In the previous two posts I showed that it took decades for the number of people who worked in private sector jobs in New York City to recover from the 1970s. And that among city residents, the share of working age adults who are in the labor force, working or looking for work, remains below the U.S. average, albeit only slightly, after having been far below until recently.
This post is about how much those who work in New York City are paid compared with the U.S. average, and how the per capita income of city residents compares with the U.S. average. The picture is mixed, in part based on one’s geographic scale and in part whether the average used is a “mean” or a “median.” New York City mean earnings and per capita income, which are just total earnings or income divided by the total number of workers or residents, are pulled up by the large number of high-earning people working, and high-income people living, in Manhattan. Places with large concentrations of wealthy people, such as the New York and San Francisco Bay area, tend to have the highest average income as measured by the mean. New York City’s median income and earnings, as discussed in post after this one, are pulled down by the large number of low and moderate income people living in the city. The places with the highest median tend to be places where poor people are scarce, such as suburban counties with exclusionary zoning. The details follow.
The spreadsheet linked below, with charts in a series of tabs along the bottom, is based on Local Area Personal Income Data from the U.S. Bureau of Economic Analysis. The data provided is the mean earnings and per capita income, as tabulated primarily from administrative records such as tax returns.
The “Earnings 1” chart shows the mean earnings of people working in the private sector, excluding the overpaid financial sector, in New York City, Downstate New York as a whole, Manhattan and the rest of Downstate excluding Manhattan, as compared with the U.S. average. “Earnings” by this measure includes a rough measure of employer contributions to things like health insurance and retirement plans, rough in that it takes national data by industry and assumes workers in the same industry receive the same non-wage benefits everywhere in the country.
The data show that based on mean earnings by place of work, the 1970s economic and social collapse had a limited impact on either the city or the Downstate region as a whole. In fact NYC and Downstate lost as much ground relative to the U.S. average in the late 1990s – virtually the only time in the period covered by the chart when the average U.S. worker, measured by the median rather than the mean, was actually gaining ground compared with inflation. That allowed workers elsewhere in the U.S. to briefly close the gap with those working in Downstate New York.
As I’ve shown previously, the mean earnings of private sector workers (excluding finance) who are working in Downstate New York has been very steady recently at around one-third higher than the U.S. average. At its lowest, around 1980, it was still 12.0% above the U.S. average. Its highest was in the early 1990s recession, the worst for the New York area since the 1970s (and far worse locally than the Great Recession) at 35.0% above average.
The mean earnings of those working in New York City has been consistently higher than the mean earnings of those working in Downstate New York as a whole, but this is mostly due to Manhattan. Even excluding finance, those working in the private sector in Manhattan have always earned far more than the U.S. average. Mean earnings per worker in Manhattan has, by this measure, been around double the U.S. average in recent years, a high for the period starting in 1969.
Take those working in Manhattan out of the equation, and those working in private sector jobs elsewhere in Downstate New York earn no more than the U.S. average, give or take few percent. Compared with the U.S. average, those working elsewhere Downstate and not holding public sector jobs were better off relative to the U.S. average in the late 1960s and early 1970s, and in most of the 1980s and 1990s, than they are today.
There are several takeaways from this chart.
First, the amount of income available to be earned in Manhattan has always been high, and the relative income of those living in the city compared with the suburbs has depended not on the regional economy, but rather on where those who hold those high-wage jobs choose to live.
Second, travel time to work comparisons between those residing in different parts of the metro area miss the point. People are going to willing to travel from far and wide to access the high wage jobs in Manhattan, and don’t deserve a Purple Heart for doing so. They can always work locally – for less. It would be more relevant to tabulate travel times based on place of work, not place of residence.
Third, because the average person working in Manhattan and, to a lesser extent, places like Nassau and Westchester Counties earns so much more than average, the same should be true of those at the bottom – particularly since those at the bottom generally can’t afford to live there and face long and/or expensive commutes. These places should have a higher minimum wage, at least one-third higher than the U.S. average. Higher than has been agreed by the state legislature for the whole state.
The “Earnings 2” chart shows the mean earnings of two different types of private sector worker, including finance, in New York City as a whole: wage and salary employees and self-employed proprietors. The data show that with occasional setbacks, the inflation-adjusted mean earnings (including benefits) of private sector wage and salary employees working in New York City has risen consistently since the mid-1980s, and is now around $100,000. Meanwhile the mean earnings of self-employed proprietors, which now number more than 1 million working in the city, has plunged.
This is likely due to a shift in the composition of the two groups. Before the mid-1980s, most self-employed workers were businesspeople, including partners in professional and Wall Street firms. They shared the profits from, and risks of, those firms. But starting in the mid-1980s most financial firms became corporations, and their extremely highly paid executives became wage and salary employees. They still get the lion’s share of the profits, but the risks have been shifted to others.
The high pay and bonuses on Wall Street accounts for a large share of the increase in mean pay for wage and salary workers employed in New York City. In 2011, Finance and Insurance sector workers who worked in Manhattan earned $112 billion, up from $74 billion just a few years ago in 2004. The earnings of all private sector workers who worked anywhere in New York City in 2011 was $391 million – Manhattan’s financial sector accounted for 28.8% of the total. A large share of New York’s financial sector workers live in the suburbs, and the number of financial sector jobs has been going down, so the New York City economy has generally become less and less dependent on them. But the New York City and (in particular) State tax bases have become more and more dependent on Wall Street over the years.
