According to a June 2015 report from the Partnership for New York City and GLG, while New York City remains the top city for the global financial services industry, there is a notable trend among large private sector employers to move jobs and business operations to less expensive and more business-friendly locales.
The new report is based on a survey of 50 companies based in New York, including large banks, insurance firms, asset managers, private equity firms, hedge funds and financial technology start ups (and eight real estate firms). The loss of more than 25,000 jobs on Wall Street over the last five years is one major headline of the report.
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Financial services contributes at least 20% to the economic output of the city, more than twice that of the next biggest industry. Moreover, even though the industry represents a mere 9% of the city’s private sector jobs, it actually represents just a hair under a third of the private sector payroll.
Also keep in mind the financial services industry totals up to close to $8 billion annually to the city in various taxes.
Based on data from the Quarterly Census of Employment and Wages and the Big Apple’s Department of Finance, GLG estimates that the financial services industry represents more than $2.5 billion in personal income taxes, which equals approximately 25% of all personal taxes paid in New York City, as well as $2.5–$3 billion in residential and commercial property taxes.
Finally, the New York State Comptroller calculates that financial services firms add up to around $3 billion (just under half) of all business tax revenues in NYC.
Loss of financial services jobs on Wall Street
The financial services sector represents over 8% of the city’s employees (around 310,000), but has shrunk from a peak of 360,000 at the turn of the century. Of note, the financial industry includes around 23,000 high-technology jobs in such as programming, software engineering, data processing and network management.
Over the last five years, New York City has seen a loss of more than 25,000 financial services jobs. Also of concern, most of the jobs lost were middle wage jobs held by residents of the city, and even more worrisome, the job losses are expected to increase over next five years.
The loss of financial services jobs has an especially negative impact on the overall economy of the area. According to the PNYC/GLG report, a loss of 100 commercial banking jobs will result in a total loss of 354 other jobs. Keep in mind that over 700,000 jobs in other sectors of the Big Apple’s economy depend on financial services.
Increasing domestic and foreign competition for NYC
New York City has seen a gradual loss of middle- and lower-paying jobs in financial services due to technology or relocation of jobs elsewhere.
Respondents to the survey who were planning to relocate jobs out of the city were considering both lower cost domestic locations as well as foreign countries India and Argentina.
Just over 62% of survey respondents reported that they had expanded their NYC operations in the last 3 years, but just 52% are planning an expansion in the next 3–5 years. Moreover, around 60% of the city’s financial services employees work for a firm that relocated at least some operations out of the city over the last three years. The reasons for relocating operations from NYC were cost pressures, lack of government incentives and stiffening competition from other U.S. and international financial hubs.
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