Not long ago, the U.S. Bureau of Economic Analysis released its Local Area Personal Income data for 2015.
And I downloaded some data, using the “interactive data” tool to the right on the website, to see if various trends I have observed in the past have continued. The data show that the Tri-state area continues to be a much richer than average part of the U.S., due mostly to those living and working in Manhattan (many of the richest of whom live in the suburbs), but Brooklyn, the Bronx and Queens remain relatively poor. Manhattan is rich enough that New York City’s share of the nation’s personal income is stable even as its share of the nation’s population continues to fall. In New York State the total earnings per worker of state and local government workers (including employee benefits) continues to soar relative to the earnings of most private sector workers, who are left worse off as a result. The idea that lower wages for private sector workers are offset by, and in some sense caused by, higher employer costs for employee benefits hasn’t been true for more than two decades, and Obamacare did nothing to alter this. And more and more people have become self-employed, freelance, and contract laborers, rather than being employees at all, and the average earnings of such workers continues to fall. A series of charts and some discussion follows.
It should be noted that all dollar figures one sees in the rest of this post have been adjusted for inflation into $2015, using the Consumer Price Index for all urban consumers. The spreadsheet that forms the basis of this post can be found on Saying the Unsaid in New York, as it exceeds Room Eight limits. It has much more data than I have highlighted below, on many individual Tri-State area counties, for those who want to search for other interesting trends themselves.
In the first tab, the unadjusted data as downloaded is all the way down below. There are two more worksheets of data, and then the Charts used in the rest of this post.
As mentioned, per capita income is higher in most of the NY metro area than the U.S. average, in 2015 by 31.4% for New York City, 51.1% for the Downstate Suburbs, 33.9% in Northern New Jersey, 26.4% in Central New Jersey, and a whopping 121.1% (more than double) for Fairfield County. Per capita income is based on the people living in each area, and many of the highest paid people living in the suburbs work in Manhattan.
Per capita income is simply total personal income, obtained from a variety of sources, divided by population, and it is heavily influenced by the number of rich people living in each area, and by how high their incomes are. Although metro New York has always been a relatively rich part of the country, most parts of it have become somewhat richer relative to the U.S. average than they had been 20 or 40 years ago. Meanwhile, per capita income is somewhat lower than the U.S. average in Upstate NY Urban counties, having been slightly higher in the past, while Upstate Rural Counties remain below the U.S. average.
New York City’s per capita income is 31.4% above the U.S. average even though Staten Island is only 4.3% above average and the Bronx, Brooklyn and Queens are far below average. Brooklyn had been only 1.6% below average in 1969, but it was 18.6% below average in 2001. Despite “gentrification” it was still 11.2% below average in 2015. Queens was New York City’s middle class borough in 1969, with a per capita income that was 30.0% above the U.S. average. It was an immigrant borough in 2015, with a per capita income that has fallen slightly below Brooklyn. The Bronx was a mere 7.3% below the U.S. average in 1969, but it was 34.8% below average in 2000. It remained 32.6% below average in 2015.
Then there is Manhattan, the county with the second highest per capita income among all U.S. counties at $156,808. Rounding out the top five are four rural counties with very few, very rich people – Teton in Wyoming (Grand Teton National Park, Yellowstone National Park, Jackson Hole), Shackelford County, Texas (population 3,375), Pitkin County, Colorado (Aspen), and Wheeler County, Nebraska (population 759).
The good news is that adjusted for inflation, per capita income was higher in 2015 than it had been in 2005 – by 10.4% in the U.S., 19.8% in New York City, 11.7% in the Downstate Suburbs, 14.1% in Upstate Urban counties, 16.5% in Upstate Rural counties, 9.3% in Northern New Jersey, 8.7% in Central New Jersey, and 16.7% in Fairfield County.
