New York State labor market analyst James P. Brown has a somber message for Wall Streeters who want to see their incomes grow over the next 20 years or so: find another industry to work for.
Bankers' pay is set to stagnate compared with other professions - not just this year and next, but for at least a decade and possibly far longer, Brown says. That's what happened after every previous episode when compensation in finance wildly outpaced that of other college-educated professionals, he told a Manhattan community group Tuesday. He cited work by Thomas Philippon, a NYU-Stern School finance professor who has studied the causes and evolution of pay differentials between workers in finance and the rest of the economy.
Now that the financial-sector bubble has burst, Brown says, "It's a reasonable expectation that in real terms, the salary differential we had between Wall Street jobs and other college-educated jobs will shrink over time." Financiers' pay will be "flat to falling...Not just now, but going forward" for at least 10 years, perhaps 20. "If you are in the finance industry, you need to adjust to that reality. You won't be able to wait it out," warns Brown, a regional economist with the New York State Department of Labor.
'Look Who's On the Other Side of Your Trade'
Instead of waiting for banking to take off again, he suggests better opportunities will arise within corporations that need to raise capital. "The most likely translation of your financial skills is in the finance department of a company. Financial skills translate well into corporate finance departments....I always tell people, 'Look at who's on the other side of your trade.' If you bought it, find out who sells it. If you sold it, who buys it."
Still, Brown says, "If you have to jump into a completely different industry, you're going to have to take a significant cut in pay."
During this or any recession, he says job-seekers in the New York area should turn their eyes beyond Manhattan. New York's outer boroughs and the rest of the metropolitan area tend to be less affected by recessions than the city itself, he says - in part because many companies economize by moving staff and facilities out of Manhattan, where everything costs more.
Government Needs Financial Skills
Other tips he offered:
- When a company relocates, job openings always appear at the new site. (Even if current employees are offered transfers, many won't move.)
- Health care, education and government are traditional recession-resistant sectors. Because that is so widely known, the number of applicants has surged since the economy weakened. So getting hired in those fields isn't as easy as it was a few years ago.
- That said, government - both New York State and federal - still looks to be a haven for financial professionals.
"The state never has enough accountants, auditors, health care professionals," says Brown. And federal agencies including the FDIC and SEC have a large and growing need for financial skills to clean up the mess caused by the industry's meltdown. Many openings are in Washington, D.C. But the Federal Reserve Bank of New York has a big role in the cleanup, Brown notes.
What's more, in both state and federal agencies, much of the work force is very close to retirment. So they must recruit actively just to maintain current staffing levels.
"I am a regional economist," says Brown, who is 52. "There are 10 of us (working for) New York State. I am the third-youngest. I am three years away from my minimum retirement age."