SECTION 2: PUBLIC EMPLOYMENT, WAGES, AND BENEFITS

GENERAL DISCUSSION

This section tabulates the number of public employees, relative to population, their wages and salaries, and their pension benefits, in different regions of New York State compared with the national average, New Jersey, and other states. The 1997 census of governments is the primary source, but other economic data sources are used for comparison. Year 2000 census data is used for public employment to population ratios, because New York City’s employment was so severely under-estimated prior to the Census.

This is a general discussion. Public employment and wages are discussed on a category by category basis in other sections of the report.

Chart 2.1: 1997 Local Government Employment

Sources: 1997 Census of Governments. Population: 2000 Census of Population, unadjusted data.

New York City’s local government employee to population ratio was above average, but only in a few categories.

In fiscal 1997, local government in New York City had 4,987 public employees for every 100,000 residents, 37 percent above the national average of 3,634. Other regions of New York State were also above average, but to a lesser extent. The Downstate Suburbs were nine percent above average, the Upstate Metros were 16 percent above average, and the Rest of New York State was 25 percent above average. New Jersey was 2.5 percent below average.

All of New York City’s additional employment, and then some, was accounted for by just a handful of service categories. New York City had 1,046 local government workers per 100,000 residents in the welfare, public hospitals, and housing categories, more than three times the national average of 314. It had 766 in the police and correction categories, more than double the national average of 327. And, it had 464 in the transit category, eight times the national average of 57. Aside from these categories, New York City’s local government employment per 100,000 residents, at 2,711, was 7.7 percent below the national average, at 2936.

The Downstate Suburbs, Upstate Metros, and the Rest of New York State are also above average in the welfare, public hospitals, and housing categories, though not nearly to the same extent as New York City. The administration of many welfare programs is a county (or NY City) responsibility in New York, but a state responsibility in many other states. The Downstate Suburbs and Upstate Metros were also above average in police and correction, though again not nearly to the same extent as New York City. The other regions of New York State show very little transit employment – outside New York City, this is recorded at the state level, not the local level.

Aside from the categories detailed separately in this chart, local government employment is above average most of New York State. The Downstate Suburbs, at 3,170, were 8.0 percent above average, the Upstate Metros, at 3,457, were 17.7 percent above average, and the Rest of New York State, at 3,856, was 31.3 percent above average. For a spreadsheet local government employment and wage data, click here.

Chart 2.2: 1997 Local Government Employment

Sources: 1997 Census of Governments. Population: 2000 Census of Population, unadjusted data.

Outside New York City, New York State’s local government public school and highway employment was high.

Aside from the categories detailed in Chart 2.1, the below average local government employment in New York City, and the above average employment in other parts of the state, were largely explained by employment in public schools. New York City’s public school employment, at 1,655 per 100,000 residents, was 15 percent below the national average of 1,947. The Downstate Suburbs (2,145) were 10 percent above average, the Upstate Metros (2,375) were 22 percent above average, and the Rest of New York State (2,599) was 33 percent above average. New Jersey was about average.

New York City also had below average local government employment, and other parts of the state above average employment, in the highway category. New York City had 86 highway workers per 100,000 residents, somewhat below the national average of 101. The Downstate Suburbs, at 124, were 23 percent above average, the Upstate Metros, at 148, were 47 percent above average, and the Rest of New York State, at 304, was triple the national average. New Jersey was 21 percent above average in its ratio of highway workers to population. Upstate, highway employment is increased by the substantial amount of road lane mileage relative to the number of people, while Downstate subway and commuter rail tracks take the place of many highway lane-miles. Since the data is for March, the Upstate employment-population ratio may also have been increased by snow removal.

Aside from public schools and highways, and the categories detailed in Chart 2.1, local government employment per 100,000 residents was 9.2 percent above average in New York City, 1.5 percent above average in the Downstate Suburbs, 5.2 percent above average in the Upstate Metros, and 7.3 percent above average in the Rest of New York State. It was 3.5 percent below average in New Jersey. These and other categories will be discussed in more detail elsewhere in the report. To return to the spreadsheet of local government public employment data, click here.

Chart 2.3: 1997 State Government Employment

Sources: 1997 Census of Governments. Population: 2000 Census of Population, unadjusted data.

