New York’s Lost Decade
Ten years ago this month, the major investment bank Lehman Brothers collapsed, and for many Americans, a lost decade ensued: lost wages for people who lost jobs, and lost income for people who worked without raises, or worked fewer hours. New York, too, has had a lost decade, but of a different kind. The city’s economy has boomed, as new figures released by state comptroller Tom DiNapoli show, but New York has not taken advantage of its prosperity by investing enough capital in critical physical infrastructure to support future economic growth.
After 2008, many analysts (including, to some extent, this one) thought that the financial industry that emerged post-crash would be a fraction of the size of its bubble-era self. And, in fact, the securities industry—the highest-paid sector of finance, the one that underwrites and sells stocks and bonds—never regained the nearly 22,600 jobs it lost after the crash. Today, it employs 176,900 people within New York City, a gain of 10,600 since 2010. But the industry actually lost jobs in 2017, and any gains for the full year in 2018 are likely to be modest.
In terms of profits and pay, though, the securities industry is booming. As bond, stock, and other markets break new records, bonuses this year for industry workers reached $31.4 billion, just shy of the 2007 peak, and up 17 percent from the previous year. Absent a new market correction, DiNapoli expects they could climb past that level over the coming winter. Thanks to average bonuses of close to $200,000, each securities-industry worker earns an average $422,500—5.5 times as much as private-sector workers elsewhere in the city. Finance workers’ outsize gains in pay, compared with other private-sector workers’ pay, have been a feature of the city’s resurgence, starting in the 1980s, from the fiscal crisis of the 1970s; in 1982, finance workers earned “only” twice as much as the average worker.
Those salaries and bonuses mean a tax windfall for New York. The city collected $4.2 billion in taxes attributable to the securities industry for the fiscal year that ended this June, DiNapoli estimates—or 7 percent of all city tax revenues. The state collected $14 billion, or 18 percent of its total tax haul. For the city, the figure rivals the record high of a decade ago; for the state, it far exceeds it, by about $2 billion, thanks partly to tax hikes passed in the aftermath of the crash.
New York City’s budget, excluding federal and state grants, has soared, from $44.9 billion to $65.4 billion last year, or a nearly 46 percent jump, over the decade. The state budget has exploded, too, nearly 42 percent, from $115.6 billion to $164.5 billion. The money has gone, especially in New York City, to higher worker salaries and wages for a rapidly expanding public-sector workforce.
But it sure didn’t go to better urban infrastructure. Over the winter, the city’s subways, indirectly controlled by the state’s Metropolitan Transportation Authority, with some city input, suffered their worst on-time performance in modern history, with just 58.1 percent of trains running on time in January (the figure for June was 68 percent, hardly stellar). In August, the subways had only one day without a subway-signals failure causing cascading delays.
Nor have the state and city used their salad days for strategic planning of new infrastructure. During the last boom, between 2003 and 2007, New York prepared the way for four new subway stations—three on Second Avenue and one on the Far West Side—to open up in the ensuing decade. That wasn’t nearly enough, but this time, aside from a little desultory planning for the next phase of the Second Avenue Subway, the city and state have done next to nothing to bequeath new infrastructure to the next decade. The closest Mayor de Blasio got was to mull over a new streetcar between Brooklyn and Queens before, apparently, ditching the idea. If this is how our critical infrastructure performs at what may be the tail end of an economic expansion, how will it fare in a bust?
