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Article

April 2019

Recent trends in employment and wages in New York City’s finance and insurance sector

The finance and insurance sector has traditionally been considered as one of the most important sectors in New York City’s economy. While employment in the sector remains below pre-9/11 levels, it has gradually recovered since 2010. The sector continues to play an important role in the city’s economy, particularly in terms of wages and its contributions to output and tax revenues. However, wages in the sector remain disproportionately concentrated at the top of the earnings distribution, resulting in above-average wage differentials and higher levels of labor income inequality.

According to the U.S. Bureau of Labor Statistics (BLS), “the financial and insurance sector comprises establishments primarily engaged in financial transactions (transactions involving the creation, liquidation, or change in ownership of financial assets) and/or in facilitating financial transactions.”1 The three principal activities performed by firms in the finance and insurance sector include (1) providing financial intermediation (i.e., raising financial capital by issuing securities, making loans, purchasing financial assets, and transferring or repackaging securities, etc.), (2) pooling risk by underwriting insurance and annuities, and (3) offering specialized services to facilitate financial intermediation, insurance services, and employee benefit programs.2

The finance and insurance sector (North American Industry Classification System [NAICS] 52) includes the following subsectors: (1) monetary authorities—central bank (NAICS 521), (2) credit intermediation and related activities (NAICS 522), (3) securities, commodity contracts, and other financial investments and related activities (NAICS 523), (4) insurance carriers and related activities (NAICS 524), and (5) funds, trusts, and other financial vehicles (NAICS 525).3

The finance and insurance sector is an important source of employment at the national level. In 2016, it employed a total of 6,161,000 full-time and part-time workers in the United States, representing 4.1 percent of the country’s total full-time and part-time workers and 4.9 percent of all U.S. private sector workers. (See table 1.)

Table 1. Full-time and part-time employment in U.S. finance and insurance sector, 2016 (in thousands)
IndustryLevel

Total full-time and part-time employment

148,658

Domestic industries

150,263

Private industries

125,682

Finance and insurance (NAICS 52)

6,161

Federal Reserve banks, credit intermediation, and related activities (NAICS 521 and 522)

2,629

Securities, commodity contracts, and other financial investments and related activities (NAICS 523)

922

Insurance carriers and related activities (NAICS 524)

2,599

Funds, trusts, and other financial vehicles (NAICS 525)

10

Note: NAICS = North American Industry Classification System.

Source: U.S. Bureau of Economic Analysis.

The subsectors accounting for the largest shares of total U.S. finance and insurance sector employment in 2016 were (1) Federal Reserve banks, credit intermediation, and related activities (2,629,000 employees, or 42.7 percent), (2) insurance carriers and related activities (2,599,000 employees, or 42.2 percent), (3) securities, commodity contracts, and other financial investments and related activities (922,000 employees, or 15 percent), and (4) funds, trusts, and other financial vehicles (10,000 employees, or 0.2 percent).

The finance and insurance sector has a large value-added contribution to gross domestic product (GDP).4 In 2016, this contribution reached 7.5 percent, 1.5 times greater than the 4.9 percent reached in 1980.5 Although the sector’s value-added contribution to GDP averaged 7.2 percent during 2000–16, it increased 46.6 percent over the same period, from $817.5 billion to $1.4 trillion.6

This article analyzes the evolution of employment and wages in New York City’s finance and insurance sector since 2000. The remainder of the article is organized as follows. The next section briefly discusses the importance of the finance and insurance sector in New York City’s economy. The section that follows examines employment trends in the city’s finance and insurance sector during the 2000–17 period, with an emphasis on the impacts of the September 11, 2001, terrorist attacks and the 2008 financial crisis. The section after that analyzes the evolution of wages in the sector during 2000–16. The next section compares wages across selected finance and insurance occupations and examines wage differentials within those occupations. The section also briefly discusses the principal causes of labor income inequality in New York City’s finance and insurance sector. The final section concludes.

The importance of the finance and insurance sector in New York City’s economy

Although the finance and insurance sector was severely affected by the 9/11 terrorist attacks and the 2008 financial crisis, it continues to play an important role in New York City’s economy.7 Accounting for approximately 8 percent of the city’s nonfarm employment, the sector generates about 20 percent of its gross city product—a contribution twice that of the real estate (10 percent), information technology (10 percent), and government (9 percent) sectors and 5 times that of the education sector (2 percent).8

The finance and insurance sector makes valuable contributions to New York City’s economy through its relatively high employment multiplier effect. Most subsectors within finance and insurance have a multiplier effect ranging from 2.0 to 4.0, and an estimated 700,000 nonfinancial jobs depend on this sector.9 Finance and insurance generates more than 60 percent of New York City’s total private sector wages and is a major contributor to the city’s tax base.10 In 2015, the sector contributed $2.5 billion in personal income taxes, accounting for 25 percent of the total personal and income taxes collected by the city in that year.11 Similarly, the sector contributed an estimated $3 billion in business taxes in 2015, representing close to 50 percent of the city’s tax revenues in this category.12

Employment in New York City’s finance and insurance sector since 2000

In this section, we use Current Employment Statistics (CES) survey data, by industry, to examine the evolution of employment in New York City’s finance and insurance sector during the 2000–17 period.13 The CES data, compiled by the New York State Department of Labor in collaboration with BLS, provide monthly employment, hours of work, and earnings information based on a sample of approximately 18,000 New York State employers.14 The CES employment figures capture employed full-time and part-time workers in nonagricultural establishments during the payroll period that includes the 12th of the month.15 The CES survey excludes self-employed workers, unpaid family members, and private household employees.16 It provides employment estimates for a given county or metropolitan area, regardless of the place of residence of the workers included in the survey.17 Since the CES monthly job estimates for areas below the state level (i.e., counties and metropolitan areas) are not seasonally adjusted—and monthly variations in employment, hours worked, and earnings reflect economic cycles—using average annual data over longer periods provides a more accurate indicator of employment trends.18

As table 2 shows, between 2000 and 2017, total nonfarm employment in New York City increased 18.3 percent, from 3,732,300 to 4,413,900. By contrast, over the same period, employment in the city’s finance and insurance sector declined 8.4 percent, from 369,700 to 338,600. In 2000, the sector employed 9.9 percent of New York City’s total nonfarm workers, 11.3 percent of its private sector workers, 13 percent of its private service-providing workers, and 75.7 percent of all workers engaged in the financial activities supersector. By 2017, the finance and insurance sector’s share of the city’s total nonfarm employment had declined to 7.9 percent, and the sector employed 9.9 percent of all private sector workers and 10.6 percent of private service-providing workers. However, the sector’s share of employment in financial activities rose to 79.4 percent in 2017, compared with 75.7 percent in 2000.