The bad news is that – as will be seen later — this had nothing to do with people who work being paid more. Per capita income rose because, relative to the number of adults with work or retirement income, there are now fewer children to pull down the average. Particularly in Upstate New York, where per capita income rose despite economic stagnation. In places with stagnant, aging populations per capita income is up because there are fewer little capitas running around.
In other places per capita income is up because working age households have more adults working than in the past. New York City, in particular, has seen a surge of childless working young adults moving in over the past decade. They may not be earning much each, but they are almost all earning something.
Nationally, per capita income is up because today’s retirees are richer than yesterdays retirees, with government spending on them way up, as the richest generations in U.S. history move into retirement and the poorer “Greatest Generation” dies off. This is a trend that will reverse once Generation Greed starts dying off and the poorer generations to follow retire into poverty. From 2005 to 2015, adjusted for inflation, total U.S. earnings at work increased 13.2%, slightly faster than the 8.8% increase in the population. Investment income – dividends, interest and rent – increased 26.0%. Government transfer payments increased 45.5%. More on that later.
The Tri-State area is heavily developed at a high density, so new housing is expensive and population growth is difficult. For that reason its share of the U.S. population continues to fall, from 9.3% in 1975 to 7.5% in 2005 to 7.2% in 2015, including all of Connecticut. The decline in share was much more rapid from 1975 to 1995 than from 1995 to 2015, however. Particularly in New York City, which had 2.71% of the U.S. population in 2005 and still had 2.66% in 2015. And in Central New Jersey (Monmouth, Middlesex, Somerset, Ocean and Mercer counties), where the gardens of the Garden State are still being paved over for subdivisions, and its share of the U.S. population is little changed over 40 years.
With a slower decline in the metro area’s share of the U.S. population, and an increase in per capita income relative to the U.S. as a whole, the Tri-State area’s share of the nation’s total personal income barely fell from 2005, when it was 9.92%, to 2015, when it was 9.84%. Again the star was New York City, whose share of the nation’s personal income was 3.5% in 1985, in 1995, and in 2015, and 3.3% in 2005. If, as it often seems, the importance of different places is measured by money, New York City has retained its standing despite being constrained on a fixed area of land.
One of the factors I use when evaluating state and local government expenditures in Downstate New York is the difference between what private sector workers earn here, excluding the overpaid Finance, Insurance and Real Estate sector, and the U.S. average. Government is a labor-intensive business, and this factor allows an adjustment for what the labor market pays overeall, and what private sector workers can afford to pay in taxes.
The “earnings” data from the Bureau of Economic Analysis includes an estimate of non-wage benefits. And it shows that despite weak economic conditions in most of the U.S. with regard to pay, the earnings per worker gap between private sector workers working in Downstate New York and those working in the U.S. as a whole is smaller than it once was. Private sector workers in Downstate New York earned 25.1% more on average than U.S. private sector workers in both 2014 and 2015. They had earned 30.0% or more in excess of the U.S. average at several points in the past.
New York State’s tax base is heavily dependent on Manhattan, increasingly so. If one excludes the Health Care and Social Services sector, which are mostly government-financed, those working in Manhattan accounted for more than half of all earnings at work by New York State private sector workers in 2015 – for the fifth time in 20 years.
If one also considers the business income, and therefore private sector worker earnings, created by residents of the outer boroughs and suburbs spending income that they earn in Manhattan. And the business income, and therefore private sector earnings, of outer borough and suburban businesses that get most of their sales to customers in Manhattan. And the business income, and therefore private sector worker earnings, created by public employees in Upstate New York whose jobs are funded by taxes collected in Downstate New York. It is entirely reasonable to assert that Manhattan directly and indirectly generates three quarters or more of New York State’s economy.
The Finance and Insurance sector once created tens of thousands, if not hundreds of thousands, of middle-class jobs in New York City, keeping records and processing transactions. Over the past 25 years information technology has allowed those jobs to either be automated and eliminated, or shifted to other parts of the U.S. or world where wages are much lower. Tampa Bay, for example, is a now major back office center for New York-based financial companies. With many of the highest-paid Manhattan finance workers living in the suburbs, the finance sector has become a less and less important employer of New York City residents.
