In preparation for the release of the employment phase of the 2012 Census of Governments, I have downloaded some Employment and Wages data from the Bureau of Labor Statistics last weekend. According to the data, if one excludes the high-paid Finance and Insurance sector the average annual pay per private sector worker increased 6.1% in Downstate New York from 2008 to 2012. The inflation rate for the period was 6.6%, meaning that in “real” dollars average annual pay fell. This confirms the American Community Survey data I cited earlier in this post.
Showing most New Yorkers have gotten poorer. For the same period, most unionized city workers received 8.0% wage increases, and those represented by the United Federation of Teachers received a retroactive pension increase that, for those who benefitted, was worth far more. And yet they want even more money for those years, at the expense of those unrepresented people who would have to pay for it.
So we are going to find out what being a “progressive” means today. The original progressives, a century ago, were against the abuse of ordinary people and the common future by those who had gained concentrated power in our institutions. Not only the corporate “trusts” busted by Teddy Roosevelt, but also the political machines with their patronage workers providing poor services. Progressive Democrats wanted more fair and effective government so it could do more things. Progressive Republicans wanted more fair and efficient government so it could do the things it must do at a lower cost. Back then progressives weren’t people who thought that instead of having just some people get ahead of others at their expense by manipulating the business world, additional people should be able to get ahead of others at their expense by manipulating state and local government. That was Tammany Hall. The public employee unions, contractor organizations, and unions representing workers employed by contractors, have taken its place. And if there are any reductions in public services, and any tax increases that don’t go exclusively to additional services, and/or any increases in public compensation beyond what most other New Yorkers are receiving, what was once machine politics will now be “progressivism.” That will be true even in another recession. Additional commentary, and a spreadsheet, can be found below.
Here is the data. I’m setting it up for my own use, so it isn’t set up to be presented as a table, but some might find it interesting.
“What about Wall Street?” That’s what you hear when you question the social justice of what any other organized group has done these days. The way people pulled over for speeding used to tell the police “why aren’t you going after the drug dealers instead of wasting time hassling me” 20 years ago.
Well, what about it? Average annual pay per worker in Downstate New York’s Finance and Insurance sector actually fell 4.0% in nominal dollars from 2008 to 2012. That decrease is in addition to the 6.6% loss due to inflation. With financial employment also falling by 7.3% from 2008 to 2012, the total payroll of the Finance and Insurance sector fell 11.0% in Downstate New York from 2008 to 2012. Adjusting for inflation, the total payroll of this sector in Downstate New York decreased by 19.9% from 2008 to 2012. And while automation, outsourcing, and the relocation of back office operations to lower cost states means relatively few middle class New Yorkers have been affected by this decrease, because Wall Street now provides so few middle class jobs, it does have an impact on the city and state tax base.
Of course average annual pay in Downstate’s Finance and Insurance sector was a whopping $237,804 in 2012. That includes all the bank tellers and insurance brokers, who bring down the average. Aside from the Wall Street stuff, Finance and Insurance sector workers probably earn about what Finance and Insurance sector workers earn in the rest of the country, or an average of $79,206 in 2012. In Massachusetts, which has a large mutual fund and insurance industry, average annual pay per worker in the Finance and Insurance sector is about the same as average annual pay in the private sector as a whole. Meanwhile, the average pay per worker for Downstate New York’s private sector workers outside the Finance and Insurance sector was $60,174 in 2012.
The average annual payroll per employee for Downstate New York’s Finance and Insurance sector soared 70.0% from 2002 to 2008, a period when the total inflation rate was just 19.7%. Moreover, that increase came after another huge increase during the 1990s stock market bubble, when the gains were justified by all the “shareholder value” the financial sector was allegedly creating for investors.
What did the employees of this sector do to deserve such a massive increase in their average pay during those years? Their success was political, not economic, in the corporate suite and in Washington DC. In fact, they failed economically except with regard to enriching themselves. They pillaged their companies, nearly wrecked the U.S. economy, and left a situation that required a massive government bailout that (counting the rock bottom interest rates to buoy up assets prices and increase banking spreads) has lasted six years so far.
Those on Wall Street, and in the executive suite in general, are not earning a free market wage. They might best be described as a de-facto union, a union that negotiates its pay with itself and passes the bill off shareholders and others. Just like the public employee unions, and the unions of private entities that rely on public funding, now that the “progressives” are in office? It’s a comparison that both sides, Wall Street and the public employee unions, hate, I can say from personal experience. But from the point of view of the serfs and younger generations it is a fair one.
Think about this. What would happen if the average annual pay in Downstate New York’s Finance and Insurance sector were to fall just to the level of 2002? Leaving that sector with all the gains in average pay – unearned gains we now know after one bubble after another deflates – of the 1990s, but not those of the 2000s? Even without any additional employment decreases in that sector, such a decrease in Finance and Insurance would reduce the total private sector payroll of Downstate New York by 10.0%.
What would that mean for New York City’s personal income tax collections? New York State’s personal income tax collections? The MTA payroll tax? What do “progressives” have to say about this? Should it happen? And if so, what will that mean for public services and benefits for the serfs, given what they might feel they owe to their crowd?
I can tell you this. If New York’s Finance and Insurance sector continues to suck up that much unearned pay at the expense of people around the country, in the end New York won’t have a financial sector anymore. People just won’t be willing to do business with companies based here. And that would cost a lot more than 10.0% of payroll. Where are the new, untainted major financial companies? If they don’t come from here, they will come from elsewhere. I hope the DeBlasio Administration understands this, given that the City of New York is probably among Wall Street’s biggest customers, for underwriting (of municipal bonds), investing (of pension funds) and transactions (such as payroll). And the one thing businesses need most to grow is customers.
“Tax the rich” or not, the political/union class can’t pretend that anything it will take is strictly at the expense of the executive/financial class, and not at the expense of the serfs and the common future. In fact, that isn’t the case for what the political/union class has taken already, in the form of retroactive pension enhancements, either. If they keep getting richer and richer, in total compensation, relative to most New Yorkers, then most New Yorkers are going to be able to afford fewer and fewer of them, now and/or in the future. That is what has happened for the past six years, and we are just getting started. And if those fewer workers don’t do just as much work for the serfs, in exchange for the work the serfs must do for them at their jobs, then the political/union class would have committed a further social injustice.