Table 2. Employment in New York City's finance and insurance sector, by selected industry, 2000–17 (in thousands)
Industry200020012002200320042005200620072008200920102011201220132014201520162017

Total nonfarm

3,732.33,704.53,596.83,546.93,565.53,618.83,683.53,761.23,811.83,711.73,730.53,818.13,904.63,998.94,130.14,255.14,341.24,413.9

Total private

3,163.43,142.13,030.62,990.33,011.13,063.23,128.33,202.23,247.73,144.73,172.53,267.53,358.53,454.53,584.73,705.23,788.83,860.2

Service providing

3,435.03,426.93,341.63,307.73,332.83,391.63,459.03,532.93,583.53,509.33,541.73,630.23,712.23,800.33,924.34,038.04,118.74,187.5

Private service providing

2,866.12,864.52,775.42,751.12,778.52,836.02,903.82,973.93,019.42,942.32,983.63,079.63,166.03,255.93,378.93,488.13,566.33,633.8

Financial activities

488.6473.4444.9433.4435.0444.4457.8467.2464.6433.9428.3439.1438.8437.5449.2459.3465.8472.5

Finance and insurance

369.7356.5330.7318.6319.0326.4338.8346.6342.9315.7311.0321.4320.1316.9325.2332.1336.5338.6

Credit intermediation and related activities

105.1100.894.992.291.194.297.997.794.688.587.690.992.792.696.398.499.099.2

Depository credit intermediation

64.463.961.457.756.558.660.560.858.955.756.659.859.957.861.162.361.962.3

Commercial banking

46.444.746.948.849.247.444.645.949.149.548.452.154.254.154.2

Nondepository credit intermediation

31.428.426.125.124.523.924.824.023.221.019.920.321.723.523.524.024.724.0

Securities, commodity contracts, and other financial investments and related activities

201.1193.7175.2165.9168.5172.8181.5188.9188.4169.6166.3172.2169.3165.9168.7173.2177.0179.2

Securities and commodity contracts intermediation and brokerage

148.6141.0123.1115.3117.0121.5127.3130.9126.3109.8106.8109.7106.0102.1100.9102.2102.9102.7

Investment banking and securities dealing

38.039.943.047.550.849.242.842.543.142.241.642.944.544.444.5

Securities brokerage

73.373.174.475.876.573.963.860.962.960.557.455.455.456.455.0

Insurance carriers and related activities

63.662.060.660.459.459.459.460.060.057.657.158.358.158.460.260.560.660.2

Insurance carriers

36.335.934.933.633.433.633.833.933.532.132.234.034.134.135.234.734.634.3

Agencies, brokerages, and other insurance-related activities

27.326.125.726.826.025.725.626.126.525.524.924.324.024.325.025.826.025.9

Source: New York State Department of Labor.

While employment declined in most subsectors of New York City’s finance and insurance sector during the 2000–17 period, the largest job losses occurred in the securities and commodities trading subsectors, which lost a total of 67,800 jobs. Of these, 21,900 jobs were lost in securities, commodity contracts, and other financial investments and related activities, and 45,900 jobs were lost in securities and commodity contracts intermediation and brokerage, representing decreases of 10.9 percent and 30.9 percent, respectively. These declines, shown in table 2, reflect recent trends in the industry and the impact of increased global competition and other economic forces.

Other subsectors of New York City’s finance and insurance sector that have suffered notable job losses since 2000 include credit intermediation and related activities (−5,900 jobs, or −5.6 percent), depository credit intermediation (−2,100 jobs, or −3.3 percent), nondepository credit intermediation (−7,400 jobs, or −23.6 percent), insurance carriers and related activities (−3,400 jobs, or −5.3 percent), insurance carriers (−2,000 jobs, or −5.5 percent), and agencies, brokerages, and other insurance-related activities (−1,400 jobs, or −5.1 percent). (See table 2.)

In addition to their devastating human impact, the terrorist attacks of September 11, 2001, negatively affected New York City’s economy, particularly its finance and insurance sector.19 The loss of the World Trade Center (WTC) complex dislocated more than 50,000 financial sector workers, most of whom were relocated to Midtown Manhattan and northern New Jersey.20 Of the jobs that were relocated from Downtown Manhattan after 9/11, an estimated 62 percent went to Midtown Manhattan and 25 percent to northern New Jersey.21

An estimated 13.4 million square feet of class-A office space were completely lost with the destruction of the WTC complex, and an additional 14.3 million square feet of class-A office space were partially damaged in nearby buildings (8.4 million of these were in the partially destroyed World Financial Center complex).22 The 9/11 terrorist attacks also affected the office vacancy rates in Downtown Manhattan, where New York City’s finance and insurance sector had been historically clustered. In the second quarter of 2001, the office vacancy rate in Downtown Manhattan was 7.6 percent, but after 9/11 it increased to 12 percent, as the exodus of financial services firms intensified.23

Between 2001 and 2002, employment in New York City’s finance and insurance sector declined 7.2 percent, from 356,500 to 330,700, a loss of 25,800 jobs. (See table 3.) Over the same period, the securities industry sustained the greatest job losses, shedding a total of 36,400 jobs. Of these, 18,500 jobs (50.8 percent) were lost in securities, commodity contracts, and other financial investments and related activities, and 17,900 jobs (49.2 percent) were lost in securities and commodity contracts intermediation and brokerage.

