In a final post on Local Area Personal Income data from the Bureau of Economic Analysis, I will summarize where different parts of New York State get their money. The spreadsheet was attached to the prior post. Given that people often live in one place and work in another, there are two ways to answer that question: what sectors are bigger parts of the economy in different places based on their share of money earned at work; and from where do residents of different places receive their money money? Given that this is a blog read by political types, I’ll stick to the answers that could be politically interesting.
In summary, compared with the rest of the country those living in Manhattan are more likely to receive income (in all its forms) from earnings at work, those living in the suburbs are more likely to get it from their investments, and those living Upstate and in the outer boroughs are more likely to get it from government transfer payments (Social Security, Medicare, Medicaid, Welfare, SSI, Food Stamps, Section 8, etc). Work earnings are more likely to come from the private sector for those working in Manhattan, the private Health Care and Social Assistance sector in the other boroughs, and government agencies and enterprises elsewhere in the state. And, as noted, Manhattan accounts for half of money earned at work in New York State’s private sector if the substantially government-funded Health Care and Social Assistance sector is excluded.
I begin with some aspects of work earnings by place of work. One area of increasing interest is the economic status of the self-employed, an increasingly large part of the economy. From 2001 to 2005, the number of wage and salary workers in New York City fell by 84,751, but the number of self-employed proprietors rose by 139,053 or 22.3%, including a gain of 58,256 in Manhattan. Despite the fact that New York City taxes self-employment income twice, through its unincorporated business tax. Self-employment growth is not unusual. In the Downstate Suburbs, the number of wage and salary employees rose by 33,084 (1.8%) over these years, while the number of self-employed proprietors rose by 85,653 (22.2%), almost the same rate as in New York City. In Upstate New York, the number of wage and salary employees was down 8,321 (0.3%) while the number of self-employed proprietors rose by 112,511 (19.5%). Nationally, self-employment rose by 5.1 million (18.1%) while wage and salary employment increased by 2.1 million (1.5%).
What does this burst of self-employment represent? One explanation is that the internet and business-motivated immigrants have fostered a burst of entrepreneurship, creativity, and economic freedom. The second is that businesses don’t want to pay Social Security taxes, unemployment taxes, worker compensation taxes, retirement plan contributions and health insurance premiums for the next generation of workers, but want to keep those benefits for existing employees, including the executives. Perhaps there is a little of both. What I can say is that based on the difference between employment growth in the Bureau of Labor Statistics household survey (which includes the self-employed) and establishment survey (which does not), the self employment trend is reversing in New York this year as the unemployment rate falls. When the economy is hot and labor is in demand businesses, it seems, want to have workers in house and available when needed rather than selling to the highest bidder each day.
Nationally, proprietor’s income accounted for 14.6% of the money earned at work in 2005, according to the BEA, up from 13.8% in 2001. In New York City, the self-employed earned 16.0% of the money, including 16.6% for those working in Manhattan. Self-employed proprietors accounted for 16.3% of the money earned in the Downstate Suburbs but just 11.9% of the money earned in Upstate New York. Even there, however, the share increased from 10.3% in 2001.
Upstate New York stands out in its dependence on earnings in Government, which accounted for 22.1% of the economy in 2005, well above the national average of 16.5%. In “big government” New York City government agencies and enterprises accounted for just 10.8% of the money earned at work in 2006, up somewhat from 10.4% in 2001 but falling as the recession eases. New York City’s economy, in fact, has always been less reliant on government jobs and pay than the national average as far back as the data goes. Most “blue state” locations are. The biggest source of earnings in New York City? Wall Street, of course. And remember, the in the best paid government jobs a large share of New York City government workers live not in the city, but in the suburbs.
For those working in the Downstate Suburbs, government accounts for 15.7% of total earnings, slightly below the national average. The suburban share of New York City government earnings would be on top of that. Clearly for residents of Upstate New York and the Downstate Suburbs more government employment is a good thing, since they get the money from jobs. Not so residents of New York City. No wonder government employment has been falling in New York City for 20 years while soaring in the rest of the state. In fact, press reports indicate that all the additional “property tax relief” aid passed in the latest state budget will be used for higher public school spending, meaning property taxes will still be high and there will be an even greater demand to cut New York City’s share of school aid next year.
What has been soaring in New York City is employment in the Health Care and Social Assistance sector, along with public spending on health care. With much of the money going for low-paid aides, however, the Health Care and Social Assistance sector actually accounted for just 8.5% of the money earned at work in New York City in 2005, well below the national average of 9.4%. The local economy of both the Downstate Suburbs (12.8% of all earnings at work) and Upstate New York (11.7%) were far more dependent on this substantially taxpayer-funded sector. The low share in New York City, however, is primarily due to Manhattan (despite its concentration of large hospitals), with its huge share of high-paid jobs in other parts of the private sector. The Health Care and Social Assistance sector accounts for nearly one-third the money earned in the Bronx, more than a quarter in Brooklyn and Staten Island, and 17% in Queens.
In terms of the economy, therefore, Manhattan is bringing in taxes and the rest of the state is spending them, but much of the money earned in Manhattan is in fact earned by those who reside outside its borders, and Manhattan wouldn’t be Manhattan without them. So considering instead personal income for those residing in different places, where does that come from?
It should be no surprise that those living in a place where there is so much earning at work going on, Manhattan, should get a larger than average share of their income from working. Earnings at work accounted for 74.6% of the personal income of Manhattan residents in 2005, well above the national average of 69.5%. Residents of the Downstate Suburbs come in at just slightly above average in work earnings, at 70.6% of the total, while residents of Upstate New York are well below at just 66.0%. Residents of New York City as a whole are also below average at 67.8%, although that share is rising. Each of the outer boroughs below the national average; just 57.9% of the personal income of Bronx residents comes from earnings at work.
Where New York City is above average is in the share of its residents’ income accounted for by transfer payments, in cash payments such as welfare and Social Security and service vouchers such as Medicare, Medicaid, etc. Such unearned payments accounted for 19.1% of the money earned by New York City residents, compared with 11.5% for the Downstate Suburbs and 14.9% nationally. The share for Upstate New York, at 19.2% and going up, was higher than for New York City, at 19.1% and going down. That gap may be much greater today, after two more years of economic growth in New York City and two more years of retirement Upstate. It should also be noted that the share of personal income accounted for by transfer payments is lower in the New York — Northern New Jersey — Long Island metropolitan area as a whole at 14.6% than the national average at 14.9%. Such payments are not concentrated in the New York area, rather those who rely on them, for historical and government policy reasons, are concentrated in New York City. The MSA as a whole is not especially poor, but unfortunately for New York State, a good chunk of it is not within its borders.
Where New York City, particularly outside Manhattan, is well below average is in the share of its residents’ income accounted for by investment returns (dividends, interest, and rent collections). These accounted for 13.1% of the personal income of city residents in 2005, compared with 15.6% nationally and 14.8% in Upstate New York. For residents of the Downstate Suburbs, on the other hand, investment returns accounted for 17.9% of total personal income. In Nassau and Westchester, the figure was nearly 20%. Upstate New York was below average in investment returns.
The future? I’d expect the share of New York City residents’ personal income from transfer payments to fall, and the share from work earnings to rise, as the city become younger relative to the national average. The key question is the future of the near half-million fewer New Yorkers than would be expected at the national average in the workforce. If future generations of New Yorkers are more likely to be employable and employed, dependence on transfer payments will continue to diminish.