The Bureau of Economic Analysis has released Local Area Personal Income data for 2007. I might look into it more deeply once it is available in disk form, allowing more detailed information for more places to be downloaded in one shot. But the most important finding hasn’t changed — New York State’s economic base and tax base are concentrated overwhelmingly in Manhattan. A place that is what it is, and attracts economic activity despite high taxes, wages and real estate costs, only because it sits at the center of a mass transit system that allows two million workers from a metropolitan area of 18 million to concentrate in one place. Without it, Manhattan is Milwaukee and New York State is Michigan or worse. And because of the seeming compulsion of those in charge of our public and private institutions, particularly the state of New York, to extract every ounce of vitality from the future of those institutions and leave them in ruins, that is where we are heading. As this information is not new, if you have been reading posts and downloading the associated spreadsheets I’ve put up here for three years, there is no need to read further. For those who want more details, a summary follows.
The data show that if one excludes the Heath Care and Social Assistance sector, which is substantially government-financed, Manhattan accounted for 53 percent of all the money earned at work in New York State’s private sector in 2007. Not New York City. Not the Downstate region. The entire state! That was at the peak of a Wall Street bubble, but even in 2003, a low point for this statistic, Manhattan still accounted for 48% of fully private sector earnings, or about half. Half is a good shorthand for Manhattan share of New York State’s private economy.
And that is just directly. Add in the economic activity created by spending by those who work in Manhattan and live elsewhere, including every dime my family spends in Brooklyn. Of the $340 million earned in Manhattan, more than $174 million was earned by those living outside — the $174 million is a net figure, netting out the small amount earned by Manhattan residents who work elsewhere. Add in as well the money earned at companies located elsewhere that provide goods and services to Manhattan, including those that don’t want to pay tolls for driving there. And the economic activity created by their employee’s consumer spending.
Consider as well New York State’s tax-funded economic activity. It is hard to tabulate this specifically within the city, as city agencies tend to report all of their employment and payroll from a headquarters (typically located in Manhattan) although most of the employees work elsewhere. What one can say is that is that various levels of government accounted for 9.9 percent of the money earned in all of New York City in 2007, and 20 percent of the money earned in the rest of the state. And a large share of New York City public employees, particularly in categories that are the best paid, live outside the city, and are thus also dependent on government spending. By state law residents of the suburbs are allowed to take local government jobs in New York City, but suburban governments are free to bar New York City residents for competing for their own jobs. There are many, many state laws just like that.
The substantially government-funded health care and social assistance sector accounted for 7.8% of the money earned in New York City in 2007, but a greater 12.1% of the money earned in the rest of the state. And, once again, many of the better paid jobs in the health care and social assistance sector in New York City are held by residents of the suburbs, with a much smaller number of lower-paid non-profit workers commuting the other way. That is particularly the case for those institutions located in the outer boroughs. I was once told that Long Island Jewish Medical Center, on the border of Brooklyn and Queens, is staffed by physicians and nurses for Nassau and Suffolk, and orderlies and maintenance staff from Brooklyn and Queens. The health care and social assistance sector accounts for 30.6% of the money earned at work in the Bronx, 26.0% in Brooklyn, 16.8% in Queens and 25.9% on Staten Island.
And where do all the taxes come from to support all the government and government-funded earnings in the rest of the state, and in the outer boroughs of New York City (often paid to commuters from the suburbs)? To a large extent from Manhattan, where the private sector economic activity is. And to the activity generated by Manhattan, therefore, one must add a share of the activity generated by the consumer spending of those working in government and health care and social assistance elsewhere in the state, including Upstate New York.
It is not unreasonable to say that Manhattan generates 75% of the economy of New York State. I would say that is an underestimate. Where else are goods and services produced that bring in money from outside the state? The extent of that independent economic base seems to shrink every year, and that which remains is often so deeply subsidized — like the AMD chip plant up in the Capital District — that it might better be described as a more lucrative (and hidden) form of workfare. In regional economic theory, the businesses and types of businesses that bring in money from elsewhere are the economic base, and their activity generates a “multiplier effect” of activity at suppliers and consumer demand. Manhattan is the vast majority of the economic base of the entire state.
Which brings us back to the MTA. No matter what the state legislature does now, that $30 billion in debt and all the unfunded retiree liabilities (including those to the 99% of LIRR workers who become disabled right after reaching retirement age) aren’t going away. The state legislature is trying to reach a deal to ensure the slow and steady deterioration of the regional mass transit system due to deferred maintenance. This would be associated with a slow shrinkage of the Manhattan economy. This would not trouble the tax-absorbing people of the rest of the state, because it could be offset by ongoing reductions in public services for people who don’t matter. As long as the collapse is slow enough, pensions, retiree health care, and senior services for the generations that do matter would still be paid, as they take the first dollar off the top. In twenty years, they’d be gone, and little would be left. That’s the non-plan.
And that’s the reason I say that MTA “doomsday plan” isn’t doomsday. Because it would just accelerate the damage into the present, when Generation Greed would be around to experience it. By threatening doomsday, Generation Greed is trying to pretend that it is younger generations, and “freeloading, welfare-dependent” New York City, that have the most to lose. I beg to differ.
The young who are renting can move away. New businesses can be started elsewhere. Or, they could stay here, but only if prior generations sell them real estate at rock bottom prices to make it worth their while. Substantial numbers of people who are decent shape could walk or bike to work in Manhattan. And, the subway (unlike the rest of the transit system) could be shrunk down (with say 40 percent of the stations closed) and cover its costs, at least for a while. That emaciated transportation system, and some people driving and telecommuting, are enough to accommodate a scaled down Manhattan economy, perhaps two-thirds of its recent size. Provided that a much greater share of the jobs went to those in walking and biking distance. So what a real doomsday would produce is a social and economic adjustment, with Manhattan jobs leaving not for the suburbs but out of New York State entirely, and a large share of those that remained going to those who lived nearby. Everyone would be much worse off, but the cost of real estate would be lower too — especially in the suburbs.
Who would be in a better position to adjust to the scenario those who control our institutions have created? Those who could probably find as good or better deal elsewhere? Or those whose standard of living depends on a special deal they can only get here? I believe those objecting to tolls and other financing for the MTA, who tend to represent (or pretend to represent) places that rely on more heavily subsidized forms of mass transportation (buses, commuter rail), are overplaying their hand.
Or just angry and ignorant. No matter who you want to hate, you’ll find them in New York City. Resent the rich? BEA data show Manhattan had a ridiculous per capita income of $120,790 in 2007. Despise the poor? The per capita incomes of the Bronx, Brooklyn and Queens are quite low at $26,001, $31,768, and $36,073 respectively. Meanwhile, the rest of the state is full of decent, hardworking, middle class…public employees and retirees who think everyone else is living off the public dime more than they are.
I’m short time, but I’ve attached the data as downloaded just so readers can see I’m not making it up.