ These modern 21st century post-pandemic workers are also likely to place a premium on “big enough” cities—larger than median size—with relatively affordable housing and access to at least some of the amenities that large urban centers offer.
Sure enough, when Abrahams and Levy compiled a list of 23 large metropolitan areas with low employment exposure to LLMs, high education levels, and relatively affordable housing costs, Rochester made their list. The Buffalo metro area does as well, as do other rust belt regions like Milwaukee, Akron, and Scranton. Here’s the list:
| Top metropolitan areas with low employment exposure to LLMs, high education levels, and affordable housing costs | |
| Akron, OH | Jackson, MS |
| Allentown, Bethlehem, Easton, PA-NJ | Little Rock-North Little Rock-Conway, AR |
| Augusta-Richmond County, GA-SC | Louisville-Jefferson County, KY-IN |
| Baton Rouge, LA | Milwaukee-Waukesha, WI |
| Birmingham, AL | New Orleans-Metairie, LA |
| Buffalo-Cheektowaga, NY | Oklahoma City, OK |
| Chattanooga, TN-GA | Rochester, NY |
| Columbia, SC | Savannah, GA |
| Dayton-Kettering-Beavercreek, OH | Scranton – Wilkes-Barre, PA |
| Greensboro-High Point, NC | Toledo, OH |
| Greenville-Anderson-Greer, SC | York-Hanover, PA |
| Houston-Pasadena-The Woodlands, TX | |
The list also includes metro areas outside the rust belt such as Chattanooga, New Orleans, Oklahoma City, and Savannah. The rusting experience led many mid-sized cities like Rochester to naturally evolve to embody key attributes today that happen make them likely beneficiaries of a workforce migration resulting from LLM disruption.
An influx of highly educated and motivated workers ready to remake themselves for success in an AI economy would be good for the Rochester region. While this doesn’t necessarily translate to Rochester becoming the next San Jose, the potential impact that this population shift could have on our local economic landscape needs no elaboration.
Sowing the seeds of Rochester’s AI future
There are reasons to be bullish about Rochester’s future in the burgeoning AI economy. The Economic Development Administration selected the “NY SMART I-Corridor” as one of its Regional Technology and Innovation Hubs. That designation (and the $40 million that came with it) can help reshape our region as a semiconductor powerhouse. Convened by OneRoc, the Buffalo Niagara Partnership, and CenterState CEO, the initiative is a coalition of more than a hundred organizations. Two cautions, however: A big coalition is helpful when securing public money but the cost of coordination can be significant. Second, no federal money is safe under the new Trump Administration. In his recent address to Congress, President Trump urged the Speaker of the House, Mike Johnson, to end the CHIPS and Science Act of 2022, source of the Tech Hubs’ funding.
But the existing structural advantages that make Rochester an attractive destination for labor market refugees displaced by LLMs deserve the attention of leaders as well. These attributes, while markedly less exciting than multimillion dollar spending initiatives, deserve to be touted and nurtured so that our local economy can attract skilled workers displaced by AI. Local leaders ought to consider the following:
■ Rochester evolved into a diverse regional economy despite relatively high taxes and burdensome regulations. Making the local economic environment any more unfavorable to entrepreneurs and small businesses that provide jobs risks compromising this advantage.
■ The region’s education infrastructure is world-class. While highly educated displaced workers are unlikely to pursue new degrees, our local institutions could be leveraged to provide training in new skills through workforce development and reskilling programs.
■ Our cost of living, particularly our supply of relatively affordable housing compared to other areas, is one of the area’s primary assets. Measures that facilitate expanding the supply of housing would nurture this asset, while demand-accelerating measures will do harm.
In my day job, I work to help promote the financial success of families, businesses, and nonprofit organizations throughout our region. Their well-being is dependent on the success of the local economy, and vice versa. Our region is poised to benefit from the potential influx of highly educated and motivated workers displaced by the AI economy. It’s an exciting opportunity we ought not squander.
Eric W. Morris is portfolio manager and staff economist at Alesco Advisors.
The views and opinions expressed in this article are solely those of the author, Eric W. Morris, and do not necessarily reflect the views of Alesco Advisors LLC. This article is for informational purposes only and does not constitute investment advice. Any references to economic or market trends are based on publicly available information and are not intended to predict future performance. Alesco Advisors does not guarantee the accuracy or completeness of third-party research cited.
