The Current Employment survey data has been rebenchmarked for this year, and the annual average data for 2008 has been released. Meanwhile with a recession underway and public money increasingly tight, politicians and lobbyists are once again spewing nonsense about where our tax dollars go, talking about anything and everything other than the categories of expenditure in which New York City and State are far above average, and on which spending has increased the most. And the news media is reporting some of the nonsense that is spewed, converting the press releases from PR people into stories. So I have decided to once again say the unsaid, since no one is paying me to say otherwise, in the hope that someone, somewhere will get it. And just in case there are some people who read my posts who can’t make sense of (or are bored by) tables of numbers, this time I am trying a simple chart.
In the attached spreadsheet the table and chart show 1990 to 2008 annual average employment, for New York City and the rest of the state; and for public schools, other local government, the substantially government-funded (via Medicare, Medicaid, and public employee and retiree health benefits) private health care and social assistance sector, and the rest of the private sector — the part generating the tax dollars that pay for all preceding. In the chart all of these are put in an index, with their level of employment in 1990 set to 100, so one can see how they have changed in the years since, in and of themselves and relative to each other. New York City is in black with solid lines, the Rest of New York State in gray with dashed lines, with different markers showing the different sectors. Hey media, want to present some facts? Please download the spreadsheet, print the chart, and read on.
Looking at the thick lines without markers, one sees that two parts of the economy, the private sector excluding health and social services in New York City and the private sector excluding health and social services in the Rest of the State, were in about the same place in 2008 that they had started in 1990. New York City’s private sector ended the period with 3.4% more jobs (87,500), while the rest of the state ended it with 1.6% more jobs (51,600).
One can clearly see the effects of the two recessions, both of which hit New York City harder, from 1990 to 1993 (it had actually started in 1989) and 2000 to 2003. The 1989 to 1993 recession was far worse, as was the fiscal crisis that accompanied it, for two reasons. First, it was concentrated on the two coasts, in the Northeast (including New York) and California, which had had real estate bubbles in the late 1980s and busts in the early 1990s. And second, it was concentrated in the financial sector, with the end of the junk bond era with the bankruptcy of Drexel Burnham Lambert, the merger of many banks and the associated loss of thousands of jobs, and structural change due to office automation and outsourcing and the associated elimination of tens of thousands of middle class back office jobs in New York City and its suburbs.
For Downstate New York as a whole there is every reason to believe that the current recession, which the New York State Department of Labor asserts finally reached New York last August, will be at last as bad as that of the early 1990s. We have had another real estate bubble, one that affected most of the country this time, that has been bursting in one metro area and then another since 2006 and has finally just started to burst in New York City. The structural change in finance needs no description — it is far greater than even the upheaval in the wake of the late 1980s stock market and junk bond crashes.
It is not certain that the private sector economic damage will be once again greater in New York City than in the rest of the state. In the early 1990s New York City was plagued by a crack epidemic and crime wave. Among the middle- and upper-middle class, the large baby boom generation was in the parenting phase, with children entering the school years, and the low quality of the city’s schools caused this group to flee the city for the suburbs, taking their local consumer spending power with them. This time the large baby boom generation is in the empty nester phase, and the large baby boom echo generation is in the singles and couples phase, so for most the schools are less of an issue.
While the private sector (excluding health and social services) has about the same number of jobs as in 1990, New York City Local Government (excluding the public schools) has 7.6% (25,300) fewer. Most of that reduction occurred in the fiscal crisis of the early 1990s, with employment reductions coming slowly under former Mayor Dinkins and then quickly under former Mayor Giuliani. Services at the city’s parks and libraries, for example, have never returned to the level of the Koch Administration, let alone the entire era before the 1970s. This sector is represented by the black diamonds in the chart.
