NYC Wage Growth
Press, Text, Crain's New York / Apr 12, 2015

Aaron Elstein

Jay Ball is a professional hacker. For more than 10 years, his job has been to break into the computer networks of large banks, then tell them he did it and how they can fix the problem. Thanks to breaches at JPMorgan Chase, Sony and other major corporations, the demand for tech-security experts is furious—and Mr. Ball is reaping the benefits.

Earlier this year, his employer increased his pay by twice as much as in previous years. It was a meaningful bump for Mr. Ball, considering that New Yorkers in his line of work are typically paid about $120,000, according to federal data.

Mr. Ball, who earns somewhat more than that, plans to use his additional salary to renovate the kitchen in his two-bedroom Hoboken apartment: new appliances, cabinets and, perhaps most important, a dedicated hot-water spigot so he can brew coffee faster.

“I’ve had the plans for a while,” he said, “but with the raise I can now pull the trigger.”

Mr. Ball’s good fortune is increasingly commonplace. Although reports of pay increases at places like McDonald’s and Walmart garner headlines, wages are rising among all income levels in New York City for the first time since the Great Recession.

According to a report slated to be released April 13 by the Fiscal Policy Institute, average hourly private-sector wages in the first two months of this year rose by 4.4% in New York—to $34.06—the strongest increase since the recession and more than twice the national average. “The labor markets are finally tightening, and we are seeing a bit of wage growth as a result,” said Adam Kamins, a senior economist at Moody’s Analytics.

In its most recent survey of U.S. economic conditions, the Federal Reserve called private and public sector pay increases in the New York metro area “widespread”—the only part of the country described that way, and the first time the Fed has used such language for New York since October 2007.

For the first time in years, New Yorkers are getting raises that outpace increases in the cost of living.

That’s a welcome development for Mayor Bill de Blasio, whose signature issue is income inequality. The mayor can take credit for some of the wage increases, as in the past year his administration has signed new contracts that grant raises and retroactive pay to about 250,000 teachers, firefighters and other municipal employees. (Around 75,000 city workers haven’t finalized their contracts.)

PAY CHECK

Even before the recent 4.4% bump, the annual average wage paid in New York City had risen to $61,640 as of the middle of last year—according to the most recent federal data—10% higher than in mid-2009. But not all wages rose equally, and some declined. Here’s a sampling of average NYC wages prior to this latest surge (ranked by the percentage change since 2009):

Source: U.S. Bureau of Labor Statistics

Among the beneficiaries is Victoria Primiano, 32, a second-grade teacher at P.S. 62 in Queens’ Richmond Hill neighborhood. Ms. Primiano said the new contract hiked her pay to $77,000 from $74,000. “I’m still paying off my student loans,” she said, “so this raise definitely helps.”

But while the mayor says he’s pleased that New Yorkers are earning more, he’s maintaining his push to narrow the income gap. “I’m glad there’s some good news; don’t get me wrong,” Mr. de Blasio said at a press conference last week. “But there’s something much more fundamental going on here. We have an imbalanced society and an imbalanced economy. We have to address the issue of income inequality very, very forcefully or future possibilities for this country will be undermined.”

Echoing her boss, Deputy Mayor for Housing and Economic Development Alicia Glen noted to Crain’s that New Yorkers’ average earnings remain 5% below pre-crisis levels when adjusted for inflation. Rebounding wages is “good news on top of many years of very bad news,” she said, which is why the de Blasio administration will continue to advocate for raising the minimum wage to $13.50 in the city. (Albany recently declined to raise the statewide minimum beyond the existing plan to reach $9 an hour by 2016.)

Currently, some 132,000 city residents are paid minimum wage or slightly more. Shantel Walker, 33, who earns $9 an hour working part time at a Papa John’s in Bushwick, is trying to get a raise for workers. She will be in midtown later this week to march in a union-backed movement to raise the minimum wage to $15 an hour. Said Ms. Walker: “I want to be able to afford one of the pizzas I make.”

The mayor’s office, not surprisingly, is urging private employers to raise salaries on the grounds that doing so will make for a more productive workforce. “We’re heading in the right direction,” Ms. Glen said, “but it can’t reduce the call for doing more systemic actions.”

As it happens, growth in the city’s private sector—about 90,000 jobs were added last year—is driving most of the pay increases. And though welcome for employees, rising salaries put additional pressure on employers already struggling to do business in the most expensive city in the country.

The flip side of the hot market in computer security, for instance, is that some tech companies are forced to cut back head count in New York and hire in lower-cost locales. Matti Kon, chief executive of InfoTech Solutions, a Manhattan-based cybersecurity firm with 150 employees, said he recently began hiring in Poland, where people will work for 60% less than here. “I fought against offshoring jobs for a long time,” Mr. Kon said. “But you can’t fight the marketplace.”

Small-business owners also say they’re squeezed because pay is growing faster than the rates they can charge customers. Exhibit A: Ava Seavey, founder and president of Avalanche Creative Services in Manhattan, which produces television commercials. She says wages for people who help set up and edit her TV shoots have risen by nearly 20% in the past year. That has forced her to cut back on full-time staff and hire more freelancers. “You want to stay loyal to your employees,” Ms. Seavey said, “but I need to make a living.”

Exhibit B: Octavio Hoyos—who owns an office-cleaning outfit in Jackson Heights, Queens, called Saniall Commercial Cleaning—said he has had to raise pay to $11 an hour from $9 to find workers who will clean offices at night. Rising labor costs have halved his profit margins and made it hard for him to compete for larger assignments. “Rising wages are great; I’m all for them,” Mr. Hoyos said. “But they’re hard for small business.”

For the most part, however, better-paying jobs are driving New York’s job growth, a welcome shift from what had been a stubbornly low-wage recovery. “For many years after the recession, the economy was producing mainly low-wage jobs in retail and restaurants,” said James Parrott, chief economist at the Fiscal Policy Institute. “Now middle- and high-paying jobs are growing faster than low-wage jobs.”

For example, the ranks of New Yorkers who design computer systems have risen 50% since 2009, to 66,000. Average pay in all computer-related jobs in the city has grown 14% (to $97,000). The tech boom, meanwhile, is fueling other sectors. Advertising jobs are increasing, thanks in part to the arrival of Google and Facebook in the city. Head count among ad-sales representatives has grown by 20,000 in the past six years, to 71,000, and in that time their average pay has gone up by 36% ($89,000).

Health care is also seeing strong increases in head count and pay. Hospital employment has grown by 10,000—to 170,000—in the past six years. Average pay for registered nurses has risen 6% in that time ($86,000) and has jumped 12% for physical therapists ($91,000). General internists have seen their pay increase by 25% ($185,000), while surgeons are earning 14% more ($218,000).

The roaring real estate market is also a factor, as construction employment has risen 8% since 2009. Sinade Wadsworth, a 23-year-old from the Bronx, left nursing school three years ago to become an apprentice carpenter. She’s now making about $100,000 a year installing doors and ceilings in the World Trade Center complex and working on the renovation of Macy’s flagship store on West 34th Street. Earlier this year, her pay rose 25%, to $50 an hour, per her union contract. “I’m sitting tight with my money,” Ms. Wadsworth said, “because I’m saving for a house.”