More Finance Jobs Leave Wall Street, Lured Elsewhere by Tax Breaks and Lower Costs
New York City’s share of U.S. securities industry jobs is now less than one in five, says state Comptroller Tom DiNapoli, down from one in three in the 2000s.
A year ago, Goldman Sachs employed about 2,000 people in Dallas. Then the number jumped to 4,000. And in June the Dallas City Council approved $18 million in tax breaks to help Goldman Sachs build an almost $500 million new office tower in the city where it expects to employ 5,000 people. The tower would be the firm’s second-largest U.S. office behind New York.
“Our vision for this is that in the same way we have developed a really good talent base in places like London and Hong Kong and New York, I think there will be people who come to Dallas and want to work in fintech and do that at Goldman Sachs,” said Stephanie Cohen, who co-leads the investment bank’s consumer and wealth management division, earlier this year.
Goldman’s move to relocate mid-career and operational jobs to lower-cost and fast-growing cities in the South and West is being replicated across Wall Street — draining jobs and tax revenues from New York City and the region.
The annual comprehensive report on the securities industry released Tuesday by state comptroller Tom DiNapoli shows that New York City’s share of all jobs in that industry has continued to decline, reaching a 33-year low of 17.7%, compared with a 33% share two decades ago.
While the DiNapoli report shows that the securities industry remains the city’s highest-paying sector by far with enormous impact on the economy, the stock market downturn has pummeled Wall Street profits, threatening tax collections that have bolstered both state and city budgets during the pandemic.
For the industry nationwide, pre-tax profits plunged by 56% for the first half of the year to $13.5 billion. Revenue from the trading of stocks and bonds has fallen and crucial investment banking fees from bringing initial public offerings to market or arranging mergers and acquisitions have dropped. Meanwhile, since Wall Street borrows enormous sums to finance its activities, rising interest rates will send its costs soaring.
The city and state will soon feel the pain.
The industry accounts for 22% of all taxes collected by New York State — mostly through personal income taxes, which increased by some 43% in the last fiscal year ended March 31. Because New York City relies on the property tax as its largest source of tax revenue, the industry provides only 8% of all taxes to the city.
“Profits the last two years were unusually high and unlikely to continue, but it does put the city’s and state fiscal situation at risk,” said Ana Champeny, research director at the Citizens Budget Commission. “As the comptroller points out, it could get worse, and both the city and state need to be working at restraining spending.”
The move toward remote and hybrid work also threatens property tax revenues in future years, the comptroller noted, since financial services occupies a little more than a quarter of all the office space in the city.
“If the shift to remote work proves to be a permanent structural change in New York City, it presents a significant risk to the city’s finances in the future,” the report said.
‘Wall Street’ Wanders
The report’s key data points show the securities industry’s outsized role in the economy:
• Last year, average pay on Wall Street rose to $516,560, the first time that salaries have topped half a million dollars. Adjusted for inflation, pay ended up just below the previous record set in 2007.
• Average pay is more than five times the average of the rest of the private sector and almost double the compensation in information services, the next highest paying sector.
• Wall Street accounts for 16% of all economic activity in the city.
While New York remains the world capital of finance and the home of corporate headquarters, CEOs and top dealmakers, most of the growth of “Wall Street” is taking place outside of New York. The percentage of finance jobs in the city declined by half a percentage point in the last year alone.
“They are hiring people to start their careers here but as they proceed in their careers the opportunities are outside New York,’’ said Jake Siewert, an official in former President Barack Obama’s administration who spent nine years at Goldman and is now at Warburg Pincus, another major Wall Street firm.
In other, less expensive locations, Siewart said, “Banks can offer them 75% of what [they] might pay for that job in New York, that person has a better lifestyle because the cost of living is lower, and there is no question that COVID made that easier for banks to move jobs elsewhere that haven’t been doing that.”
Average securities industry pay in Dallas is $235,759, according to research from the comptroller, about half that in New York, reflecting both the kinds of jobs and the lower pay for those positions.
The securities industry was one of the few sectors not to see significant job losses during the pandemic. Modest gains this year are expected to add about 1,600 positions, bringing employment to about 182,000. Still, that is 4% lower than the 2007 figure, before the financial crisis.
DiNapoli sees a silver lining. “It could have been a whole [lot] worse given the anecdotes that everyone is leaving New York,” he said Tuesday.
It isn’t clear if anything can be done to stem the loss of jobs to other locales. Siewert says government and political leaders tend to take the industry for granted. Given the industry’s normally high profitability and sky-high pay, tax incentives are politically difficult if not impossible, DiNapoli argues.
He added that the climate for working in New York City needs attention, too.
“For folks that work on Wall Street like for others, what can be done is improvement of quality of life concerns, public safety, cleanliness and health, homelessness, and the issue of mental health and inadequate mental health services,” he said.
The administration of Mayor Eric Adams did not respond to a request for comment on the loss of jobs.