Like its local governments, the State of New York’s public hospital employment was above average.

Although the federal and state governments collect most of the taxes, most of the actual work of government is done at the local level. Nationally, the states accounted for only 28 percent of state and local employment States have little or no employment in public schools (except in states like New Jersey where there has been a state takeover of some districts), housing and community development, water, sewer, sanitation and fire protection.

In some other categories, however, there is an overlap between state and local government, and the division of responsibility between the two varies from state to state. One might assume, on that basis, that New York’s state employment would be low in categories where its local government employment was high. This was the case in the welfare category, but not case otherwise. In general, New York’s state employment per 100,000 residents was higher than the national average in the very same categories where its local employment was also high.

For example, New York’s employment in state hospitals, at 263 per 100,000 residents, was 57 percent higher than the national average of 167, and 34 percent higher than in New Jersey. The State of New York’s employment in correction was above the national average, and 47 percent higher than in New Jersey, even though it forces its local governments, especially New York City, to house state prisoners in local jails. In the chart New York State’s highway and transit employment was divided by the population outside New York City, rather than the total state population, because that is where the state provides services. New York State had 130 transit employees per 100,000 residents outside New York City, well above the national average of 64 (both state and local transit workers) or New Jersey at 122. (1998 data for NJ: New Jersey’s transit employment, which is all recorded at the state level, was not reported correctly in 1997). New York State also had 130 state highway employees per 100,000 residents outside New York City, well above the national average (88) or New Jersey (92).

Despite this, New York State’s total state employment 100,000 residents was seven percent below the national average and just three percent more than in New Jersey (if NJ’s public school employment is excluded). This is because New York’s public college and university employment, and parks and natural resources employment, were half the national average. As in New Jersey and many other northeastern states, New York State residents are more likely to attend private colleges and universities than those living elsewhere in the country.

For a spreadsheet of state public employment data, click here.

Chart 2.4: March 1997 Payroll Per Employee
Private Sector and Local Government, vs. National Average

Sources: Local government: 1997 Census of Governments, March 1997 payroll divided by full time equivalent employment. Private Sector: Bureau of Economic Analysis, 1997 annual private earnings by place of work divided by annual average private employment.

*Private figures for New York City and the Downstate Suburbs are aggregated because they constitute an integrated labor market; data for finance industry workers in Manhattan are excluded.

New York’s local government payroll per employee was generally proportional to the private sector…except for police officers and teachers.

In 1997, the average private sector worker in Downstate New York (excluding the extremely high paid finance industries in Manhattan) earned 29 percent more than the average private sector worker in the United States. Private-sector workers in the Upstate Metros earned 3 percent less than average, those in the Rest of New York State earned 25 percent less than average, and those in New Jersey earned 25 percent more than average. Comparing the average wage of local government employees with their national counterparts, most of those in all parts of New York State could expect to do about as well, in a relative sense, as their private sector counterparts. Excluding the categories detailed separately in the chart, local government employees earned 22.5 percent more than the national average in New York City, 20.5 percent more in the Downstate Suburbs, 3.9 percent less in the Upstate Metros, and 16.5 percent less in the Rest of NY State.

There are some big exceptions to this rough equality, however. In New York City, public school instructional employees (ie. teachers) earned just 10.9 percent more than the national average, and police employees with the power of arrest (ie. police officers) earned just 6.6 percent more than average. In the Downstate Suburbs, Upstate New York, the Rest of New York State, and New Jersey, on the other hand, public school instructional employees were very highly paid, relative to the private sector and the national average. In the Downstate Suburbs and New Jersey, the average wage of police officers was also relatively high. While New Jersey had highly paid teachers and police officers, the pay of its other local government employees was low relative to the national average and the private sector.

To return to the local government employment and wage spreadsheet, click here. Data for other categories of local government are discussed elsewhere in the report.

Chart 2.5: March 1997 State Payroll Per Employee

Source: 1997 Census of Governments, March 1997 payroll divided by full time equivalent employment.

New York’s state workers generally received above average pay, even though most are sited in low-cost Upstate New York.