The New York City and state budgets, however, remain highly dependent on taxes on Wall Street firms and their massively paid workers. So a critical question for New York’s public sector is whether Wall Street pay has returned to something like “normal,” to a level that can be counted on the future? The answer depends on your temporal frame of reference.
In 2015, the work earnings by those working in the Finance and Insurance sector in Manhattan equaled slightly less than one percent (0.97%) of all the money earned at work by everyone in the entire United States. If one only compares 2015 with the rest of the “financialization” era that got going in the mid-1980s, that does not seem out of line. Wall Street’s percent of total U.S. work earnings did fall below that level in a few “bear market” years, but it was higher most years during the 1990s and 2000s bubbles.
But if one looks back before 1987, one finds that Wall Street’s share of total private sector work earnings in the United States was once much lower, generally between 0.5% and 0.7% of the total. New York’s financial tax base, therefore, might still be over-inflated relative to what it is worth, and liable to fall by one-third or more compared with 2015 levels. Another stock market bubble, inflated by zero percent interest rates, may only be postponing this reckoning. A similar reckoning took place in Michigan, and will be discussed later.
New York City’s local government spending is a high percent of the income of those who actually live in the city, which is why its tax burden is so high. But 2015 data based on place of work show that state and local government worker earnings were just 10.4% of the total work earnings of those working in New York City, well below the U.S. average of 12.5%. It has not always been so. Back in 1969 state and local government workers accounted for 10.9% of total worker earnings in NYC, slightly more than today, while such workers accounted for just 10.5% of total U.S. work earnings, far less than today.
High financial sector earnings in New York City – in Manhattan specifically – depress the state and local government share of the total. The only other part of the Tri-State area where state and local government workers account for a lower share of total earnings at work is Fairfield County, home of the hedge fund industry.
Meanwhile state and local government workers account for a very large share of total earnings at work in the Downstate NY Suburbs (17.4%), Upstate Urban counties (20.8%) and Upstate Rural areas (26.7%). The data show that these areas have always been highly dependent on state and local government jobs, but the level of dependence has grown as the rest of the earnings base – in agriculture and manufacturing Upstate, corporate headquarters and manufacturing in the Downstate Suburbs – has shrunk.
While New York City was never the “big government” part of the state those in other parts of it liked to claim with regard to actual government employment, it long had an unusually high level of government transfer payments such as “welfare,” disability, food stamps, Medicaid, Social Security old age, and Medicare. In 1995, these government “transfer receipts” accounted for 19.9% of the total personal income of those living in New York City, compared with 14.1% for the U.S. as a whole, 11.3% for the Downstate Suburbs, 16.4% for Upstate Urban counties, and 18.7% for Upstate Rural counties. The high level of transfer payments to New York City residents was a big source of outrage in the rest of the state at the time.
Most government transfer payments, however, go to those over age 65, not the needy. As the suburban generations moved out of the cities and left their aging parents behind, New York City (and other older cities) were left with a relatively large percentage of their populations in old age from the 1960s through the 1990s. That, however, has changed. Those left behind seniors have died off, and young working college graduates and immigrants have taken their place in New York’s housing.
As a result, in 2015 transfer payments had fallen to 17.4% of the personal income of NYC residents, while soaring to 17.3% of the personal income of the U.S. as a whole. About the same. Today it is the Upstate Urban counties, at 20.2% of personal income, and the Upstate Rural counties, at 24.1%, that are far above the U.S. average. With young people moving away, the populations there have skewed toward the older and retired – despite the large number that retire to Florida. And as the employment base leaves and more of the population under age 65 is age 55 to 64, disability payments have also increased. The Downstate NY suburbs remain below average, and similar to the other suburban areas around the Tri-State area, with transfer payments at 12.9% of personal income.