Table 3. Employment in New York City's finance and insurance sector, by selected industry, 2001–02 (in thousands)
Industry20012002Change, 2001–02Percent change, 2001–02

Total nonfarm

3,704.53,596.8-107.7-2.9

Total private

3,142.13,030.6-111.5-3.5

Service providing

3,426.93,341.6-85.3-2.5

Private service providing

2,864.52,775.4-89.1-3.1

Financial activities

473.4444.9-28.5-6.0

Finance and insurance

356.5330.7-25.8-7.2

Credit intermediation and related activities

100.894.9-5.9-5.9

Depository credit intermediation

63.961.4-2.5-3.9

Commercial banking

Nondepository credit intermediation

28.426.1-2.3-8.1

Securities, commodity contracts, and other financial investments and related activities

193.7175.2-18.5-9.6

Securities and commodity contracts intermediation and brokerage

141.0123.1-17.9-12.7

Investment banking and securities dealing

Securities brokerage

Insurance carriers and related activities

62.060.6-1.4-2.3

Insurance carriers

35.934.9-1.0-2.8

Agencies, brokerages, and other insurance-related activities

26.125.7-0.4-1.5

Source: New York State Department of Labor and authors' calculations.

Employment in New York City’s finance and insurance sector started to recover gradually after 2003. This recovery lasted until the 2008 financial crisis. Between 2003 and 2008, employment in the sector grew by 24,300, from 318,600 to 342,900, an increase of 7.6 percent. Over the same period, employment increased in all of the city’s finance and insurance subsectors, except nondepository credit intermediation (−1,900 jobs), insurance carriers and related activities (−400 jobs), insurance carriers (−100 jobs), and agencies, brokerages, and other insurance-related activities (−300 jobs). (See table 4.)

Table 4. Employment in New York City's finance and insurance sector, by selected industry, 2003–08 (in thousands)
Industry200320042005200620072008Change, 2003–08Percent change, 2003–08

Total nonfarm

3,546.93,565.53,618.83,683.53,761.23,811.8264.97.5

Total private

2,990.33,011.13,063.23,128.33,202.23,247.7257.48.6

Service providing

3,307.73,332.83,391.63,459.03,532.93,583.5275.88.3

Private service providing

2,751.12,778.52,836.02,903.82,973.93,019.4268.39.8

Financial activities

433.4435.0444.4457.8467.2464.631.27.2

Finance and insurance

318.6319.0326.4338.8346.6342.924.37.6

Credit intermediation and related activities

92.291.194.297.997.794.62.42.6

Depository credit intermediation

57.756.558.660.560.858.91.22.1

Commercial banking

46.444.746.948.849.247.41.02.2

Nondepository credit intermediation

25.124.523.924.824.023.2-1.9-7.6

Securities, commodity contracts, and other financial investments and related activities

165.9168.5172.8181.5188.9188.422.513.6

Securities and commodity contracts intermediation and brokerage

115.3117.0121.5127.3130.9126.311.09.5

Investment banking and securities dealing

38.039.943.047.550.849.211.229.5

Securities brokerage

73.373.174.475.876.573.90.60.8

Insurance carriers and related activities

60.459.459.459.460.060.0-0.4-0.7

Insurance carriers

33.633.433.633.833.933.5-0.1-0.3

Agencies, brokerages, and other insurance-related activities

26.826.025.725.626.126.5-0.3-1.1

Source: New York State Department of Labor and authors' calculations.

The post-9/11 recovery of New York City’s finance and insurance sector was abruptly interrupted by the 2008 financial crisis, the worst suffered by the U.S. financial sector since the 1930s. This crisis was primarily caused by a steep housing-price decline, which, combined with dubious lending practices, contributed to large losses on mortgages and mortgage-backed securities held by a wide range of depository and nondepository institutions.24 From July 2007, when the crisis began, to October 2008, the nine largest banks in the United States marked down their valuations on loans and other troubled assets by an estimated $323 billion.25 In the fourth quarter of 2008, Wall Street giants Goldman Sachs and Morgan Stanley reported losses of $2.12 billion and $2.37 billion, respectively, and close to $7 trillion of shareholder wealth evaporated as a result of the crisis.26

As table 5 indicates, New York City’s finance and insurance sector lost 31,900 jobs between 2008 and 2010, a decrease of 9.3 percent. As in the aftermath of 9/11, the securities subsectors experienced the largest reductions in employment as a consequence of the 2008 financial crisis. Over the 2008–10 period, 22,100 jobs (−11.7 percent) were lost in securities, commodities contracts, and other financial investments and related activities; 19,500 jobs (−15.4 percent) were lost in securities and commodity contracts intermediation and brokerage; and 13,000 jobs (−17.6 percent) were lost in securities brokerage.

Table 5. Employment in New York City's finance and insurance sector, by selected industry, 2008–10 (in thousands)
Industry200820092010Change, 2008–10Percent change, 2008–10

Total nonfarm

3,811.83,711.73,730.5-81.3-2.1

Total private

3,247.73,144.73,172.5-75.2-2.3

Service providing

3,583.53,509.33,541.7-41.8-1.2

Private service providing

3,019.42,942.32,983.6-35.8-1.2

Financial activities

464.6433.9428.3-36.3-7.8

Finance and insurance

342.9315.7311.0-31.9-9.3

Credit intermediation and related activities

94.688.587.6-7.0-7.4

Depository credit intermediation

58.955.756.6-2.3-3.9

Commercial banking

47.444.645.9-1.5-3.2

Nondepository credit intermediation

23.221.019.9-3.3-14.2

Securities, commodity contracts, and other financial investments and related activities

188.4169.6166.3-22.1-11.7

Securities and commodity contracts intermediation and brokerage

126.3109.8106.8-19.5-15.4

Investment banking and securities dealing

49.242.842.5-6.7-13.6

Securities brokerage

73.963.860.9-13.0-17.6

Insurance carriers and related activities

60.057.657.1-2.9-4.8

Insurance carriers

33.532.132.2-1.3-3.9

Agencies, brokerages, and other insurance-related activities

26.525.524.9-1.6-6.0

Source: New York State Department of Labor and authors' calculations.

