Local Area Personal Income data from the Bureau of Economic Analysis includes both personal income and earnings data (the CA05 series) and employment data including (unlike other series) the number of self-employed proprietors (CA05). A spreadsheet with a summary of this data for 2005, including three worksheets of output tables ready to print, is attached. I’ll discuss this information in more detail in a later post, but here I’ll just make the point that excluding the high-paid Finance and Insurance sector, with its insane bonuses and hedge fund traders, the average private-sector earnings per worker (wages and benefits) in Downstate New York (New York City plus the suburbs) continues to be one-third higher than the national average (or 134 percent of that average in 2005). The higher earnings are primarily due to Manhattan, where earnings per worker was double the national average even with Finance excluded, though Westchester workers are also well paid. There is a rough correlation for broad areas (Upstate, Downstate), between what private sector workers get paid, relative to their U.S. counterparts, and what local government workers get paid.
The private sector comparison is important because average earnings levels impact what local governments need to pay, relative to the national average, to attract workers of equal ability and motivation, and thus provide equal services. This is so not only because the private sector offers competing opportunities, at least to those willing to change careers, but also because average wage levels affect the cost of living for goods and services that cannot be imported, and for housing. For this reason, the federal government bases relative Medicare reimbursement rates on average pay per worker. Health care, like local government, is a labor-intensive field.
When evaluating local government spending and pay levels in high-cost Downstate New York and New Jersey, I use similar data to discount for the cost of living here. Either I express taxes, expenditures and debt as a share of total personal income, or reduce expenditures and pay by a factor that adjusts for relative earnings. Generally, I end up multiplying Downstate New York wages and expenditures by around 0.75, because both personal income in the broad New York MSA and earnings per worker in Downstate New York (excluding Finance) tend to be consistently around one-third higher than the national average.
Why, a public employee looking for a raise might ask, exclude Wall Street? Looked at in its entirety across the country, the Finance and Insurance sector isn’t especially well paid. It includes people who provide financial transactions of various sizes, and compensation varies based on the size. Those selling and processing individual insurance policies, bank teller transactions, mortgage and car loans, mutual fund sales, and home sales tend to be paid less. Those managing multi-billion-dollar commercial transactions tend to be paid more. It is as if some teachers only taught one student at a time, while others lectured in a stadium to a class of 70,000 – and graded all their homework. As it happens, New York City has a concentration of people getting paid huge money for huge transactions, and this skews the pay per employee here. That isn’t a labor force most of us are a part of, though if you are qualified you might want to get in because (as at the end of every financial frenzy) there is a labor shortage. Just don’t count on being employed next year.
The data shows the average private sector worker (finance excluded) earned 134 percent of the U.S. average) in Downstate New York, and 86.2% of the national average in Upstate New York, in 2005. The average local government worker earned 133.5% of the national average in New York City, 139.4% in the Downstate Suburbs, and 95.2% of the national average in Upstate New York. These are averages, and more detailed 2002 Census of Governments data shows that some local government workers do better, relative to the national average for their category, than others.
It is worth noting that in Downstate New York the trend in private earnings per worker (relative to the national average) is flat from 2001 to 2005; Upstate the trend is down. For local government, the trend is up a tiny amount for New York City, and more significantly in the suburbs and Upstate. (A continuous series by sector is not available going back to 1969, as a result of an industry classification change).
For the substantially government-funded Health Care and Social Assistance sector, a different pattern emerges. Despite high public spending in this sector overall, average earnings per worker is low in large areas of Downstate, particularly in New York City’s outer boroughs. As discussed in prior posts, this is because of the out-of-proportion number of low-paid home health care and personal care workers who work there. This brings down average pay. Below average pay more than offsetby very high numbers of tax-funded workers is a recurring situation, it seems, in public agencies and related non-profits.
Manhattan and the Downstate Suburbs are closer to the private sector as a whole in average earnings relative to the national average, at 126 percent of the average in Manhattan and 119 percent of the average in the suburbs. New York City’s physicians also are relatively poorly paid compared with the cost of living, other data show, though there are more of them here than is typical.