It should be noted that even at the start of this period and increasingly thereafter, New York City has been and is one of the most privatized local governments in the country, with many services provided under contract by companies that public employees provide elsewhere. Contract employees don’t show up as local government employees in the chart. This situation dates back to the 1970s fiscal crisis, when the services provided (or rather not provided) by New York City agencies were discredited. The non-profit sector is the primary recipient of the contracts. Sanitation, provided by private carters elsewhere but by public employees in New York City, cuts the other way, as does the city’s relatively large public housing system, public hospital system, and public transit system (public transit in the rest of the state is counted as “state government” and is not in the chart). While large, these services have not been adding employees in New York City. If anything, they have been shrinking, squeezed by what has been growing. And that brief increase of 11,500 from 2004 to 2008, with added hours in the libraries? Even in the best of circumstances the recession would have reversed it, and as will be explained below, these are not the best or circumstances.
The New York City public schools, represented by the black circles, also suffered a sharp drop in employment in the early and mid-1990s, offset by a recovery later in the decade. The mid-1990s cutbacks were in reality far worse that it appears, because school enrollment — fueled by the large “baby boom echo generation” (the children of the baby boomers) and a surge of immigration, was soaring at the time (even as many baby boomers fled the city). Once can clearly see the effect of the first Pataki/Bruno/Silver budget in 1995, when state aid to the New York City schools (already low) was slashed but aid to the rest of the state (already high) was increased. Despite the recession, employment in the schools in the rest of the state kept growing that year, while in the city’s schools employment plunged. No wonder that in a surprising decision, the NewYork State Court of Appeals certified that the Campaign for Fiscal Equity Lawsuit could move forward on July 13, 1995.
As their part of the 1995 deal, the United Federation of Teachers (which represents New York City teachers) secured an early retirement incentive from the Giuliani Administration (which we are still paying for), allowing thousands of experienced teachers to flee to Florida, a trick they tried to repeat after 9/11 (Bloomberg turned them down) and made permanent in early 2008 (after Bloomberg went in on the deal, why I don’t know). Later in 1990s, with class sizes soaring and tax revenues rising, the city hired new “teachers” to replace those who had left, but it did so at far lower pay than in the suburbs and in the midst of a low-unemployment boom and a national teacher shortage. The result was a revolving door of unmotivated, uncertified teachers, particularly in schools serving less well off New York City children, and a further plunge in the quality of the city’s schools.
There has been a temporary period of stability and partial recovery for the city’s schools since, with flat employment better than it seems because (as the large baby boom echo generation and the children of the 1990s immigrant wave exits school) enrollment has been falling, here and elsewhere. In addition, since the advent of Mayoral control in education additional non-teaching duties have been contracted out, allowing more teachers to be hired. Despite this, employment in the New York City public schools was 7.6% (10,900) higher in 2008 than in 1990, although taken together all local government employment in the city is still down 14,400.
So in what categories has employment really gone up? Local Government in the Rest of New York State (excluding the public schools) for one, as represented by the gray diamonds in the chart. Employment in this sector was at about the same level for most of the 1990s, but increased in the years afterward. There was a particularly large increase of 14,100 from 2001 to 2002, as New York City reeled after 9/11 and the private sector sank, but Governor Pataki sought to hand out largess to non-city interests in his last re-election campaign. In fact, rising local government employment in the rest of the state seems to be driven as much by the need for some people to get jobs with employer-provided health insurance and pensions (as high-paid private sector jobs continue to decrease there), as it is by the need of by other people in the rest of the state for additional public services. It should be noted that, in addition, many of the local government employees working in New York City also live in the rest of the state, and are represented by state legislators from outside the city who have no interest in the quality of the city’s public services. In any event, just counting local government (other than public schools) in the part of New York State outside New York City, employment in this category was 16.8% (43,300) higher in 2008 than in 1990.
Employment in the public schools in the rest of New York State, represented by the gray circles, has gone up every year since 1992. In fact, once might say that because of the decrease of a mere 1,300 jobs out of 290,200 from 1991 to 1992 in the midst of a fiscal crisis that was devastating New York City, the rest of the state was so outraged at then-Governor Cuomo that it ousted him in the latter year and took revenge on the city’s children in the years after. Right through the mid-1990s, when employment in NYC’s schools was plunging, and the post-9/11 period, when employment in the New York City schools was flat, schools in the rest of the state were adding workers. The growth was particularly huge in the wake of Pataki’s STAR program, which directed more funding to the schools that spent the most — those outside New York City — and was supposed to allow lower property taxes but just got spent instead. One sees another big spurt from 2007 to 2008, in Governor Spitzer’s first budget, when he finally settled the Campaign for Fiscal Equity suit by reducing the city’s share of state education funding (while spending more overall). That year the number of people working in the New York City schools rose by 100 (though the number retired from those schools presumably increased more) while employment in the schools in the rest of the state rose by 6,900. Since 1990, employment in the public schools in the rest of the state is up 26.5% (76,600). This in an area without substantial population growth.