Other subsectors of New York City’s finance and insurance sector that experienced substantial job losses after the 2008 financial crisis (between 2008 and 2010) include credit intermediation and related activities (−7,000 jobs, or −7.4 percent), depository credit intermediation (−2,300 jobs, or −3.9 percent), commercial banking (−1,500 jobs, or −3.2 percent), nondepository credit intermediation (−3,300 jobs, or −14.2 percent), investment banking and securities dealing (−6,700 jobs, or −13.6 percent), insurance carriers and related activities (−2,900 jobs, or −4.8 percent), insurance carriers (−1,300 jobs, or −3.9 percent), and agencies, brokerages, and other insurance-related activities (−1,600 jobs, or −6.0 percent). (See table 5.)

Although employment in New York City’s finance and insurance sector saw its share of the city’s total nonfarm employment decline from 8.3 percent in 2010 to 7.7 percent in 2017, it has gradually recovered since 2010. An exception to this trend were activities related to securities and commodity contracts and securities brokerage. As table 6 illustrates, employment in the city’s finance and insurance sector grew from 311,000 in 2010 to 338,600 in 2017, an increase of 8.9 percent. The top five finance and insurance subsectors with the largest employment increases (in absolute terms) during the 2010–17 period were (1) securities, commodity contracts, and other financial investments and related activities (12,900), (2) credit intermediation and related activities (11,600), (3) commercial banking (8,300), (4) depository credit intermediation (5,700), and (5) nondepository credit intermediation (4,100). By contrast, the finance and insurance subsectors with the most notable declines in employment (in absolute terms) during the 2010–17 period were (1) securities brokerage (−5,900) and (2) securities and commodity contracts intermediation and brokerage (−4,100).

Table 6. Employment in New York City's finance and insurance sector, by selected industry, 2010–17 (in thousands)
Industry20102011201220132014201520162017Change, 2010–17Percent change, 2010–17

Total nonfarm

3,730.53,818.13,904.63,998.94,130.14,255.14,341.24,413.9683.418.3

Total private

3,172.53,267.53,358.53,454.53,584.73,705.23,788.83,860.2687.721.7

Service providing

3,541.73,630.23,712.23,800.33,924.34,038.04,118.74,187.5645.818.2

Private service providing

2,983.63,079.63,166.03,255.93,378.93,488.13,566.33,633.8650.221.8

Financial activities

428.3439.1438.8437.5449.2459.3465.8472.544.210.3

Finance and insurance

311.0321.4320.1316.9325.2332.1336.5338.627.68.9

Credit intermediation and related activities

87.690.992.792.696.398.499.099.211.613.2

Depository credit intermediation

56.659.859.957.861.162.361.962.35.710.1

Commercial banking

45.949.149.548.452.154.254.154.28.318.1

Nondepository credit intermediation

19.920.321.723.523.524.024.724.04.120.6

Securities, commodity contracts, and other financial investments and related activities

166.3172.2169.3165.9168.7173.2177.0179.212.97.8

Securities and commodity contracts intermediation and brokerage

106.8109.7106.0102.1100.9102.2102.9102.7-4.1-3.8

Investment banking and securities dealing

42.543.142.241.642.944.544.444.52.04.7

Securities brokerage

60.962.960.557.455.455.456.455.0-5.9-9.7

Insurance carriers and related activities

57.158.358.158.460.260.560.660.23.15.4

Insurance carriers

32.234.034.134.135.234.734.634.32.16.5

Agencies, brokerages, and other insurance-related activities

24.924.324.024.325.025.826.025.91.04.0

Source: New York State Department of Labor and authors' calculations.

Although employment in New York City’s finance and insurance sector has gradually recovered since the 2008 financial crisis—and remains considerably larger than financial sector employment in other parts of the United States—the city’s leading position as the country’s “financial capital” has been challenged by other cities and states in recent years.27 This trend has been primarily driven by cost reduction efforts by financial services firms, advances in financial technology and innovation, increased decentralization of back-office and middle-office operations, financial disintermediation, and the cost and tax advantages of competing cities and states.28

Wages in New York City’s finance and insurance sector since 2000

This section analyzes trends in earnings and wages in New York City’s finance and insurance sector since 2000. Compared with other sectors of New York City’s economy, finance and insurance has seen a substantial wage growth since 2000. This trend corresponds with the expansion of the financial sector (as a share of GDP) in recent decades. In 1950, the U.S. financial sector accounted for approximately 2.8 percent of GDP; this figure increased to 4.9 percent in 1980 and 8.3 percent in 2006.29 In 2016, the U.S. financial sector’s value added accounted for 7.5 percent of GDP.30 The growth rate of the financial sector’s contribution to GDP since 1980 has notably exceeded the growth rate reported during the 1950–80 period,31 and the financial sector has accounted for more than 25 percent of the growth of the U.S. service sector since 1980.32

Table 7 presents the number of reporting units (i.e., business entities), average annual employment, total average annual wages, and average annual wages (per worker) in New York City’s finance and insurance sector during the 2000–16 period. As the table indicates, the number of reporting units increased from 9,796 in 2000 to 12,158 in 2016, an increase of 24.1 percent. By contrast, average annual employment declined 9.1 percent (−32,777) over the same period. Total annual wages for the city’s finance and insurance sector increased 46.9 percent, from $62.8 billion in 2000 to $92.0 billion in 2016. Average annual wages (per worker) increased 61.1 percent, from $174,355 in 2000 to $280,824 in 2016, reflecting productivity improvements associated with reductions in labor input (employment), capital investments, technological innovations, and industry consolidation.33

Table 7. Employment and wages in New York City's finance and insurance sector, 2000–16
YearReporting unitsAverage annual employmentTotal average annual wagesAverage annual wages per worker

2000

9,796360,365$62,831,513,362$174,355

2001

9,908356,83864,770,785,924181,513

2002

10,000325,16653,914,471,858165,806

2003

9,751311,81852,099,479,539167,083

2004

10,009312,99261,266,235,710195,744

2005

10,686321,75367,216,296,354208,907

2006

11,045331,66780,918,081,955243,974

2007

11,681341,43097,712,757,426286,187

2008

12,093337,77494,857,601,284280,832

2009

11,825310,28771,748,443,699231,233

2010

11,937305,82279,815,300,409260,986

2011

11,935315,72884,717,073,233268,323

2012

11,992313,36183,559,822,506266,657

2013

11,925310,20882,513,359,068265,994

2014

11,928317,98093,567,181,847294,255

2015

11,976324,51492,973,503,880286,501

2016

12,158327,58891,994,435,650280,824

Source: New York State Department of Labor and authors' calculations.