Leaving aside the effect on individuals, New York City’s economy as a whole no longer benefits disproportionally from higher spending on government transfer payments, nor is hurt disproportionately by lower spending on government transfer payments, unless those reductions are specifically targeted at programs for which NYC has a disproportionate number of beneficiaries. Such targeting, however, has frequently occurred in the past at both the federal and state level.
As for actual poor people, the New York City boroughs other than Manhattan still have plenty of those. Compared with the 17.3% of U.S. personal income accounted for by transfer payments, the 2015 figure was 24.1% in Staten Island, 24.9% in Brooklyn, 25.2% in Queens – and 33.6% in the Bronx. Interesting that Staten Island, Brooklyn and Queens are almost exactly the same. Brooklyn was the only outer borough where the percent of personal income accounted for by transfer payments was lower in 2015 than it had been in 1995, at 24.9% now vs. 27.6% then. As I’ve noted in the past a relatively high share of health care expenditures funded by Medicaid, and low worker pay overall, drives these high percentages now that “welfare” is mostly gone.
This puts into perspective the initial battle that set Governor Cuomo and Mayor DeBlasio against each other. DeBlasio wanted to raise city income taxes, so the wealthy of Manhattan would pay more to fund services to help the less well off in the rest of New York City. Cuomo held that the wealthy of Manhattan and the rest of the city should be paying more state taxes, to be redistributed to those in the rest of the state. Meanwhile, the Republican Congress wants to eliminate the federal income tax deduction for state and local income tax payments, so the wealthy of Manhattan and the rest of New York City can pay higher federal taxes for redistribution to states where people are “against big government.”
No one seems to be considering the fact that in an actual free market, or under a more redistributive set of government policies, perhaps the wealthy of Manhattan would not be quite so wealthy. Government, as an interest, is now dependent on a set of conditions that many of the people who run it are theoretically against. It is like funding the government with taxes on smoking and gambling, but then not being able to afford people doing less of either.
The next five charts update and expand on an analysis I did previously comparing three classes – the executive/financial class, the political/union class, and the serfs.
If one takes the Bureau of Economic Analysis data back to 1969, the first year of the dataset available online, adjusts for the industry classification change in the early 2000s, and adjusts for inflation, one finds that back then the mean earnings per worker (including benefits) of state and local government workers in Downstate New York ($64,339 in $2015), of private Finance, Insurance and Real Estate sector workers ($56,895), and other private sector workers ($55,842) were not that different. That was before the wealthy and the financial sector took over the federal government, and the public employee unions reversed the early 1900s “progressive” era by taking over state and local government in New York. Based on this one might conclude that it is reasonable for the mean earnings of state and local government workers to be somewhat higher than those of most private sector workers, due perhaps to higher required qualifications or effort.
In 2015 the mean earnings per worker in the Finance, Insurance and Real Estate sector was $120,458, more than double the 1969 level (adjusted for inflation) but down 13.8% from 2005. The big recent drop in mean earnings per worker is associated with a huge increase in the number of people working in Real Estate – by 100,000 (50.0%) in New York City alone from 2005 to 2014, and 31,200 (92.9%) in Brooklyn. Since other data series with wage and salary employees alone don’t show this kind of growth, I assume that most of this is a swarm of newly minted self-employed Realtors trying to get by on the bubble.
(According to the BLS the number of wage and salary employees in New York City’s Food Services and Drinking Places industry increased by more than 100,000, by more than 50.0%, from October 2007 to October 2016. Given what that industry pays and how high rents are, how sustainable is that?)
Starting in 2001 BEA employment data is available on the Finance and Insurance sector alone. In Downstate New York, that sector had a mean earnings per worker of $182,164 in 2015, sky-high but down 11.0% from 2005. The drop from the peak in 2000 is much greater.
With Downstate financial workers earning less, its state and local government workers have had to lean harder on workers in the rest of the private sector to fund their rising compensation – which is mainly in the form of soaring health care and retirement costs. Since most state and local government workers have labor contracts and pension deals that guarantee them more each year than the one before regardless of the taxpayer’s ability to pay, the only time their mean earnings fell was during the high inflation of the 1970s and early 1980s. That inflation reduced the “real” value of public employee pensions and wages, along with those of private sector workers.