Overall, local government employment in the rest of the state is up by nearly 120,000 over 18 years, as its many local governments are apparently run by thousands of John Lindsays. Those older than I am might recall the reaction of the rest of the state when then New York City Mayor Lindsay borrowed money, increased spending, and then showed up in Albany with a tin cup saying they needed more aid to keep taxes down and prevent devastation. My guess is it was not well received. Somehow the rest of the state has had more success.
One remnant of the Lindsay era continues to add jobs in New York City, however, the Health Care and Social Assistance sector. Employment in this sector, represented by the black triangles, has gone up each and every year, relentlessly, when the economy is hot and tax dollars are flowing, and when people in the rest of the private sector are losing jobs, taxes are being raised, and government spending on other things is being slashed. The cost cutting Giuliani Administration barely and only briefly slowed the growth of this sector down. Its employment level is up by 48.5% (182,500) in New York City from 1990 to 2008, including another 1.5% (8,400 last year). And while the level of Medicaid spending in the city has received some much deserved attention, what may surprise some is that in the rest of New York State employment in the health care and social assistance sector has gone up nearly as quickly, by 46.3% (220,200) from 1990 to 2008 including an increase of 1.9% (12,800) last year. One can see this sector, represented by the gray triangles, growing at about the same pace as the health and social services sector in New York City.
Now to be fair employment in the health care and social assistance sector rose 70.2% in the U.S. as a whole from 1990 to 2008 according to the Bureau of Labor Statistics. On the other hand, the population of the U.S. rose 22.2% during that time while that of New York rose just 8.3% according to the U.S. Census Bureau (with virtually all the growth in New York City). Moreover, there were 52 workers in this sector for every 1,000 people in the U.S. in 2008, compared with 66.8 in New York City and 62.5 in the rest of the state. It should be stressed, moreover, that New York State has not seen an influx of social workers tending to the needs of the poor and troubled. What has been growing is the health care portion of this sector, and the part of social assistance that consists of Medicaid-funded aides who provide at-home care for senior citizens.
The relentless nature of the growth in this sector, and in the public schools outside New York City, shows what the Greater New York Hospital Association, Local 1199, the New York State United Teachers, and the New York State Association of School boards are talking about when they accuse the state of “budget cuts.” Not a reduction in employment. Any slowdown in spending growth, and therefore employment growth, is considered a “budget cut.”
Add it up, and New York State’s Health Care and Social Assistance sector added more than 400,000, and local governments in the rest of the state have added about 120,000, organized and self-interested voters, lobbyists, TV commercial funders, and campaign contributors (er workers) since 1990. The 2008 total is more than 1.9 million. Their influence extends to anyone who believes the commercials which say that if their employment doesn’t go up 1.5% or more per year, they’ll stop teaching our children and let our babies die. Pay up or else!
But how? How did a barely-increased number of private sector workers pay for 520,000 more government and government-funded workers, mostly outside New York City, in the past 18 years?
This was possible, in part, because some of those private sector workers (nearly all in the financial industries) were able to earn (or at least seize) monstrously massive pay during those years, and pay monstrously massive state and local taxes.
And hiring the additional 520,000 was only possible, in part, because it in fact wasn’t paid for — yet. A large part of the cost of those additional 520,000 is their pensions, and those pensions and were both enhanced and under-funded during the years from 1990 to 2008, an off-the-books debt that now has to be paid. The on-the-books debts soared as well — for New York State, New York City, the MTA and other public authorities. Even as the infrastructure stagnated or declined, yet another off-the-books debt. Note that the Thruway Authority, the MTA and New York City are deep in debt even though the Tappan Zee Bridge is falling apart, the Second Avenue Subway is unbuilt, the signals on IND subway lines (letters below J) are nearly 80 years old, and the Brooklyn Bridge hasn’t been painted in 30 years. All these debts now have to be paid. The alternative is bankruptcy.