New York State, in theory, has a big advantage in paying its employees. It can collect taxes in high-wage Downstate New York, while paying wages in the average wage Upstate Metro Areas, or the low wage rural areas of the state, thus reducing the wage bill as a share of income. The State of New York has, in fact, located virtually all its facilities, from prisons, to universities, to mental hospitals, to parks, along with the state capitol and its offices, upstate. Even so, the average New York State worker was paid 20 percent more than the average state worker in the U.S. as a whole, and nearly as much as the average state worker in New Jersey, a higher cost state.

There are exceptions. New York State’s instructional higher educational employees (ie. professors and deans) earned just 4.5 percent more than the national average. Its financial administrators (ie. the Department of Finance and the State Comptroller), its social insurance administrators (ie. the Department of Labor), and its highway department workers earned just 8.4 percent more.

Aside from these exceptions, New York’s state workers earned 29 percent more than the national average, and more than New Jersey’s state workers. New York State’s state transit workers (including almost all transit workers outside New York City) earned 22 percent more than the local government national average (most mass transit agencies in the U.S. are classified as local government). While many of these are located in the high cost Downstate Suburbs (ie. the LIRR and Metro North), New York State’s transit workers also earned 16 percent more than local transit workers in New York City.

To return to the state employment and wage spreadsheet, click here.

Chart 2.6: Government Wages and Salaries
Local Government: 1997

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York’s total local government wages and salaries were high as a share of the income of NYC residents.

New York City’s local government wages and salaries equaled 7.4 percent of the income of all NYC residents in fiscal 1997, well above the national average of 5.1 percent. Wage were high despite below average pay per worker, relative to the private sector. This is because New York City had higher than average local government employment, while city residents have lower than average incomes to support it, compared with those commuting in. Local government employee wages and salaries, as a share of residents’ personal income, were somewhat above average in the Downstate Suburbs and Upstate Metros, and substantially higher than average in the rest of New York State. They were somewhat below average in New Jersey, primarily as a result of low pay per worker relative to the private sector.

State Government

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

The State of New York’s wages and salaries were low as a percent of its residents’ personal income.

With below average state employment relative to population, and divided by high downstate incomes, New York’s state employee wages and salaries equaled just 1.9 percent of the personal income of state residents in FY 1997, below the national average of 2.1 percent. This was despite higher than average wages. New Jersey, at 2.0 percent, was slightly below average. For a spreadsheet of this data, including data for all 50 states and all the counties of New York State outside New York City, click here.

Chart 2.7: State and Local Government Wages and Salaries

Sources: Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York’s state and local public employee wages and salaries were higher than average as a share income, but not to the same extent as its taxes.

Together, the wages and salaries of New York’s state and local government workers equaled 8.5 percent of the personal income of New York State residents in Fiscal 1997, 18.5 percent more than the national average and 24 percent more than in New Jersey. While New York’s public employee wages and salaries were among the highest in the nation as a share of income, there were four states that were higher and 15 additional states between 7.5 and 8.5 percent. In general, public wages and salaries varied more as a share of income than state and local taxes. Many southern states with below average taxes, for example, had above average public employee wages and salaries as a share of income. Higher federal aid, higher charges for services, higher fee and fine revenues, and/or lower spending on items other than wages, presumably account for the difference. Meanwhile Illinois, whose state and local taxes were just slightly below average, had the third lowest public employee wages and salaries as a share of its residents’ income, behind New Hampshire and Pennsylvania.

Public employee wages and salaries fell as a share of personal income between 1972 and 1997, both in New York State and in the United States as a whole. The decline was by 19.9 percent in New York State, and by 19.3 percent in the nation. Several states including Illinois, Massachusetts, Michigan, Wisconsin, New Hampshire, Vermont, and Virginia posted declines of 25 percent or more. In Alabama, Kentucky, North Carolina, Oklahoma, Wyoming, New Jersey and Ohio, on the other hand, the decline was less than 10 percent. . Only South Carolina saw its state and local wages and salaries rise as a share of its residents’ income. To return to the wages and salaries spreadsheet, click here.

Chart 2.8: Contributions to Employee Pension Funds
Local Government: 1997

Sources: 1997 Census of Governments. For local government in New York State: a special tabulation by the Office of the NYS Comptroller. Income: Bureau of Economic Analysis. See notes at the end of this section for details.