After 9/11, the number of business entities in New York City’s finance and insurance sector remained relatively unchanged (increasing a mere 0.9 percent). However, as table 7 shows, average annual employment fell 8.9 percent between 2001 and 2002, recording a loss of 31,672 jobs. Similarly, over the same period, total annual wages in the sector decreased by $10.9 billion (−16.8 percent), and average annual wages fell by $15,707 (−8.7 percent), from $181,513 in 2001 to $165,806 in 2002.

Table 7 also illustrates the impact of the 2008 financial crisis on the number of reporting units, average employment, total sector wages, and average annual wages in New York City’s finance and insurance sector. Between 2008 and 2009, the number of finance and insurance reporting units declined 2.2 percent, from 12,093 to 11,825. Annual employment fell 8.1 percent, from 337,774 in 2008 to 310,287 in 2009, a loss of 27,487 jobs. Over the same period, total wages in the city’s finance and insurance sector fell 24.9 percent, from approximately $95 billion to $71.7 billion, and average annual wages decreased 17.7 percent, from $280,832 to $231,233.

Wages by occupation and wage differentials in selected occupations of New York City’s finance and insurance sector

In this section, we analyze and compare wages in selected occupations in New York City’s finance and insurance sector. In addition, we briefly discuss wage differentials in these occupations, using Occupational Employment Statistics (OES) survey data compiled by the New York State Department of Labor in collaboration with BLS. The OES survey collects earnings (or wage) information from approximately 51,000 sampled nonagricultural establishments.34

In the OES survey, an establishment is defined as a goods- or service-producing unit that normally participates in a single economic activity.35 The OES employment data include full-time and part-time workers; workers on temporary leave, paid vacations, unpaid short-term absences, and temporary job reassignments; and salaried officers, executives, and staff members of incorporated firms.36 Self-employed workers, owners or partners of unincorporated firms, and unpaid family members are not included in the OES survey.37

The wage data in the OES survey include straight-time gross pay, excluding premium compensation.38 OES wage figures also include base-rate pay; cost-of-living allowances; guaranteed pay; hazardous-duty compensation; and commissions, bonuses, tips, and other forms of incentive pay.39 Backpay, nonproduction bonuses, overtime pay, severance pay, shift differentials, and tuition reimbursement are excluded from the OES survey.40

The OES survey provides information about mean (average) and median wages in an occupation. The mean wage is calculated by dividing total wages for an occupation by its weighted survey employment.41 The median wage represents the estimated 50th percentile of the wage distribution in the occupation. This means that 50 percent of workers in the occupation earn less than the reported median wage, and 50 percent earn more.42 The “entry” wage reported in the OES survey is the mean wage of the bottom third of wages in a given occupation. The “experienced” wage is the mean wage of the top two-thirds of wages in an occupation.43

Table 8 uses OES data to present detailed employment and wage information for selected occupations in two of the principal occupational categories directly related to New York City’s finance and insurance sector: (1) business and financial operations occupations and (2) sales and related occupations.

Table 8. Employment and wages in New York City's finance and insurance sector, by selected occupation, 2017
OccupationEmploymentAnnual wages
TotalPercent of totalMeanRatio of mean annual wages in occupation to mean annual wages in occupational categoryMedianEntry(1)Experienced(2)

Business and financial operations occupations

101,070100.0$105,5501.0$87,390$54,680$130,990

Compliance officers

10,17010.188,1900.881,99052,160106,210

Compensation, benefits, and job analysis specialists

5,5005.480,2100.876,09058,36091,140

Credit analysts

5,3405.3137,1301.3119,18073,430168,980

Financial analysts

41,79041.3138,9001.3111,98072,640172,030

Personal financial advisors

20,49020.3170,1001.6151,12067,350221,480

Insurance underwriters

4,1804.1109,0001.092,50057,990134,500

Financial examiners

4,3004.3119,9101.1106,10070,680144,530

Credit counselors

9801.059,4100.651,70039,97069,130

Loan officers

5,2505.2127,9701.2104,36056,660163,630

Financial specialists, all other

3,0703.0113,0001.197,34059,110139,940

Sales and related occupations

89,350100.064,2701.034,77021,84086,280

Insurance sales agents

6,5607.3107,9401.780,62044,170139,820

Securities, commodities, and financial services sales agents

46,33051.9179,6102.8163,24075,520231,660

Sales representatives, services, all other

36,46040.881,7401.368,65038,730103,250

Notes:

(1) Entry wage = mean (average) wage of the bottom third of wages in an occupation.

(2) Experienced wage = mean (average) wage of the top two-thirds of wages in an occupation.

Source: New York State Department of Labor and authors' calculations.

A total of 101,070 people were employed in New York City’s business and financial operations occupations shown in table 8. In terms of employment, the top five occupations in this category in 2017 were (1) financial analysts (41,790, or 41.3 percent), (2) personal financial advisors (20,490, or 20.3 percent), (3) compliance officers (10,170, or 10.1 percent), (4) compensation, benefits, and job analysis specialists (5,500, or 5.4 percent), and (5) credit analysts (5,340, or 5.3 percent). In the sales and related occupations category, securities, commodities, and financial services sales agents (46,330) accounted for 51.9 percent of total employment in 2017; sales representatives, services, all other (36,460) accounted for 40.8 percent; and insurance sales agents (6,560) accounted for 7.3 percent.

