In 2000, about 14 percent of young New Yorkers worked in finance, earning about 77 percent more than average for their age group. Now they make about 115 percent more than average, and their numbers have shrunk to about 10 percent of their cohort.
Pointer from Tyler Cowen.
I am sure that there are many possible interpretations. The one that comes to my mind is that NYC financial firms are hiring fewer mediocre/marginal young workers. This reduces the proportion of young workers in the financial industry but raises the average incomes of those who do work in that industry.
Back office people have been moved to Utah or eliminated by technology.
This is 100% of the explanation.
Finance is a lot of proprietary knowledge. The more people that work there the looser the control over that knowledge. Better to pay one person a lot of money to work 80 hours then two to work forty hours. Two people means two people that could walk out your door to a competitor with your client list.
Don’t they also work about twice as much? On an hourly basis, that doesn’t sound like such a great deal.
Maybe the “easiest” possibility is that NY experienced growth in other, lower income sectors. Its possible, for instance, that nothing about finance changed, but that as Millennials (a much larger generation than Xers who were the “young workers” in 2000) have entered a post-financial-crisis NY economy, there are a lot of them working non-finance jobs (which would account for the apparent shrinking financial employee pool) for reasonably low wages (at least a popular complaint of current young workers who feel over-educated/underemployed).
The other alternative is a common theory (and largely consistent/overlapping with your suggestion) that after a recession that affects a particular industry, firms discover they can get by without a large number of workers/positions they used to think were really important. After the crisis, it may just be that a lot of folks who got laid off were those marginal workers, and those positions won’t reemerge.
Someone more familiar with labor stats than I am could probably verify/crush that claim pretty easily since it’s hardly novel, but it’s worth considering the possibility that finance didn’t change since the measures we’re given are relative to the broader labor market.
More young people who make less than the prior average have been moving to New York, lowering the earnings baseline of the cohort and decreasing the % in finance – would seem to be the/an alternative
A typical 25-year-old made $43,000 in New York in 2000, adjusting for inflation. In 2014, a 25-year-old in the city could expect to make about $37,000.
Wow. That’s pretty terrible, considering how expensive it is to live there. I would hope a lot of those people are waiting tables, bartending, etc. and thus have lots of unreported cash income.
The young people of 2000 got 16 years older?
This sounds right. The same revenue is spread over fewer people, due to technology, so that revenue per worker is higher. People like to ask why we pay professional athletes so much more than teachers. However, with 3.1M public school (full-time-equivalent) teachers, we actually spend a lot on (total) teacher pay. If technology allowed us to educate the whole country with a few thousand teachers the way TV allows us to entertain the whole country with a few thousand athletes, then those teachers would probably be very well compensated.