New York City’s pension contributions were high, both as a share of the income of all NYC residents and as a share of the wages of its employees, but only for employees hired before 1976.

Local government labor costs are affected by fringe benefits such as pensions, as well as by wages and the number of employees. In fiscal 1997, the tax revenues required to fund employer contributions to public employee pension funds equaled nearly six tenths of one percent of the income of all New York City residents, 49 percent above the national average. Local governments in other parts of the state were below the national average.

Higher employer pension contributions offset, in part, the lower wages that some New York City public employees receive. Employer pension contributions equaled 7.9 percent of the wages of all NYC local government workers, compared with just 4.5 percent in the Downstate Suburbs, 4.6 percent in the Upstate Metros, 4.8 percent in the Rest of New York State; the national average was 7.6 percent. New York City’s pension contributions, however, vary significantly based on when a public employee was hired. According to a December, 2000 report by the Office of the NYC Comptroller (1994 data), they equaled 12.5 percent of wages for its “Tier I” employees (those hired before July 1, 1973), and 7.0 percent for Tier II (including police, firefighters, and those hired from 1973 to 1976). This compares with just 3.9 percent for Tier III and IV, because employees in those plans must contribute 3.0 percent of their own wages to the pension system, yet receive less generous pensions. Those joining the pension system after 1995 are required to contribute 5.85 percent of their wages to the pension system, in effect a Tier V.

State Government

New York State’s contributions to pension funds on behalf of state employees, as a share of the income of state residents, were nearly 60 percent lower than the national average in FY 1997. For a spreadsheet of pension data, both as a share of the personal income of all area residents and as a share of public employee payroll, click here.

Chart 2.9: Contributions To Employee Pension Funds

Sources: Census of Governments. Income: Bureau of Economic Analysis. See notes at the end of this section.

In FY 1972, the burden of public employee pension contributions was crushing throughout New York State, as a result of generous pension enhancements handed out at the peak of the 1960s stock market bubble.

The chart above assumes that the fiscal burden of contributing to state employee pension funds is distributed to different parts of the state in proportion to personal income, and therefore equals 0.11 percent of the income of residents in every part of the state. Given that assumption, the taxes required to fund contributions to state and local pension funds absorbed 0.69 percent of the income of New York City residents in Fiscal 1997, nearly equal to the national average of 0.68, and lower than 20 of the 49 other states. In it were a separate state, the part of New York State outside New York City would have had the 8^th lowest pension contributions in the country as a share of income.

In fiscal 1972, however, New York’s state pension contributions were average, and its local pension contributions were extremely high, both in NYC and elsewhere. The taxes required to pay for contributions to New York City’s pension funds absorbed 1.18 percent of the income earned by all city residents in 1972, more than triple the national average. Pension contributions were nearly as great in the rest of the state. Overall, state and local government pension contributions, as a share of all residents’ personal income, fell by 64 percent in New York State from 1972 to 1997, while remaining about the same nationally. While pension contributions fell in California and some other states, they rose in states such as Washington and Georgia.

To return to the spreadsheet of public employee pension contributions as a share of total personal income (and as a share of public employee wages) in all states, and for 1997 for local government in all counties in New York State, click here.

Chart 2.10: State and Local Employer Pension Contributions

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis.

The fiscal burden of NYC’s pension contributions had nearly fallen to the national average by FY 1997.

The chart above shows the declining burden of contributions to state and local pensions in New York State. Nationally, the cost of pension contributions has been stable. While contributions to local government pensions remained above average in New York City, this is only because of high contributions for those employees granted exceptionally generous pensions in the Lindsey Administration. As a result of a provision in the state constitution, these pensions cannot be reduced. In fact, as a result of recent legislation, many long time retirees received pension increases of up to 50 percent. Spreadsheet here.

While newly-hired New York City Police and Fire Department employees continue to receive expensive pensions, other New York City employees do not. They are required to contribute 5.85 percent of their own salaries to the pension funds, far more than the employer’s contribution, and if they stay more than five years that money is not returned until age 57, when it will have lost value relative to inflation. New York’s state pensions, which were never overly generous, have been reduced as much as New York City’s, which once were. As a result, in some years New York’s state and (aside from New York City) local governments have not had to make any pension contributions at all.