In terms of average annual wages, the top five occupations in business and financial operations in 2017 were (1) personal financial advisors ($170,100), (2) financial analysts ($138,900), (3) credit analysts ($137,130), (4) loan officers ($127,970), and (5) financial examiners ($119,910).  In the case of sales and related occupations, securities, commodities, and financial services sales agents earned an average annual wage of $179, 610 (the highest for all finance and insurance sector occupations listed in table 8), and insurance sales agents earned an average annual wage of $107,490.

Table 8 also shows the ratio of mean annual wages in an occupation to the mean annual wage in the occupation’s respective major category. In 2017, the top five business and financial operations occupations with above-average annual earnings (measured by a ratio greater than 1.0) were (1) personal financial advisors (1.6), (2) financial analysts (1.3), (3) credit analysts (1.3), (4) loan officers (1.2), and (5) financial examiners (1.1). In the case of sales and related occupations, the occupations with the highest ratio of mean wages were (1) securities, commodities, and financial services sales agents (2.8), and (2) insurance sales agents (1.7).

The mean annual wage ratios shown in table 8 reveal that, compared with business and financial operations occupations, sales and related (front-office) occupations (e.g., insurance sales agents; securities, commodities, and financial services sales agents) offer notable wage premiums. In addition, within the business and financial operations category, occupations directly related to sales (e.g., financial advisors, financial analysts, credit analysts, and loan officers) offer higher wage premiums than do occupations generally associated with middle-office and back-office operations (e.g., compliance officers, compensation and benefits specialists, insurance underwriters, and credit counselors).

While a detailed analysis of wage dispersion in New York City’s finance and insurance sector is beyond the scope of this article, the data presented in table 8 reveal several interesting findings. In New York City in 2017, the median annual wage for all business and financial operations occupations was $87,390, compared with $34,770 for all sales and related occupations. As expected, given the large disparities in median annual wages between these two occupational categories, the range (difference) between the highest and lowest median annual wage in the business and financial operations occupations was larger than the range in the sales and related occupations.44 In 2017, among the business and financial operations occupations included in table 8, personal financial advisors had the highest median annual wage ($151,120), while credit counselors had the lowest ($51,700). In this case, the range of median annual wages was $99,420. Among the sales and related occupations in New York City’s finance and insurance sector in 2017, securities, commodities, and financial services sales agents had the highest median annual wage ($163,240), while sales representatives had the lowest ($68,650). The range in this case was $94,590.

Several studies in the economics literature explore wage dispersion and wage differentials across industries and within the same occupations and establishments.45 Classical economic theory suggests that, in a competitive labor market, wages should be equal to a worker’s marginal value of labor.46 If wage differentials account for differences in labor productivity, they should be consistent across similar occupations in different sectors of the economy.47 However, some studies have found notable residual wage differentials across different sectors of the economy.48 Existing wage differentials across different sectors have been primarily attributed to differences in work environment and unobserved worker characteristics.49 However, even after these factors are taken into account, wage disparities persist across and within different sectors of the economy.50

According to Oliver Denk, the wage gap between workers at the top and bottom of the earnings distribution in the European financial sector is notably higher than that in other sectors of the European economy.51 This difference is primarily due to the disproportionate concentration of financial sector workers at the upper end of the earnings distribution.52 A similar situation exists for U.S. financial sector workers.53 The disproportionate concentration of such workers at the top of the earnings distribution, along with their substantial wage premium, has contributed to higher levels of income inequality in developed economies with an advanced financial sector or high levels of “financialization.”54

Consistent with general trends in the U.S. labor market, the wage differentials between workers in New York City’s finance and insurance sector can be partially explained by increases in the return to schooling since the 1980s.55 For example, in 1979, college graduates earned 47 percent more than did high school graduates; by 2001, this figure had increased to 90 percent.56 Structural changes in the U.S. economy since the 1980s have contributed to historic increases in the return to schooling and to the widening of wage differentials between experienced workers and new labor market entrants.57

The wage differentials in New York City’s finance and insurance sector shown in table 8 can also be explained by the increased internationalization (or globalization) of the U.S. economy since the 1980s. In 1970, the ratio of total trade (i.e., exports and imports) to GDP, which is normally used as an indicator of trade openness, was 8 percent in the United States; by 1996, this figure had risen to 19 percent and, two decades later, in 2016, reached approximately 25 percent.58 Increases in the ratio, combined with cross-border financial integration and other forces of globalization, explain the relative increase in the demand for skilled workers in the U.S. economy and its financial sector since the 1980s.59

Wage differentials between top earners in the finance sector and those at the bottom of the wage distribution also arise from substantial differences in labor productivity and from the widespread use of bonus payments as an important component of workers’ compensation, particularly in the case of workers directly engaged in sales-oriented (front-office) activities.60 In addition, wage differentials in the financial sector may result from the unequal distribution of economic rents by financial sector firms to workers in selected occupations—or what is known as “wage premium,” whereby workers in selected occupations receive wages above their productivity. This wage premium has a disproportionate impact on the wages of workers at the top of the earnings distribution relative to workers at the bottom, contributing to greater levels of labor income inequality.61 This effect is particularly pronounced in countries where the financial sector accounts for a large share of employment and GDP.62

Given the characteristics of financial sector workers and the importance of the financial sector in many of the European countries included in Denk’s study,63 it seems reasonable to assume that his findings can also explain the wage dispersion in the selected occupations in New York City’s finance and insurance sector shown in table 8. Finally, regarding the relationship between the growth of finance and wage and income inequality, Denk’s findings are consistent with those of a 2012 study by Thomas Phillipon and Ariell Reshef and a 2017 study by Phillipon, which demonstrate that in the case of developed national, regional, or local economies with advanced financial sectors that account for a significant share of output, the growth of the financial sector is likely to contribute to higher levels of wage and income inequality.64 This phenomenon is mainly attributed to two related factors: (1) the concentration of financial sector workers at the top of the earnings distribution and (2) the provision of specialized financial services to high-income households.65

Conclusions

Despite experiencing notable decreases in employment, particularly after 9/11 and the 2008 financial crisis, New York City’s finance and insurance sector continues to play an important role in the city’s economy. At present, the sector employs close to 8 percent of New York City’s nonfarm workers, its total wages account for more than 60 percent of the city’s private sector wages, and its relatively high employment multiplier indirectly supports an estimated 700,000 nonfinancial sector workers.66 The finance and insurance sector also is a major contributor to New York City’s tax base. In 2015, the sector’s tax contributions accounted for approximately 25 percent of the personal income taxes and close to 50 percent of the business taxes collected by the city.67

Although the finance and insurance sector remains an important source of employment in New York City, it has seen its share of total nonfarm employment decline since 2000 and has suffered major job losses as a result of 9/11 and the 2008 financial crisis. Between 2000 and 2017, New York City’s total nonfarm employment increased 18.3 percent, from 3,732,300 to 4,413,900. By contrast, over the same period, the city’s employment in finance and insurance fell 8.4 percent, from 369,700 to 338,600, because of increased global competition, industry consolidation, technological innovation, and the long-lasting effects of 9/11 and the 2008 financial crisis.