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Well said and insightful! Editors: I didn’t see an LLM definition anywhere! Here is one I looked up: A large language model (LLM) is a type of artificial intelligence (AI) that excels at processing, understanding, and generating human language. LLMs are useful for analyzing, summarizing, and creating content across many industries.
This doesn’t sound like good news to me. Rochester’s economic strength has historically relied upon a well-educated workforce. The Big 3 demanded highly educated employees and our local universities were happy to oblige. If our future is to be a place of refuge for those who can’t compete in an increasingly technology-based work environment, we are simply whistling past the graveyard.
While all of this is true, there is one fact we’re ignoring here. The primary impact of LLMs and their inevitable implementation is going to be on the very workers ALREADY negatively impacted by the “rust belt” collapse of the manufacturing era. And those impacts will be doubly felt in that community as they fall further and further behind the employable demographic due to their lack of skills, and poor education exacerbated by endemic poverty. What you say above is definitely an opportunity for the already educated and the already rich. But unless we have a plan to pull those who are already behind the 8-ball (so to speak) up with us we’re going to continue to struggle as a city to succeed and be relevant. We can’t continue to ignore that productivity improvements typically affect blue collar workers long before and more deeply than they affect white collar workers. We need a plan to change that.
Also while LLMs are a relevant technological breakthrough they are by no means the end-game of AI. Think of them as “baby AI” – in it’s infancy with plenty of room to grow and become more adept (I’ve worked in this industry for 42 years – and can spot a trend when I see one).
Since, eventually, AI can be used to improve itself, this growth and change may be exponential. As such to be positioned to succeed in an AI dominated world we need to consider that – as AI does become capable of replacing people across the spectrum of employment, including white collar jobs, how does that affect how we look at work, livability, employment, productivity, poverty, wealth and other factors that will also be disrupted. To see some of THOSE possible futures I’d suggest a good background in Science Fiction (which is rapidly becoming science fact) because those are ethical issues we will soon be facing – otherwise it’s just going to be another rust belt – only this time in both white and blue collar worlds.
Also good luck building new houses when Canada invokes a retaliatory tariff on wood – which we buy 70 percent of ours from them. Tariffs are stupid. Just a side fact.
Interesting thought experiment. (a good exercise to look at the future) . At first glance it makes me think of the Beach Boys song “Wouldn’t it be nice”. I’m trying to imagine what the brochure would look like. “Free snow shovels and no worry about sun over exposure”. Given NYS in general has a population flight problem (>500,000 since covid) , I have a mental block thinking about people flocking here. The article is smart in the realization that this is a high-taxed and highly regulated area. Interesting conclusion that it can attract people in spite of that (instead of reform from Albany on down). In reading local media for the last few years, it gives me the perception there is pressure on housing supply in the greater Roc area (ie not a lot of slack to support growth) . NYS College system has historically been well thought of, however it sure looks to me like they are trying to dumb it down with reconfiguration of the Regents. The article is right to question the future of Chips funding. This effort has always been part “pipe-dream” as I’m familiar with the industry and this region does not have tech workers to support this today.(It was also configured to be a Union boondoggle) I’m also concerned about the anecdotal Crime stories I read . Just read one where a car was stolen from a “secure” UofR parking lot, and even though the car was found, the Police were limited in their pursuit or the perps. Cat Converter theft from the Strong parking lot? (Not to mention that a Union supported Gov is stripping benefits from striking Prision Guards) Not going to attract the desired residents if that’s the narrative. It certainly would be nice if white collar opportunities gravitated here. I see a tough path toward that end.
Housing is a key as you suggest … I do disagree however with the implication that the current “supply of relatively affordable housing” is as good as you make it sound.
Given the significant opportunity implications of your article, it behooves government and business leaders to move beyond their respective silos in creating a model to solve what essentially is a housing crisis at all levels whether rentals, single units, affordable, “missing middle” housing, low income, and more. A key is that zoning codes have to be updated across the area to allow this to happen.
It is highly recommended that the Chamber of Commerce, the County Exec., and the City Mayor jointly put out a call for a Housing Summit with the goal of resolving this crisis within 3-5 years and become a model for the country. As validation of the crisis, please listen to Evan Dawson’s ‘Connections’ program on WXXI earlier this week.