In contrast, many private employers have shifted to “cash value” and “defined contribution” pension plans in recent years. These shifts often lead to lower pensions for long time employees, while providing important benefits for new employees, especially those hired in mid-career, and those who may move on to other jobs in the future. The private sector has made these adjustments to attract qualified employees. Moreover, while many private employers match contributions to deferred compensation plans, paying in up to five or six percent of an employee’s salary, New York State’s public employers do not. Thus, while both private pension plans and New York’s public pension plans benefit some employees at the expense of others, they tend to disadvantage the opposite people.

Chart 2.11: Average Annual Earnings Per Employee

Source: Bureau of Economic Analysis. Note: For this chart a single private-sector average is calculated for New York City and the Downstate Suburbs. It excludes the very high paid finance industry in Manhattan.

According to an alternate data source, local government employees earned somewhat more than private sector workers in New York City, the Downstate Suburbs, the Upstate Metros, New Jersey, and the United States, but far more than private sector workers in the Rest of New York State.

The next three charts use administrative data from the Bureau of Economic Analysis to provide an alternative to Census of Governments data. In 1998, the average New York City local government employee earned $46,025, 9.4 percent more than the private sector average of $45,072 in the downstate region. The BEA earnings estimate includes both a fairly accurate tabulation of payroll and a rough estimate of the value of non-wage benefits. The latter is based on national fringe benefit data, and the assumption that non-wage benefits, tabulated by industry, are the same share of payroll everywhere in the United States. Therefore, the average earnings of New York City’s local government earnings may be higher than the private sector average according to this source, while its wages were lower according to the Census of Governments, because (nationally) on average local government workers receive more generous non-wage benefits than private sector workers.

In the early 1980s, the average annual earnings of New York City’s local government workers were much higher, relative to the private sector, than today. By 1998, their earnings exceeded the private-sector average by the same percentage as in New Jersey and the United States. Over the years, average local government earnings, relative to average private earnings, have stayed about the same in the Downstate Suburbs, have risen in the Upstate Metro Areas, New Jersey, and the Untied States, and have soared in the Rest of New York State. In the late 1990s, local government earnings fell everywhere relative to the private sector, as private sector earnings increased strongly. For a spreadsheet of this data, click here.

Chart 2.12: Local Government Employee Earnings

Source: Bureau of Economic Analysis, REIS disk.

Local government earnings were a lower percentage of total earnings in New York City than in other parts of New York State, and just slightly higher than in New Jersey or the U.S. as a whole.

This chart uses Bureau of Economic Analysis data to tabulate the size of local government relative to the overall economy.

In 1998, the earnings of local government workers accounted for 8.5 percent of all the money earned in New York City. That was somewhat above the national average (8.2 percent) or New Jersey (8.1 percent), but below the Downstate Suburbs (8.9 percent) and the Upstate Metros (9.4 percent), and far below the Rest of New York State (14.3 percent). Local governments’ share of the economy fell in New York City from 1980 to 1998, and rose in the Rest of New York State, while ending up about the same elsewhere. By this measure, therefore, local government is an average part of the economy in New York City, and an above average part of the economy in other parts of New York State.

However, when the earnings of local government workers are compared with the personal income of New York City residents only, rather than all those working in the city, the results are different. The city shows a greater reliance on local government than the Downstate Suburbs or Upstate Metro Areas, though still less than in the Rest of New York State. This is because many of the highest earners living in the Downstate Suburbs and New Jersey work in New York City, while many of the highest earners working in New York City live elsewhere. Since both residents and businesses pay taxes and require services, each measure tells part of the total story. For a spreadsheet of this data, click here.

Chart 2.13: Federal & State Government Employee Earnings

Source: U.S. Department of Commerce, Bureau of Economic Analysis, REIS disk.

State government accounted for a below-average share of the money earned in New York City; the federal government accounted for a below-average share of the money earned in New York State.

In 1998, the earnings of New York’s state employees accounted for 3.0 percent of the money earned at work in the state, below the national average (3.4 percent) and New Jersey (3.3 percent). While state employees only account for just 1.0 percent of total earnings in New York City, however, they account for nearly six percent in the Upstate Metro counties (including Albany County, where the state capitol is located), and nearly seven percent in the Rest of New York State. As mentioned previously, the majority of the State’s parks, prisons, universities, and offices are located in Upstate New York.