The terrorist attacks of September 11, 2001, resulted in major reductions in employment in New York City’s finance and insurance sector. They also contributed to higher office vacancy rates in the city’s Financial District and to the permanent displacement of a significant number of financial sector jobs from the historical Downtown Manhattan cluster to more modern, state-of-the-art facilities in Midtown Manhattan.68 The city’s finance and insurance sector lost 25,800 jobs between 2001 and 2002, and most of these losses occurred in activities related to securities and commodities sales and trading.

Employment in New York City’s finance and insurance sector began to gradually recover after 2003, as the sector emerged from the major shocks, losses, and disruptions caused by 9/11. Between 2003 and 2008, New York City’s finance and insurance sector added 24,300 jobs, an increase of 7.3 percent. This short-lived recovery was drastically interrupted by the 2008 financial crisis, which led to the collapse of several major financial institutions and large job losses for the sector. Between 2008 and 2010, New York City’s finance and insurance sector lost 22,100 jobs, a decline of 11.7 percent, and, as in the aftermath of 9/11, most of these losses took place in activities related to securities and commodities sales and trading.

Employment in New York City’s finance and insurance sector has gradually recovered since 2010, rising from 311,000 in 2010 to 338,600 in 2017, an increase of 8.9 percent. Despite this impressive recovery, employment in the sector has failed to reach the levels reported in 2000 (369,700). This is due to several factors, the most important of which are the impact of labor-reducing technological innovation, increased business consolidation, and the cost and tax advantages offered by competing localities.69

Despite its shrinking employment and the impacts of 9/11 and the 2008 financial crisis, New York City’s finance and insurance sector has seen substantial wage increases since 2000. Between 2000 and 2016, total annual wages in the sector increased 46.9 percent, from $62.8 billion to $92 billion, and average annual wages (per worker) rose 61.1 percent, from $174,355 to $280,814. These trends reflect the effects of increased labor productivity, capital investment, and technological innovation.70

Although a detailed empirical analysis of wage dispersion is beyond the scope of this article, we found considerable variations in the distribution of median annual wages in selected occupations in New York City’s finance and insurance sector. This wage dispersion can be explained by factors such as increases in the return to schooling, differences in labor productivity and work environment, the effects of unobserved worker characteristics, the “financialization” of the economy, the impact of globalization, the widespread use of bonuses to compensate top earners in the financial sector, and the distribution of economic rents by financial firms (in the form of a “wage premium”) to employees at the upper level of the earnings distribution.71

The financial sector’s growing share of the New York City’s gross city product, combined with the aforementioned factors, has contributed to the concentration of income among financial sector workers at the top of the earnings distribution. This disproportionate concentration—and the financial sector’s provision of specialized financial services to high-income households and high-net-worth individuals—has, in turn, contributed to one of the most resilient characteristics of New York City’s economy: higher levels of labor income inequality among financial sector workers.

Suggested citation:

Mario A. González-Corzo and Vassilios N. Gargalas, "Recent trends in employment and wages in New York City’s finance and insurance sector," Monthly Labor Review, U.S. Bureau of Labor Statistics, April 2019, https://doi.org/10.21916/mlr.2019.7.

Notes


1 “Finance and insurance: NAICS 52,” Industries at a Glance (U.S. Bureau of Labor Statistics), https://www.bls.gov/iag/tgs/iag52.htm.

2 Ibid.

3 Ibid.

4 “Value added by industry as a percentage of gross domestic product” (U.S. Bureau of Economic Analysis, 2018), https://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5101=1&5114=a&5113=22r&5112=1&5111=2000&5102=5.

5 Ibid.; and Robin Greenwood and David Scharfstein, “The growth of modern finance,” Journal of Economic Perspectives, vol. 27, no. 2, spring 2013, pp. 3–28.

6 “Value added by industry as a percentage of gross domestic product” (U.S. Bureau of Economic Analysis, 2018).

7 James Orr, “How important is the finance sector to the New York City economy?” (The Economic Studies Group, The Graduate Center, City University of New York, June 9, 2017),

http://esg.gc.cuny.edu/2017/06/09/how-important-is-the-finance-sector-to-the-new-york-city-economy/.

8 At risk: New York’s future as the world financial capital (Partnership for New York City, June 2015), http://pfnyc.org/our-research/at-risk-new-yorks-future-status-as-a-world-financial-capital/.

9 Ibid.

10 Ibid.

11 Ibid.

12 Ibid.

13 The CES data are produced as part of a collaborative effort between BLS and State Workforce Agencies (e.g., labor departments in various states). Starting in 2011, the production of CES estimates at the state and Metropolitan Statistical Area levels was transferred to BLS. However, to improve the quality and reliability of CES data, State Workforce Agencies regularly provide local and regional information to BLS and continue to offer analyses of CES data for their constituencies. See “Current Employment Statistics (CES) technical notes” (New York State Department of Labor), https://www.labor.ny.gov/stats/lstechnotesces.shtm.

14 Ibid.

15 Ibid.

16 Ibid.

17 Ibid.

18 Ibid.

19 Nicole Pohl, “Where is Wall Street? Financial geography after 09/11,” The Industrial Geographer, vol. 2, no. 1, 2004, pp. 72–93.