Since then the fortunes of the political/union class and the serfs have diverged, with 2015 mean earnings per worker in Downstate New York at $70,265 for private sector workers outside FIRE, and $109,758 for state and local government workers. The private sector figure is no higher than it had been in 2001 and just 8.9% higher than it had been in 1988. And it is private sector workers who have faced higher expectations in what they produce during those decades, not government workers.
Consider, moreover, that the private sector figures cited above include members of the executive/financial class outside of FIRE, all the media and tech barons, the highest paid professional athletes and entertainers, the partners at the Big (however many are left) accounting firms, white shoe law firms, and high level architecture and engineering firms. And it includes members of the political/union class outside government, working for contractors with government rules that guarantee higher wages and benefits than similar private sector workers with no such government connections receive.
For the rest of Downstate New York’s private sector workers, it is likely mean earnings are no higher than 20 or 30 or even 40 years ago, when adjusted for inflation, and perhaps lower. Meanwhile the inflation-adjusted mean earnings per worker of state and local government workers in Downstate New York was 19.0% higher in 2015 than it had been in 2001. And 46.8% higher in 2015 than it had been in 1988.
The trend is even starker for Upstate New York, which doesn’t have Manhattan and its high paid workers pulling up the private sector average. There the mean private sector worker earnings per worker was $48,331 in 1969, converted into 2015 dollars, and $48,294 in 2015, actually slightly lower. Again with the caveat that given rising income inequality, most workers are actually earning less – despite higher average educational attainment in all likelihood, and higher productivity. This trend is likely repeated in many agricultural and industrial areas of the U.S., and could be worse in parts of the U.S. that don’t have a rich Downstate New York available to have state tax dollars transferred from.
Most of those Downstate taxes, however, are not going to Upstate serfs. They are going to state and local government workers, whose earnings per worker soared from $54,430 ($2015) in 1969, somewhat higher than the private sector average, to $88,291 in 2015, vastly higher. Just in the past 20 years, since the start of administration of New York State Governor Pataki, the mean earnings per worker of Upstate New York state and local government workers increased 26.5%. Until the administration of Governor Andrew Cuomo the number of such workers was soaring too.
One might say that for Upstate’s private sector workers, a mean earnings per worker no higher than 1969 is not so bad, because Upstate New York was a fine place in 1969. This ignores a few things. First, in 1969 Upstate New York might have been a fine place for those who were working young adults at the time (and are age 60 or older today’s), assuming they didn’t end up in Vietnam, and their children. But in 1969 the senior citizens of that time were far poorer and more neglected. So things were not as good for everyone back then as is currently remembered, there or elsewhere in the U.S.
And second, in some ways 2015 is not as good as 1969, based on what other people are paid and how much has been spent. State and local taxes are higher, in exchange for diminished public services (except, of course, for today’s seniors, the same people that got the best deal as young people back in 1969). This has made people, in some ways, collectively poorer.
As for their personal standard of living, induced by advertizing and people like Donald Trump, many workers spent more over the past 30 years than did the workers of 1969, in order to keep up with the Joneses and people on TV. Even though they weren’t paid more on average. And thus saved little, and will face old age in poverty. With consumer demand shifting to a more expensive lifestyle more affordable options – smaller homes in places where only one car per family is needed, vacation areas in Upstate New York accessible by bus rather than in Florida or the Caribbean reached by air – have received little investment and atrophied. You can’t go to the Irish Alps and have the same experience as people did back in the 1960s.
And by the way, does it really make sense for the minimum wage in Upstate New York, with a mean private sector earnings per worker of $48,294, to be the same as in Downstate New York, with a mean private earnings per worker (excluding FIRE) of $70,265? For the minimum wage in Manhattan, which has the second highest per capita income in the U.S., to be the same as in Alleghany County NY? Just asking.