The federal government provides relatively little employment and earnings in New York State, relative to other parts of the country. The only part of the state with a significant federal presence is the primarily rural counties grouped here as the Rest of New York State. In 1991, the earnings of federal government workers accounted for 5.4 percent of total earnings in the Rest of New York State, compared with 6.0 percent in the nation as a whole. By 1998, the earnings of federal government workers had fallen to 4.6 percent of total earnings in the nation, and just 3.8 percent in the Rest of New York State. Federal cutbacks, particularly in the military, thus hit Upstate New York disproportionately. In 1998, federal, state, and local government workers combined accounted for 25 percent of the income earned at work in the Rest of New York State, down from over 27 percent in 1991. Government workers accounted for only 11.2 percent of the money earned in New York City, well below the national average of 16 percent. For a spreadsheet of this data, click here.

Chart 2.14: New York City Employment (000’s)

Sources: New York State Department of Labor, Current Employment Survey data.

Aside from education, New York City’s local government employment continues to fall slowly, while private health and social services employment, which is substantially government-funded in the city, continues to soar.

Employment data provides some indication of post-1997 trends in New York City. Local government education employment, which includes both New York City’s public schools and its public colleges and universities, rose by 8.1 percent from 1997 to 1999 before leveling off. Other local government fell by 1.2 percent. For the entire 1993 to 2000 period, which corresponds with the Giuliani Administration, local government education employment rose by 11.5 percent, and other local government employment fell by 11.1 percent, in New York City.

The major growth has occurred in private-sector industries that are funded, at least in part, by the government. Employment in the city’s health services industries rose 11.9 percent from 1993 to 2000, and by 3.6 percent from 1997 to 2000. Employment in the its social services industries rose by 26.7 percent from 1993 to 2000, and by 14.8 percent just from 1997 to 2000. When combined, employment in New York City’s private, mostly non-profit health and social services industries rose from just over 300,000 in 1983 to 500,000 in 2000, a gain of 67 percent. Despite their dependence of public funding, employment in these industries rose right through the local government cutbacks of the mid-1990s, as well as through the severe private-sector recession in the early 1990s.

Health and social services are discussed in Section 3 of this report.

Section 2 Summary

New York City’s local government employment per 100,000 residents was 36 percent higher than the national average in 1997. It was much higher than average in the welfare, hospitals, housing, police, correction, and transit categories, but lower than average otherwise. In other parts of New York State, local government employment per 100,000 residents was also above average, though not by as much. In addition to the welfare and hospitals categories, employment in education was much higher than average in other parts of the state. New York’s state employment was below average.

In general, in each part of New York State local government pay per worker is higher or lower than the national average by the same percentage as private sector pay per worker. Teachers, however, are very highly paid relative to the private sector and the national average in the Downstate Suburbs, Upstate Metros, the Rest of New York State, and New Jersey, while receiving lower pay in New York City. Police officers, as well, receive high pay in the Downstate Suburbs and New Jersey and low pay in New York City, relative to the private sector and the national average. New York State employees are paid more than the national average.

The wages and salaries of NYC’s local government workers were 45 percent higher than the national average as a share of the income of New York City residents. Above average pension contributions increased total local government labor costs further, primarily as a result of generous pensions for police officers, firefighters, and employees hired before 1976. Local government wages and salaries were also above average as a share of income in other parts of New York State, though pension contributions were below average. The overall cost of New York’s state workers, both wages and pensions, was below average as a share of the income of state residents.

The fiscal burden of contributions to public employee pension funds was far above average throughout New York State in FY 1972, as a result of the generous pensions handed out during the 1960s stock market bubble.

According to a different source, local government workers earned slightly more than private sector workers in New York City, New Jersey and the United States. Local government workers earned more relative to the private sector in other parts of New York State.

The earnings of local government workers account for an average share of the money earned in New York City, but an above average share in other parts of the state. Taking all levels of government together, government workers’ earnings accounted for a much lower share of the total economy in New York City than in the United States, but a much higher share than the U.S. average in other parts of New York State.

Move on to Section 3.