Gotham Gazette

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Income Numbers Show a Changing City

Incomes rose the most in the Bronx? The growth in earnings in manufacturing surpassed that for finance and information? New York City residents fared better than higher income commuters?

These sound like trends that might have occurred in decades past. Actually, though, they happened fairly recently -- from 2000 to 2005 -- according to the personal income series compiled by the U.S. Commerce Department. The Commerce Department's Bureau of Economic Analysisputs this report together using tax records and state administrative records on employment. You rarely read about such data in news reports, partly because the information is only annual, and there is a lag between the period of time covered by the data and its release. But despite that, this data tell us important things about the economy.

In 2005, the total personal income of New York City residents was $343.4 billion. This was 16 percent greater than in 2000, before adjusting for inflation. Since the city's population grew by 2.4 percent from 2000 to 2005, per capita income increased 13.3 percent. For the first half of this period (through mid-2003), the city's economy was declining. The downturn resulted from the national recession, the aftermath of 9/11 and the bursting of the Wall Street and technology bubbles. But the city's economy started to recover in the last half of 2003, and by 2005, total employment in the city had recovered although real total personal income (i.e., after adjusting for inflation) did not regain the 2000 level until 2006.

Consumer inflation was 3.8 percent in 2006, and the city's Office of Management and Budget projects that personal income increased by 6.6 percent in 2006.


Personal income counts the income of all persons from all sources. It includes wages and salaries, proprietors' income, employer-provided health insurance, dividends and interest income, social security benefits, and other types of income. By far the largest component of personal income is a category called "earnings," which includes wages and salaries, and proprietors' income. In New York City in 2005, earnings totaled $351.7 billion. This exceeded residentsĂ­ total personal income of $343.4 billion because commuters who live outside the city took home nearly a quarter (24 percent or $83 billion) of the earnings generated in the five boroughs. Employee compensation accounted for 86 percent of New York City earnings by place of work and proprietors' income was the remaining 14 percent.

From 2000 to 2005, net earnings received by city residents grew more than twice as fast as earnings of commuters (an increase of 17 percent versus 7 percent). This reflects the fact that a lot of the jobs lost during the downturn early in the decade occurred in high-paying industries such as financial services, information and professional services that tend to have high concentrations of commuters. Also, much of the employment growth in the first half of this decade was in health, social and educational services, industries that tend to employ proportionately more city residents than commuters.

Employer contributions for pension and health insurance ñ which are included as employee compensation -- increased by nearly a third from 2000 to 2005 or more than three times as fast as the growth in wages and salaries, reflecting the steep rise in health insurance costs.


One of the unique features of the personal income series is that it includes data on the number and earnings of those who are self-employed. Self-employment grew rapidly in New York City from 2000 to 2005, increasing by 37 percent, reflecting an increase of 207,000 persons. On the other hand, New York City wage and salary employment registered a decline of 3 percent, or 120,000, over this period. A part of this spurt in self-employment results from the practice by some businesses of improperly classifying their workers as independent contractors. Since 2000, the earnings of the self-employed grew only half as fast as the number self-employed (18 percent vs. 37 percent). For wage and salary workers, total employee compensation (wages plus employer contributions) increased by 14 percent even though their number declined by 3 percent.


The table below shows the three main categories of resident personal income, their shares of the total, and the 2000-to-2005 growth rates for each. (Capital gains, from stock or real estate are not considered "income" in this set of statistics, but are considered changes in the value of an asset.) The decline in interest rates largely accounts for the decline in the dividends, interest, and rent income.

Transfer payments come to city residents from state and federal social insurance and safety net programs. They increased by 30 percent from 2000 to 2005, largely because of the increase in Medicare and Medicaid payments. Medicare grew by 50 percent and Medicaid increased by one-third over this five-year period. These sizable increases have been due to rising health care costs as well as significant growth in the number of beneficiaries, particularly for Medicaid. Medicare and Medicaid payments go to health care providers and the total amount is nearly four times as great as the Social Security benefits paid to city residents. In 2005, city residents received $11.1 billion in Social Security while Medicare payments to health care providers in New York City totaled $12.8 billion and federal and state Medicaid payments to city providers totaled $27.7 billion.