Put another way, in Downstate New York the mean earnings per worker of state and local government workers was 15.3% above the mean for private sector workers (except finance) in 1969, 38.7% in 1995, and 56.2% in 2015. The comparable figures for Upstate New York are 10.5% in 1969, 57.2% in 1995, and 82.8% in 2015.
One might conclude that this trend and its extent raise social and distributive justice issues. If one follows the media in New York, however, the social justice issue seems to be that unionized public employees have gotten a raw deal and deserve to take more, leaving everyone else with less. Since the news is driven by propaganda these days. That also seems to be the “progressive” position, particularly now that a “millionaire’s tax” passed in the recession has been kept, and Wall Street isn’t throwing off money like it once did. No one dares to say otherwise. Once side demands “fairness.” Anyone speaking for the other side “hates the middle class” and is “negotiating in the press.”
Even if one chooses to believe, however, that the less well off serfs really do deserve to be increasingly worse off relative to members of the political/union class, one question remains. How the heck are the serfs supposed to afford the rising taxes the political/union class requires? The answer is they can’t, which is why the number of state and local government employees has been trending down, and public services have been cut. Since those government employees are better off relative to the serfs, the serfs can afford to hire fewer of them. This puts “privitization” in perspective. It is a way for the serfs to afford public services, by hiring other serfs.
The executive/financial class faces the same sort of question. If you are going to pay most workers less, or at least the same as 40 years ago, how do you expect to also sell them more, in order to keep profits and executive pay as high as they have been? The answer had been two-income couples rather than one worker per family, and then inadequate retirement savings, and then soaring debt. Until the U.S. ended up broke, with falling life expectancy for those born after 1957 or so.
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” The U.S. has missed by far more than that.
I decided to take a peek at another state, in this case Michigan, on the same basis. With high paid Manufacturing there taking the place of Wall Street here.
The thing to remember about Michigan manufacturing workers is that not only is their mean earnings down from the peak of 2000, adjusted for inflation, but the number of such workers is down 40.0% from 2000 to 2015. Which means that the total worker earnings thrown off by Michigan’s manufacturing sector fell by 47.3% from 2000 to 2015, or nearly half. Considering that manufacturing accounted for about one-third of total private sector worker earnings in that state in 2000, one can see how this was a Great Depression for the state.
And the serfs? The mean earnings per worker in the rest of the state’s private sector was $47,529 in 2015, not much more than the $46,893 ($2015) in 1969 and less than the $48,369 in 1972. Meanwhile the mean earnings per worker of Michigan’s state and local government workers jumped from $50,101 in 1969 ($2015) to $61,590 in 2000 to $65,484 in 2015.
There are many reasons for this divergence. But with hurting private sector workers facing round after round of tax increases and service cuts, and facing poverty in old age, and with Democrats generally associated with unionized public employees, is it any wonder that Democratic politicians have been run out of statehouses all over the country? And since much of the increase in compensation to state and local government workers is in the form of decades of work-free income, something that they don’t see or appreciate while they are working, are they even grateful for it?
The collapse of work earnings from manufacturing in Michigan holds some lessons for New York. There, a large number of innovative auto companies merged down to a “Big Three” oligopoly, one in which everyone from the executive suite to the assembly line was vastly overpaid compared with similar workers elsewhere. Because they could, they sold those less privileged workers increasingly bad cars, and the Big Three were highly profitable but increasingly disliked by their customers.
But over in Japan, a smaller market, you had not three but ten auto companies fighting to innovate, build better products, and gain market share. When Michigan’s Big Three started losing in the marketplace, they turned to government bailouts to maintain their position of privilege, with “voluntary agreements” to limit imported cars and exceptions from fuel efficiency standards for gas guzzing FUVs. Until a final collapse between 2000 and 2008.