20 Ibid.

21 Ibid.

22 Ibid.

23 Ibid.

24 Eamonn K. Moran, “Wall Street meets main street: understanding the financial crisis,” North Carolina Banking Institute, vol. 13, no. 1, 2009, pp. 5–101, http://scholarship.law.unc.edu/ncbi/vol13/iss1/3.

25 Ibid.

26 Ibid.

27 Thomas P. DiNapoli, “The securities industry in New York City” (Office of the New York State Comptroller, October 2017), pp. 1–8, https://www.osc.state.ny.us/osdc/rpt6-2018.pdf.

28 Ibid.; Orr, “How important is the finance sector to the NYC economy?”; and At risk: New York’s future as the world financial capital (Partnership for New York City, June 2015).

29 Greenwood and Scharfstein, “The growth of modern finance.”

30 “Value added by industry as a percentage of gross domestic product” (U.S. Bureau of Economic Analysis, 2018).

31 Thomas Philippon and Ariell Reshef, “Wages and human capital in the U.S. finance industry: 1909–2006,” The Quarterly Journal of Economics, vol. 127, no. 4, November 2012, pp. 1551–1609.

32 Greenwood and Scharfstein, “The growth of modern finance”; and U.S. trade overview, 2016 (U.S. Department of Commerce, April 2017), https://www.trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ian_005537.pdf.

33 Thomas Philippon, “The FinTech opportunity,” BIS Working Papers 655 (Bank for International Settlements, August 2017), https://www.bis.org/publ/work655.pdf; and Philippon and Reshef, “Wages and human capital in the U.S. finance industry.”

34 “Occupational Employment Statistics technical notes” (New York State Department of Labor), https://www.labor.ny.gov/stats/lstechoes.shtm.

35 Ibid.

36 Ibid.

37 Ibid.

38 Ibid.

39 Ibid.

40 Ibid.

41 Ibid.

42 Ibid.

43 Ibid.

44 For more information on measures of wage dispersion, see Carl B. Barsky and Martin E. Personick, “Measuring wage dispersion: pay ranges reflect industry traits,” Monthly Labor Review, April 1981, pp. 35–41, https://www.bls.gov/opub/mlr/1981/04/art5full.pdf.

45 For wage dispersion across industries, see Barsky and Personick, “Measuring wage dispersion”; H. M. Douty, “Sources of occupational wage and salary rate dispersions within labor markets,” Industrial and Labor Relations Review, vol. 15, no. 1, October 1961, pp. 67–74; and Richard Thaler, “Anomalies: interindustry wage differentials,” Journal of Economic Perspectives, vol. 3, no. 2, spring 1989, pp. 181–193. For wage dispersion within the same occupations and establishments, see John E. Buckley, “Wage differences among workers in the same job and establishment,” Monthly Labor Review, March 1985, pp. 11–16, https://www.bls.gov/opub/mlr/1985/03/art2full.pdf; and Krista Sunday and Jordan Pfuntner, “How widely do wages vary within jobs in the same establishment?” Monthly Labor Review, February 2008, pp. 17–50, https://www.bls.gov/opub/mlr/2008/02/art2full.pdf.

46 George J. Borjas, Labor economics, 7th ed. (New York: McGraw Hill Education, 2016).

47 Ibid.

48 David H. Autor, Laurence F. Katz, and Melissa S. Kearney, “Trends in U.S. wage inequality: revising the revisionists,” Review of Economics and Statistics, vol. 90, no. 2, May 2008, pp. 300–323.

49 Ibid.

50 Alan Krueger and Lawrence Summers, “Efficiency wages and the inter-industry wage structure,” Econometrica, vol. 56, no. 2, 1988, pp. 259–293; and Borjas, Labor economics.

51 Oliver Denk, “Financial sector pay and labour income inequality: evidence from Europe,” OECD Economics Department Working Papers, no. 1225 (Organisation for Economic Co-operation and Development, 2015), http://www.oecd-ilibrary.org/economics/financial-sector-pay-and-labour-income-inequality_5js04v5wjw9p-en.

52 Ibid.

53 Philippon and Reshef, “Wages and human capital in the U.S. finance industry.”

54 Greta R. Krippner, “The financialization of the American economy,” Socio-Economic Review, vol. 3, no. 2, May 2005, pp. 173–208.

55 Borjas, Labor economics.

56 Autor, Katz, and Kearney, “Trends in U.S. wage inequality.”

57 Ibid.

58 Borjas, Labor economics; and U.S. trade overview, 2016 (U.S. Department of Commerce, April 2017).

59 George J. Borjas and Valerie A. Ramsey, “Foreign competition, market power, and wage inequality,” Quarterly Journal of Economics, vol. 110, no. 4, November 1995, pp. 1075–1110; and Kevin M. Murphy and Finis Welch, “The role of international trade in wage differentials,” in Marvin Kosters, ed., Workers and their wages: changing patterns in the United States (Washington, DC: AEI Press, 1991).

60 Brian Bell and John Van Reenen, “Bankers and their bonuses,” The Economic Journal, vol. 214, no. 574, February 2014, pp. F1–F21.

61 Denk, “Financial sector pay and labour income inequality.”

62 Ibid.

63 Ibid.

64 Philippon and Reshef, “Wages and human capital in the U.S. finance industry”; and Philippon, “The FinTech opportunity.”

65 Ibid.

66 At risk: New York’s future as the world financial capital (Partnership for New York City, June 2015).

67 Ibid.

68 Pohl, “Where is Wall Street?”

69 DiNapoli, “The securities industry in New York City.”

70 Philippon and Reshef, “Wages and human capital in the U.S. finance industry”; and Philippon, “The FinTech opportunity.”

71 Borjas, Labor economics.

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About the Author

Mario A. González-Corzo
mario.gonzalez-corzo@lehman.cuny.edu

Mario A. González-Corzo is an associate professor in the Department of Economics and Business at Lehman College, City University of New York.

Vassilios N. Gargalas
vassilios.gargalas@lehman.cuny.edu

Vassilios N. Gargalas is an associate professor in the Department of Economics and Business at Lehman College, City University of New York.

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