Take the chart attached to this post. Add soaring debts and interest costs. Add soaring pension and retiree health care costs — not the retirement cost of tomorrow’s workers mind you, but yesterday’s. And that’s where all the money is going in New York State. Anything else is barely talking about. An emphasis on anything else is misdirection, deception, propaganda, and lies. For any media outlet to repeat what anyone says about anything else, without also mentioning what a joke it is to even talk about it, is to participate in the fraud. And that participation has helped to bring us to where we are today.
And now, with an additional 520,000 organized voters (er workers) on the books (and earning pension rights), we face a mother of a recession and a structural change in finance. It could be twenty years before New York City’s financial sector is allowed to steal (er earn) what it did during the dot.com and housing bubbles, the hedge fund and ponzi scheme days. What if, as a result of a diminished level of private sector pay per worker, as a result of an inability to further defer pension obligations (let alone paying them back), and as a result of an inability to continue to go deeper and deeper into debt (let alone pay it back), the ratio of public and publicly funded workers to private sector workers has to fall back to what it was in 1990 in order to balance the state and city budgets? What then? How could it happen? And what would happen if, as a result of the need to divert tax dollars pay for all those debt and pension obligations from the past, the number of local government and health care and social assistance workers relative to the number of private sector workers in other categories had to fall below the level of 1990?
Any projection of what might happen has to take into account the fact that (in general) the same people, backed by the same interests, continue to control the New York State Legislature, where the decisions have been and will be made. It may be that in a fiscal disaster employment in the health care and social assistance sector throughout the state, and local government employment in the part of the state outside New York City, finally stops going up. With an acknowledgement by the legislature that as a result of their “shared sacrifice” the workers in those sectors have every right to let our babies die and stop providing public services, as New York City’s government agencies did in the 1970s. But employment in those sectors isn’t going back down by 520,000 if 1.9 million organized voters have anything to say about it, and it is more accurate to say that no one else has anything to say about it.
How many people even vote in elections for state legislature? In 2006, according to the New York State Board of Elections, 4.5 million voted, but for state assembly more than 700,000 were blank, void and scattered — mostly people who showed up to vote for Governor but didn’t bother for state legislature. (Perhaps they were New York Times readers who thought that voting for Spitzer would solve everything). The total voting for state assembly was less than 3.8 million, meaning the 1.9 million in public and publicly-funded sectors that are growing are more than half of the total. Add retirees from these sectors and from local government in New York City, and one has a big plurality of state legislature voters. And the rest? Most are probably people who believe that all their tax dollars are going to Black people and illegal immigrants on welfare in New York City. Because that is what they have been told over and over again for forty years.
How much, under the principle of “shared sacrifice,” would employment in New York City’s local government agencies have to fall to offset the additional 520,000 added since 1990, the majority outside the city, in other tax-funded categories? New York City’s total local government employment in 2008, including the New York City Transit portion of the MTA, was 460,000. So local government employment in New York City could be cut to zero, and it still wouldn’t be enough. A bit extreme? Assume only one quarter of the increase in health care and social assistance employment is funded by state and local taxes, with the rest funded by the federal government, private employers, and individuals. That cuts the state and local tax funded increase to 120,000 local government workers in the rest of New York State plus 100,000 health care and social assistance workers statewide, for a total of 220,000. Which means that, with cost deferrals and taxes on massive Wall Street bonuses no longer options, New York City local government employment would have to fall by slightly less than half.
With the Wall Street crash, the fiscal crisis, and the energy crisis, there has been much talk of the 1970s repeating. Given that the excess pensions, spending and debts of the Lindsay era in New York City have been repeated in the rest of the state and, in some ways, nationally, my view is that it is going to be the 1970s in many places over the next few years, though I’m not sure where. In the 1970s, however, the United States had more or less balanced trade, a balanced budget, a personal savings rate of 10 percent, and three decades before the large baby boom generation would reach eligibility for Social Security and Medicare. Not now. And in effect the values of the generation that left New York City in ruins 25 years ago have become commonplace 35 years later. That’s one reason the smart money is on an institutional collapse.