Bill de Blasio’s biggest fear is coming true. It’s not the low poll numbers; nor is it the passive-aggressive spat with Governor Andrew Cuomo. These are both big concerns, but what keeps him up at night is the idea that is that Wall Street will shrink…a lot.Large banks are planning to cut the number of support workers in New York in half over the next decade, according to a new report by Johnson Associates, Inc. These workers will move to less expensive cities in the U.S. and the developing world. As Reuters reports:
Today, about half of the employees who handle back-office functions and operations at investment banks work in high-cost locations, Johnson Associates said in a March report.By 2024, just 25 percent of those workers will remain in expensive cities, while the proportion in the developing world will jump from 25 percent to 50 percent.“The industry is under huge cost pressures and that’s one way to save money,” said Alan Johnson, who heads the firm and helps large financial companies develop compensation plans. “As you look at the cost differentials, and with technology making it easier to do things from remote locations, firms plan to have fewer people here.”
It’s difficult to overstate just how damaging this could be to De Blasio’s vision of a more progressive New York. One of the most controversial pieces of de Blasio’s agenda is his plan to hike taxes on the city’s highest earners to pay for generous social programs. The city is already heavily dependent on Wall Street’s taxes to keep its coffers full, and it will only be more so if De Blasio raises taxes. If these banks start moving operations elsewhere in significant numbers, it will spell trouble for his agenda.And that’s true even if the departing jobs are mostly back office positions. These jobs provide New York’s middle class with the work that an income-polarized city like New York desperately needs. On the campaign trail, De Blasio spoke of New York as a “tale of two cities”—one for the super-rich and one for the struggling poor, with no middle ground. If he’s not careful, those two cities may drift even farther apart on his watch.