Can anyone think of another industry that has shrunk down to a small oligopoly, has ripped off its customers, is vastly overpaid, and got a government bailout? It seems to me that the only real finance going on, with an attempt to allocate capital to firms that might actually be worth something someday, is happening on Sand Hill Road in Menlo Park, California, not Manhattan.
Among the things that distinguishes the Bureau of Economic Analysis data from other major statistical series is that it attempts to include employee benefits, both government-mandated and voluntarily-provided, it its estimate of work earnings. Rather than just wages and salaries.
One argument that has been made by business lobbyists over the years, in response to complaints about stagnant or falling wages and salaries, is that lower wages and salaries have been offset by, and in fact caused by, higher employee benefit costs, due to (among other things) the rising cost of health insurance. I recently heard this assertion made yet again, so I decided to look and see if this was true.
The answer is no. There might have been a case between 1969 and 1993, when the cost of U.S. employer provided benefits increased from 8.4% of wages and salaries to 16.2% of wages and salaries. Since then, however, the percentage has gone down when the economy was up and wages and salaries were rising, and up when the economy was down and wages and salaries were failing. It ended up in 2015 about where it was 1993, with employer benefits at 16.1% of wages and salaries.
And bear and mind these are figures for all workers, including government workers. And the cost of benefits for government workers has soared. It isn’t a stretch to assume that for private sector workers, employer-funded benefits cost less as a percent of employee wages and salaries in 2015 than they did in 1993.
While the cost of health insurance has risen faster than overall inflation in most years, employers have shifted more and more of that cost onto employees, limiting their own costs. Moreover, prior to Obamacare more and more businesses were eliminating employee health insurance altogether, a trend that may now resume. For new employees, starting in the early 1980s recession, defined benefit pensions were phased out in favor of defined contribution 401K retirement plans. And then the promised employer contributions turned out to be undefined, and were cut in each recession thereafter, often to zero. Given these anecdotal trends as observed in the media over the decades, what the data shows makes sense.
As for employer contributions to government social insurance, for programs such as worker compensation, unemployment insurance, and Social Security, their cost also increased between 1969 and the early 1980s. Since then, however, there has been little change: such contributions were 7.2% of wages and salaries in 1983, on average, and 7.2% of wages and salaries in 2015 – down from 7.8% in 1993.
In theory Obamacare imposed either an additional employer benefit cost, or an additional government social insurance cost, by mandating either employer funded health insurance or a penalty payment. In practice there is no evidence that either turned out to be significant. Despite all the noise about Obamacare, one finds no evidence of it in the data.
The fact that employers aren’t paying more for employee benefits, moreover, understates the disadvantage today’s workers face, because more and more of them don’t count as employees at all. Thus they receive neither employer-funded benefits nor employer contributions to government social insurance.
I first noticed the shift to self-employment for New York City back in the 1990s, when it was just getting started. From a low point of 288,450 back in 1976, the number of self employed “proprietors” as the Bureau of Economic Analysis calls them working in New York soared to 1,315,705 in 2015. It increased by more than half a million just in the decade from 2005 to 2015.
Upon further review, as they say in the NFL, New York City was just catching up with the rest of the country. In 1969 only 7.8% of those working in NYC were self employed, compared with 13.5% in the U.S., 15.3% in the Downstate Suburbs, 10.0% in Upstate Urban counties, 18.3% in Upstate Rural Counties, etc.
The percent of the U.S. workforce that is self-employed has soared, to 22.4% in 2015. Yet it is only in the past few years that the self-employed percent for New York City, at 23.3% in 2015, has exceeded the U.S. average. The 2015 figures are 25.4% for the Downstate Suburbs, 17.5% for Upstate Urban counties, 23.0% for Upstate Rural counties, 24.3% in Northern New Jersey, 22.6% in Central New Jersey, and 30.3% in Fairfield County. Extensive self- employment has become a trend everywhere.
