Waning Wall Street: The End Of A 35-Year Era

Spare a tear for Gotham's lost boys.

Seven years ago this week, Washington rescued the investment bank Bear Stearns from bankruptcy, and the 2008 financial crisis unofficially began.

New York has bounced back since then — without its bankers. Compared to 2007, we're missing 20,500 Wall Street workers. That New York's economy has recovered so well without adding Wall Street jobs signals the end of a 35-year era.

Since stock and bond markets started taking off during the Reagan era, New York's economy and Wall Street have followed a trend. When the stock and bond markets soared, so did the jobs.

When markets crashed, thousands got laid off. Each time, though, the jobs recovery has been slower — and this time it's been nonexistent.

“Unlike in prior economic recoveries,” said state Comptroller Tom DiNapoli last week, “the securities industry has not been a driving force in the current jobs recovery.”

Of the 528,800 private jobs Gotham has added since mid-2009, only 2 percent have been on Wall Street, compared with 10 percent after the two previous downturns.

In the '80s, for example, Wall Street gained 73,000 jobs — for a total of 163,000 by 1987. When the markets crashed the next year, 19,000 got the boot — but by 1994, they were all back, and then some.

By the turn of the century, Wall Street had 200,300 jobs — only to lose 36,700 posts over the next three years.

By 2007, we were almost back — with 191,300 workers. Seven long years later, we've got 167,800 employed on the Street.

Yep: With Wall Street making record post-bailout profits, that's 8,500 heads below where we were in 1997 — and only 4,800 higher than way back in 1987, according to industry data.

Former Wall Streeters haven't ended up elsewhere in finance; that whole part of the economy has shrunk significantly.

You may be tempted to cheer. Doesn't a smaller Wall Street help fix inequality?

Nope. As the headcount on Wall Street has shrunk, the bonuses have skyrocketed.

In today's dollars, the average Wall Street bonus back in 1987 was $32,114. Last year, it was $172,860 — flat from the previous year, but more than five times as high as when Reagan was finishing his second term.

The average Wall Streeter now makes $355,900, including bonus — quintuple the city average.

Why the big change?

Wall Street was always well-paid. But even 15 years ago, it was an upper-middle-class job. Commuters from Queens, Long Island and Jersey could make a good living on the floor of the New York Stock Exchange or selling municipal bonds at a bank.

They didn't have to have Ivy League degrees; many hadn't finished college. Today, Wall Street is the province of the top 5 percent — in income but also education. It's not a way up anymore. Fewer jobs, a lot more money.

And that's the way the recovery has gone for the whole economy. Since 2009, one of the two fastest-growing parts of Gotham's economy is other types of white-collar jobs, like architects and computer-system engineers. They make an average of $103,000 a year, the highest-paying category not on Wall Street.

The second-fastest-growing part of the economy is the lowest-paid: tourism-related jobs, which pay an average $37,000.

The problem for New York? Even as we don't need Wall Street jobs to thrive, we do need Wall Street's money.

High finance directly provides nearly 7 percent of New York City's tax dollars, and 19 percent of state tax dollars. (The city, because it has property taxes, doesn't depend as much on the 1 percent's income taxes as the state does.)

That's the only reason we've been able to increase our annual spending on city-worker pensions and health care by nearly $4 billion since the year Bear Stearns collapsed — a 26 percent hike.

But a tax base that depends on profits, not people, is not a healthy tax base.

What if Wall Street profits also decline from their recent records — and don't bounce back this time around thanks to bailouts?

Working-class, middle-class and even upper-middle-class taxpayers cannot take up the slack. They simply cannot afford to pay tens of thousands of dollars — or more — in extra city and state taxes.

So, just like the coddled Upper East Side divorcee, New York has gotten used to the cash without having to have a pesky man around. But we shouldn't deny that we've grown accustomed to a certain lifestyle that we can't support were we left to our own talents.

This piece originally appeared in New York Post

This piece originally appeared in New York Post