02 Jul New York’s future as the world financial capital
New York City remains the preferred headquarters of the global financial services industry. Among the largest private sector employers, however, there is a growing trend to move jobs and business operations to lower cost, more business-friendly environments. Absent public actions to address high costs, high taxes, aging infrastructure and a hostile political and regulatory climate, the city’s future as the world financial capital is at risk. The purpose of the survey was to better understand how the industry is evolving and what measures are needed to maintain New York’s competitive advantage as a global financial center.
The importance of finance to the overall well- being of the city cannot be overstated. At 20% of the city’s economic output, the contribution of financial services is at least twice that of the next top-grossing industry. Although the industry represents only 9% of the city’s private sector jobs, it accounts for nearly a third of the private sector payroll. It also pays at least $8 billion, or 18%, of the city’s annual tax revenues.
The survey found that certain sectors of the financial services industry in New York are growing and adding new jobs, but the industry’s rate of growth has slowed to about half that of the overall private sector. During the past five years, the city experi- enced a net loss of about 25,000 financial services jobs. This is not alarming, but the fact that these are largely middle wage jobs held by residents of the five boroughs — and that job losses are pro- jected to accelerate over the next five years — is reason for concern.
Fifty firms, including large banks, insurance companies and asset managers, as well as private equity firms, hedge funds and financial technology (“FinTech”) startups, responded to the survey, providing detailed data on their current status and future plans. Collectively, survey respondents represent nearly one-third of total industry employment in the city. Eight real estate firms were also surveyed to incorporate their observations. Furthermore, GLG conducted research on the city’s global and domestic competitive position, including interviews with GLG Council Members and other experts in the field. Econometric research was provided by EMSI, Inc.
Overall, the survey found that there is growing domestic and foreign competition for financial ser- vices industry jobs and operations that historically have been located in New York City. The industry continues to favour New York as a place that provides excellent access to both talent and customers, a relatively stable business environment, and the many lifestyle amenities. But there are rising concerns about high costs, high tax rates, aging infrastructure and a hostile political and regulatory climate. Survey responses suggest that, absent public actions to address these concerns, the city’s future as the world financial capital is at risk.
Current Status & Industry Trends
Since 2000, the growth trajectory of the financial services industry in New York City and State has gone from robust to modest, with its economic output expanding at less than half the pace of all private industry in the state (6% versus 14%). The trend is even more stark at the city level, where financial services have grown at one third the pace of all private industry (6% versus 17%).
Over several decades, New York City has seen a gradual loss of middle- and lower-paying jobs in the industry due to technology or relocation of jobs to lower cost regions. ”Back office” jobs were the first to go, followed by downsizing of trading jobs that were replaced by electronic exchanges.
Survey respondents planning to relocate jobs out of the city favor both lower cost domestic US locations as well as offshore destinations like India and Argentina.
The loss of middle wage jobs has accelerated since the 2008 financial crisis. In 2005–2007, 59% of financial services jobs paid less than $100,000, compared with 90% of all other private sector jobs in the city. By 2011–2013, the percentage of the city’s financial services industry jobs paying less than $100,000 had dropped to 51%, as compared to 88% of all other private jobs. Since its pre-recession employment apex (2005–2007), the city’s financial services industry had a net loss of 24,000 middle wage jobs paying between $35,000 and $75,000, and a net loss of 15,000 low wage jobs paying less than $35,000. These were offset by a net increase of 30,000 higher wage jobs.
Access the complete report in PDF Files here