Does this represent a burst of creativity and entrepreneurship? In some cases yes. The predominant trend, however, is for a rising share of the workforce to be turned into the equivalent of day laborers, required to plead for work each day in a shape up process like the one longshoremen faced in the movie On the Waterfront. Or worse, go to work every day as employees in all but name, but without employee benefits, without unemployment insurance, without their “employer” paying half of the payroll tax. And, of course, without Obamacare.
“The percentage of workers engaged in alternative work arrangements — defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers — rose from 10.1% in February 2005 to 15.8% in late 2015.”
The BEA data shows a much higher percent, perhaps because for many self-employment is a second job rather than a primary job.
There was some attempt to crack down on this kind of “mis-classification” of workers in the past few years. One of the few certain policies of the Trump Administration, I predict, will be an end to such enforcement, and perhaps even a federal attempt to limit enforcement by states. With a fast food executive in charge at the Department of Labor, no doubt there will soon be many “independent” “freelance” burger flippers. In South Carolina, even assembly line workers at the BMW plant are classified as “freelancers.”
Uncomfortable attention to this trend recently caused that state’s anti-union Governor to say she would do what she could to “improve the quality of the jobs.” She then left for a job in the Trump Administration, demonstrating whose job qualify she was most concerned with.
Come to think of it, I wonder what share of New York’s active and retired public employees (including those living in Florida) drive automobiles produced by one of the old “Big Three” in the U.S. using UAW labor? Aside from FUVs, I get the feeling I’m the only person in my family who drives a domestic automobile – even though many relatives of my grandparents’ generation worked at the Fischer Body plant up in Tarrytown back in the day.
Back in the day, New York City self employment meant small business owners, doctors, dentists and lawyers in private practice, partners in law, accounting, architecture, advertising and investment banking firms. Today it is Uber drivers, food cart operators, and “permalancers” at large media firms. From 2000 to 2015 the mean work earnings of self-employed “proprietors,” according to the BEA, fell 13.0% in the U.S., a stunning 56.8% in New York City, 31.0% in the Downstate Suburbs, 22.8% in Upstate Urban counties, 17.0% in Upstate Rural counties, 21.5% in Northern New Jersey, and 19.8% in Central New Jersey. Self-employment earnings surged in Fairfield County up until 2008, thanks to the sky-high earnings of all those hedge fund managers. Since 2008, however, even the hedgies have taken a wedgie.
And speaking of Obamacare is it any wonder that the Democrats, controlled by the public employee unions and the few remaining private sector unions, based their health care reform on a continuation of employer-tied health insurance? Even as more and more of the workforce is not employer tied, by choice or its absence? And shunted the next generation of less advantaged workers into a second-class system, even as they are forced to pay for the richer health benefits of active and retired public employees? At least they got something; the betting is that something is going to be taken away with only a sham of a replacement.
All told, the results of the recent Presidential election, in which desperate people were willing to gamble on of all people Donald Trump to change the course we are on. And thus Trump was able to first wipe out the Republican Party (which nonetheless thinks it won, and is apparently ignoring the extent to which Trump’s victory and Sanders’ strong showing demonstrate both parties moving left) and then the Democratic Party. Without much money and with zero institutional support. Is no surprise. Because people perceive that those institutions, all of them, have been captured by small classes of privileged people who run them in their own interest.
What remains to be seen is which of the many conflicting things Donald Trump said he actually meant, and whom exactly he has been conning. And what the reaction of the serfs might be when they find out they have been conned. But as I said before the election, if you think things are fine now, you are likely among the privileged and haven’t noticed the rest. And haven’t looked at the numbers.
With the Christmas holiday approaching, and Room Eight disappearing shortly afterward, this is likely my final post here. It remains to be seen whether the other former Room Eight writers will succeed in creating a new site. But if you want to continue reading what I have to say, I already have a site of my own, and have had one for four years. Much of the back-catalog, and You can find it here.
Thanks again to Ben, Gur and Matt for setting up and continuing Room Eight, which allowed a wider circle of (most likely) policy wonks to read what I had to say over the past decade-plus.