While the high-paid executives shifted from being self employed “risk takers” to low-risk, high reward employees, many of the low paid have been shifted from being employees to “risk takers” themselves. Everyone from newspaper reporters to taxi drivers workers for themselves now, and must either pay for their own benefits or do without them. They also have to cover the “employers’” share of Social Security and, if they earn more than $100,000, pay the New York City unincorporated business tax – originally intended for rich partners of law and Wall Street firms. The mean earnings (including benefits) of the one million self-employed workers in NYC in 2011 was $65,000, far less than the mean earnings of wage and salary employees. But, as the “Earnings 3” chart shows, the mean earnings for self-employed proprietors in NYC was still more than double the U.S. average in 2011. Private sector wage and salary workers in NYC also earn far more than the U.S. average, although again this is due exclusively to Manhattan.
What about the income of New York City residents?
Start with the chart “Per Capita Income 1.” It shows that like the mean earnings of those working in Downstate New York (excluding finance), the per capita income of those living in both New York City and the New York Metro area as a whole was about one-third higher than the U.S. average in 2011. Surprisingly, the per capita income of New York City residents was still higher than the NY Metro average through most of the 1970s. It has generally been lower than the metro area average as a whole (and thus the suburbs) since, though NYC was above the metro area average in 2010 and 2011. In general, how ever, the per capita income of the city and metro area as a whole (and thus the suburbs) has moved together over the years. ACS_11_1YR_CP03-1.xls
Once again, NYC’s relatively mean income is driven by the huge number of wealthy people in Manhattan, this time those living there. As shown in “Per Capita Income 2” Manhattan’s was more than double the U.S. average in 1969, fell to slightly less than double during the 1970s and early 1980s, and since the early 1990s has fluctuated between 250 and 300 percent of the U.S. average. Manhattan’s per capita income was 292 percent of the U.S. average in 2011, or nearly triple.
The high level of and huge gain in per capita income in Manhattan obscures some interesting trends in the other boroughs, shown more clearly in the chart “Per Capita Income 3.” The most typical borough has been Staten Island, where per capita income fell relative to the U.S. average during the 1970s and 1990s, as did per capita income in the NY Metro Area and New York City as a whole, but increased relative to the U.S. average otherwise. In 2011 Staten Island’s per capita income was 16.7 percent higher than the U.S. average. It has been and remained a middle class borough by this measure.
The other outer boroughs have only recently begun to recover from long slides in their relative income levels. In fact, of the income data presented so far it is per capita income in these boroughs that matches the anecdotal observations of the history of the city’s economy, with a collapse in the 1970s, stabilization and recovery in the 1980s and 1990s, and a renaissance since.
Queens was the most affluent outer borough in 1969, and has fallen the farthest since. When middle class New Yorkers were fleeing older areas of New York City in the 1960s many moved no farther than Queens, which has a per capita income that was 32.7% higher than the New York average in 1969. This included the Black middle class, which moved from places like Harlem and Bedford Stuyvesant to Southeast Queens. During the 1970s, however, Queens’ relative per capita income plunged, ending up at just 6.3% above the U.S. average in 1980. It was during this period that the borough’s image changed from posh Douglaston and Forest Hills Gardens to working class Archie Bunker.
Today, Queens has become known as a borough of striving immigrants. With a huge influx of people from around the world who were starting with nothing, its per capita income fell to 8.0% below the U.S. average in the year 2000. Spillover from booming Manhattan came late to Queens, but it has arrived. The borough’s per capita income was back over the U.S. average by 2009 and has remained so since.
Brooklyn has made a similar turnabout. In 1969, its per capita income was at the U.S. average. The housing in the “Brownstone” areas of the borough had mostly been built before 1920, and thus had generally turned 50 years old in 1969, and that is the age at which housing is typically passed down from those who can afford the cost of new housing units to the less well off. In the 1950s and 1960s many middle class families from Brooklyn were buying homes in the suburbs, Staten Island and Queens. But much of the southern rim of the borough still had housing that was mostly less than 50 years old, and still had residents that were mostly middle class.
In the 1970s, however, large areas of the older Brownstone belt turned poor, and later much of the southern rim was occupied by the kind of striving immigrants generally associated with Queens. The borough’s per capita income was 15.0% below the U.S. average in 1980 and 19.1% below average in the year 2000. Since then more affluent people, at first those priced out of Manhattan and then those arriving directly from all over the world, began to move into the oldest sections of Brooklyn, those that were poorer in 1969. Brooklyn’s per capita income is still below the U.S. average, but by only 5.0% or so.
Rising income has even spread to the city’s poorest borough, one of the poorest areas of its size in the U.S., the Bronx. With many middle class areas, that borough’s per capita income was just 6.2% below the U.S. average in 1969, but was 33.9% below average in the year 2000. It has since recovered to a per capita income of 24.5% below the U.S. average.
The recovery of per capita income, relative to the U.S. average, in Brooklyn, Queens, and the Bronx has only taken place in the past decade. While some areas of thee boroughs might have been “gentrifying” before that, others were still becoming poorer, and the balance was in favor of lower relative income borough-wide. That has been changing, in part because of bad news elsewhere in the U.S. Simply put it isn’t that New York City’s outer boroughs have been getting richer, it is that the rest of the U.S., and for the first time since perhaps the Great Depression the suburbs and the Sunbelt, have been getting poorer. And so we see non-poor people from the rest of the U.S., as well as immigrants from abroad, moving to these boroughs, something that was rare even in the boom years before 1950.
Per capita income, however, is a mean, and can be pulled up by a small number of people making a large amount of money, even if most people are no better off than before. Median household income is a better measure of the well being of the typical person. That and median earnings are the subject of the next post.