Trouble for the 1 Percent — and a Disaster for de Blasio
Mayor de Blasio doesn’t like inequality. Yet his first three years’ worth of city budgets have made New York even more dependent on the top 1 percent.
“The mayor had better hope the bankers’ fortunes improve. He needs inequality to get himself re-elected.”
Now, the mayor may get to see what it’s like without some of that wealth. Wall Street profits are slumping — and the industry is slashing jobs again.
Last week, the city’s investment banks finished reporting their quarterly results — and they weren’t good.
Goldman Sachs, for example, took in $7.9 billion in money from things like fees paid by companies or people wanting advice, or companies and people wanting to sell stocks and bonds.
That sounds nice. But it was down from $9.1 billion — a drop of 12.6 percent — from the same quarter last year.
Goldman took in less cash, so it slashed its expenses. Last spring, it spent $7.3 billion on workers, outside contractors, legal fees, travel, computers and the like.
This year, it spent $5.5 billion. Direct pay for Goldman workers fell by half a billion dollars.
And Goldman cut the number of people being paid, too. Last year, the bank increased staff by 1 percent. This year, it has cut staff by 5 percent, from 36,500 people earlier in the year to 34,800 now.
The same is true at other banks. Morgan Stanley and Bank of America are slashing jobs.
The city reported last week that employment in the financial industry has been falling for seven months now, after taking seasonal variations (like hiring new graduates) into account; 2,500 jobs are gone.
Keep in mind, too, that we’re already starting at a weak point. We never regained the finance jobs we lost starting a decade ago, during the financial and economic crisis.
The city is still missing 7,800 finance jobs compared to 2007.
Sure, we’ve added other types of jobs. But these don’t pay as much. The average Gotham finance job paid $288,000 last year. The average non-finance job paid $69,000.
To be sure, two people earning $69,000 apiece can live decently in New York. But they cannot afford to fund New York City’s public spending.
The problem for regular New Yorkers — besides the fact that lots of middle-class people work at banks — is that we still depend on Wall Street salaries and bonuses for an outsized share of our tax dollars.
Wall Street provides only 5 percent of the city’s jobs, but 22 percent of the wages — and therefore taxes paid on those wages — people earn in the city.
A banker who gets a million-dollar bonus pays $38,760 in city taxes. That’s enough for the city to pay its share of sending nearly four children to public school.
The bonus may be fair, or not. But either way, New York gets the money to spend.
It’s a good thing, too — because de Blasio has made sure that we’re spending a lot more money.
Thanks to the raises the mayor gave out two years ago and the 18,904 new city workers he’s added, taxpayers will spend $25.7 billion on city wages and salaries this year — up $1.3 billion since the mayor took office.
Next year, the figure will be a whopping $27.2 billion, because the mayor pushed the cost of the past raises to the future.
It’d be one thing if workers got their raises in return for lower benefits costs. But city workers’ benefits costs have gone from $17.1 billion when de Blasio took office to $19 billion today — and will keep going up, too, by another billion next year.
That means that in a downturn, de Blasio would have a lot less flexibility to cut costs. State taxes, which depend on the same Wall Street bonuses, are already slumping, the state comptroller reported last week.
The mayor can’t cut teacher salaries, thanks to the union contract — so he’d have to cut teachers. He can’t cut cop benefits — so he’d have to cut cops.
But de Blasio has added 1,300 cops so that the NYPD can help keep the streets safe without doing the aggressive stop, question and frisks of people that helped get the mayor elected.
Over time, it would be wonderful to have a more egalitarian city — or at least one with higher wages for non-bankers.
For now, though, the mayor had better hope the bankers’ fortunes improve. He needs inequality to get himself re-elected.
This piece originally appeared in the New York Post
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Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.
This piece originally appeared in New York Post