RECENTLY, JPMorgan Chase and HSBC announced reductions in the size of their workforce. This comes on top of downsizing since the financial crisis by many of New York City's largest private sector employers, including Bank of America, Citigroup, BNY Mellon, American Express, American International Group and MetLife.
In the last five years, the city has seen a net loss of 25,000 financial services jobs. Banks and insurance companies, which face stricter regulations as a result of the crisis, have shed the most jobs, while private equity and investment services firms have enjoyed robust growth. Areas where jobs have been added, like compliance and risk management, do not directly contribute to the bottom line.
Critics who think the financial services sector is still too big, and that salaries at the top are still too high, may say: So what? But that is not a view anyone who cares about our city can afford to take.
Most of the estimated 310,000 financial services workers in New York City - down from 360,000 in 2000 - are in the middle class. Fifty-one per cent make less than $100,000 a year, many of them in back-office functions. Another 700,000 or so jobs - in fields such as hospitality, healthcare, law and accounting, construction and technology - exist because of Wall Street.
All told, the industry accounts for 62 per cent of private sector wages in the city, and more than one-third of its US$700 billion (S$934 billion) annual economic output. It contributes about US$8 billion a year in city taxes - equivalent to the combined budgets of the city's police, fire and sanitation departments - and one-quarter of personal income taxes.
These statistics - drawn from a comprehensive new survey of banks, insurance companies, investors and asset managers, conducted by the Partnership for New York City, with Gerson Lehrman Group - matter because the fortunes of working- and middle- class New York are directly tied to those of Wall Street. Average wages in the industry fell almost 18 per cent, to US$189,010 in 2013, from a high of US$230,145 in 2007.
The industry is steadily looking to cut costs, and that often involves moving jobs out of New York. Within the United States, financial services jobs are moving to cities like Phoenix, Dallas, San Antonio, St Louis and Nashville, lured by lower expenses and taxes, and incentive packages from state and local governments, including programmes that prepare students for tech-oriented financial services jobs.
The global threat is just as serious. In 2007, Mayor Michael Bloomberg and Senator Charles Schumer released a study on New York's standing as the world's financial capital. The report found that laws and regulations were more favourable to financial institutions in Britain than in the US, and that London benefited from more open immigration policies.
London suffered a bigger hit from the 2008 financial crisis than New York did, which allowed us to re-establish our primacy. But today, our city faces threats not only from established financial centres like Hong Kong, Singapore, Tokyo, Frankfurt and Zurich but also from emerging regional hubs, notably Dubai and Shanghai.
Since the crisis, new regulations and civil settlements have cut heavily into bank profits. Meanwhile, governments in Europe and Asia are advancing regulatory, tax and immigration policies that reinforce the competitive advantages of their financial hubs.
To maintain Wall Street's role not just as an elite financial marketplace but also as a centre for employment and innovation, the government must step up. We need, among other things, major investments in airport capacity, including new air traffic control technology; broadband and wireless investments to reduce download times, which are appallingly slow compared with those in countries like South Korea; more resources for commercial courts to resolve disputes; a coordinated plan to defend our financial sector from cyber attacks; tax incentives that encourage retention of middle-income jobs on Wall Street; and, to spur innovation, a lower corporate tax rate on patent-related income.
New York must protect its competitiveness. The 6 per cent rent surcharge on large commercial tenants should be eliminated. Above all, the high cost of living - which compels most employers to pay salaries for mid-level employees 15 per cent to 25 per cent higher than in more affordable regions - must be addressed.
Finance has been the foundation of New York's economic greatness since the 17th century. In a shrinking and ferociously competitive world, safeguarding our role in the global economy is essential.
NEW YORK TIMES