Academic journal article Monthly Labor Review

Recent Trends in Employment and Wages in New York City's Finance and Insurance Sector

Academic journal article Monthly Labor Review

Recent Trends in Employment and Wages in New York City's Finance and Insurance Sector

Article excerpt

The finance and insurance sector has traditionally been considered as one of the most important sectors in New York City's economy. While employment in the sector remains below pre-9/11 levels, it has gradually recovered since 2010. The sector continues to play an important role in the city's economy, particularly in terms of wages and its contributions to output and tax revenues. However, wages in the sector remain disproportionately concentrated at the top of the earnings distribution, resulting in above-average wage differentials and higher levels of labor income inequality.

According to the U.S. Bureau of Labor Statistics (BLS), "the financial and insurance sector comprises establishments primarily engaged in financial transactions (transactions involving the creation, liquidation, or change in ownership of financial assets) and/or in facilitating financial transactions." (1) The three principal activities performed by firms in the finance and insurance sector include (1) providing financial intermediation (i.e., raising financial capital by issuing securities, making loans, purchasing financial assets, and transferring or repackaging securities, etc.), (2) pooling risk by underwriting insurance and annuities, and (3) offering specialized services to facilitate financial intermediation, insurance services, and employee benefit programs. (2)

The finance and insurance sector (North American Industry Classification System [NAICS] 52) includes the following subsectors: (1) monetary authorities--central bank (NAICS 521), (2) credit intermediation and related activities (NAICS 522), (3) securities, commodity contracts, and other financial investments and related activities (NAICS 523), (4) insurance carriers and related activities (NAICS 524), and (5) funds, trusts, and other financial vehicles (NAICS 525). (3)

The finance and insurance sector is an important source of employment at the national level. In 2016, it employed a total of 6,161,000 full-time and part-time workers in the United States, representing 4.1 percent of the country's total full-time and part-time workers and 4.9 percent of all U.S. private sector workers. (See table 1.)

The subsectors accounting for the largest shares of total U.S. finance and insurance sector employment in 2016 were (1) Federal Reserve banks, credit intermediation, and related activities (2,629,000 employees, or 42.7 percent), (2) insurance carriers and related activities (2,599,000 employees, or 42.2 percent), (3) securities, commodity contracts, and other financial investments and related activities (922,000 employees, or 15 percent), and (4) funds, trusts, and other financial vehicles (10,000 employees, or 0.2 percent).

The finance and insurance sector has a large value-added contribution to gross domestic product (GDP). (4) In 2016, this contribution reached 7.5 percent, 1.5 times greater than the 4.9 percent reached in 1980. (5) Although the sector's value-added contribution to GDP averaged 7.2 percent during 2000-16, it increased 46.6 percent over the same period, from $817.5 billion to $1.4 trillion. (6)

This article analyzes the evolution of employment and wages in New York City's finance and insurance sector since 2000. The remainder of the article is organized as follows. The next section briefly discusses the importance of the finance and insurance sector in New York City's economy. The section that follows examines employment trends in the city's finance and insurance sector during the 2000-17 period, with an emphasis on the impacts of the September 11, 2001, terrorist attacks and the 2008 financial crisis. The section after that analyzes the evolution of wages in the sector during 2000-16. The next section compares wages across selected finance and insurance occupations and examines wage differentials within those occupations. The section also briefly discusses the principal causes of labor income inequality in New York City's finance and insurance sector. …

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