The fourth major category of transfer payments includes various income maintenance benefits, which total $8.9 billion. Here the largest category includes the Earned Income Tax Credit, which gained by 44 percent from 2000 to 2005 and was $3 billion in 2005. Federal food stamp benefits totaled $1.4 billion in 2005, 50 percent higher than five years earlier, a growth that reflects improved enrollment procedures and a high level of continuing means-tested need in New York City.

Unemployment insurance was designed to function as an ìautomatic stabilizerî during economic downturns to help laid-off workers maintain some level of purchasing power. The income data bear this out. During the recession, unemployment compensation nearly tripled, rising from $800 million in 2002 to $2.2 billion in 2002. By the time the recovery was well underway in 2005, unemployment benefits had receded to $1.1 billion.


The income series includes figures on earnings (wages and salaries, and proprietorsĂ­ income) by industry, but only for the 2001 to 2005 period. Overall earnings increased by 12.4 percent over these four years. Among the larger industry groupings, private educational services registered the fastest growth, with earnings increasing by 37 percent. Health care and social assistance came in second with a 24 percent increase. Four sectors had 21 percent gains: real estate, retail trade, arts and entertainment, and accommodation and food services. While the number of jobs in the manufacturing sector declined sharply, earnings increased by 11 percent -- several times faster than the 3 percent growth in finance and insurance sector.

The information sector had a 10 percent increase in earnings over the four years from 2001 to 2005, although the pattern for individual industries in this sector varied. Earnings in broadcasting gained by 39 percent, while motion picture production had a 9 percent drop in earnings, telecommunications a 10 percent earnings decline, and earnings for those working for Internet service providers and related activities fell by 22 percent.


One of the most interesting trends that emerges from the personal income data for 2000 to 2005 is that the ever-resilient Bronx had the most impressive income and earnings growth among the five boroughs. As the table below demonstrates, people living in the Bronx experienced total income growth of 24 percent over this period, half again as high as the cityĂ­s overall 16 percent income growth. On a per capita basis, incomes grew by 21.5 percent in the Bronx, also outpacing the other boroughs, although it still has the lowest per capita income -- $23,513 compared to the citywide average of $41,803. Jobs and businesses located in the Bronx showed similar gains, with earnings growing at twice the citywide rate. Brooklyn came in second for these three measures and Manhattan brought up the rear.

The relatively faster income growth in the Bronx, Brooklyn and Queens over the 2000 to 2005 period is largely due to New YorkĂ­s changing job picture and who has benefited from it. The number of jobs in health, education and social services has grown, and these industries are more likely to employ outer borough residents. On the other hand, Manhattanites, like commuters, are more likely to hold jobs in higher-paying financial services, a sector that has recovered somewhat but was hard hit by the recession and the bursting of the Wall Street and bubbles.

Health, education and social services now account for 10 times more earning in the Bronx than manufacturing does and provide 36 percent of total earnings from jobs in that borough. Earnings from the banking industry were flat in Manhattan, where most bank headquarters are located, but rose appreciably in other boroughs ñ by a huge 83 percent in the Bronx, for example ñ because of an increase in the size and number of branch banks. Brooklyn also saw strong earnings growth related to the relocation of some financial securities operations from Manhattan in the wake of 9/11.

Despite all this, Manhattan residents still have far higher income level than the residents of the other four boroughs. Even with many low-income residents, Manhattan's per capita income level was $93,400 in 2005, two-and-half to three-and-a-half times the per capita income levels for the other boroughs. All indications from other sources, including tax data, suggest that incomes at the top of the distribution have been growing rapidly since the recovery got underway. A future column will examine trends in New York City's income distribution.

James Parrott is deputy director and chief economist of the Fiscal Policy Institute ( He has been studying and writing about the New York economy since he landed in New York City a quarter century ago. 

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