Economy & Business

For New York City’s Municipal Workers, a Supplementary Welfare State

(Photo: Blvdone/Dreamstime)
The inflation of its public-sector compensation packages is functionally an income-redistribution program.

New York City’s municipal work force is, under the mayorship of Bill de Blasio, now larger than it ever has been, at nearly 294,000 workers. This is not a matter of staffing up a few agencies that had been cut back during the recession; as the New York Times reports, “nearly every city agency now employs more workers than it did in 2014, when the mayor took office.”

New York City’s population is growing, up about 4 percent since 2010. But its city work force is growing much more quickly: In 2014, the city had one municipal worker for every 32 residents, while today it has one for every 28 residents, or a work force that is about 12 percent larger relative to the population. Many of those workers are doing work that needs to be done. Some of them . . . well, from the Times again: “Sanitation workers are now flanked by civilian outreach teams in blue dress shirts with expertise in project management and mulch, helping New Yorkers make sense of its new composting plan.”

New York’s ratio of city workers to residents is much higher than was Detroit’s (1:60) when that unhappy city went into a financial crisis, and it is much, much higher than the ratio of such pleasant and well-administered cities as San Diego (1:130). These figures exclude public-school employees and a few other large populations of public-sector employees, such as those of the Port Authority, who are not employees of the city government itself, so the public-sector footprint is even larger than it appears.

This is paid for at enormous expense: The average compensation (including pension and benefit costs) for a New York City municipal employee runs about $140,000 a year, or four to five times the average salary. (The median household income in New York City is just over $50,000.) Altogether, personnel expenses for the city currently top $44 billion per year and will exceed $50 billion per year by 2020.

Which puts those composting officers in perspective.

New Yorkers don’t seem to mind — for the moment. The local economy is healthy and, while there have been a few blips in crime control, New York remains one of the safest big cities in the country, especially the parts where the people who pay all the taxes live: 34,500 New Yorkers pay nearly half of the city’s taxes, and fewer than 1,200 pay nearly a fifth of them by themselves. I assume their trash collection is executed more conscientiously than it is in the precincts around Buckley Towers.

New York is unique among American cities: It is not as pleasant as Los Angeles, as affordable as Houston, or as sensibly governed as Salt Lake City, but the few thousand people who pay its taxes don’t think of it that way. If you grew up in St. George, Utah, then New York City is insanely expensive, terribly administered, and, in spite of its many charms, occasionally downright hostile. But New York is a bargain compared with Hong Kong, Zurich, or Singapore, and its public sector exhibits practically Scandinavian effectiveness and transparency compared with Shanghai, Lagos, or Dubai. Singapore is considerably cleaner and safer, but it is also a lot less interesting.

The Manhattan model means taxing high-earning residents at high levels in order to provide absurdly inflated compensation packages to workers who otherwise would probably earn something much closer to the median income.

New York lost a tenth of its population in a single decade (1970–80) when economic crises and out-of-control crime caused many families and institutions, including financial firms, to decide that they no longer had to be in New York. Rudy Giuliani’s great gift to the city was beating down crime enough and whipping municipal institutions into decent enough shape that a lot of people remembered that even if they didn’t have to be there, they wanted to be. New York is a kind of upside-down Houston: People move to Houston because that’s where the jobs are, but businesses looking for help at the high end of the labor market have gone to New York because that is where the people they want want to be. Google will not be relocating to Provo, in spite of its many virtues, because the sort of people it wants to hire do not want to live there. Young men and women making large incomes in finance, media, and technology have decided, at least for now, that the attractions of New York are worth bearing the costs. So have many affluent older couples, who have decided that New York City real estate is a pretty good investment (the city has high income taxes but relatively low property-tax rates) and who want to be able to go to dinner or the theater without an hour’s commute each way.

That’s all to the good. It’s a big country, and there is room for New York in it. New York can afford Bill de Blasio — at least for now: New York moves pretty fast in both directions.

But can the United States afford to adopt the Manhattan model?

Libertarian invective notwithstanding, public-sector workers (and not just cops and firemen) do a great many essential and useful things. We ought always to be open to the possibility that services could be improved through privatization, competition, and choice, but mainly we just want the garbage picked up and the streets kept in good repair without our having to think about it too much. And some of de Blasio’s new hires have been intelligent choices: He has staffed up the Department of Investigation, which polices city agencies for graft, fraud, and other species of corruption. (Miami should take note.) And though the mayor has failed dreadfully in his role as the city’s advocate, much of what is most dysfunctional about the city — the mass-transit system, especially — is not under his direct and exclusive control. Blame Andrew Cuomo for your F-train nightmare.

That being said, the Manhattan model doesn’t mean delivering services superior to Cairo’s at a price lower than Geneva’s. What it means is using the public sector as a supplementary welfare state.

The Manhattan model means taxing high-earning residents at high levels in order to provide absurdly inflated compensation packages to workers who otherwise would probably earn something much closer to the median income. It is hardly restricted to New York: Your local school district does much the same thing, and there are Philadelphia police detectives who, thanks to “overtime,” earn in excess of $300,000 a year. The helpful folks at your local DMV are being paid a great deal more than they would in their next-best option. I have known many vice principals, but I never have been tempted to hire one away at $100,000 a year. The inflation of public-sector compensation packages is functionally, and at least to some extent intentionally, an income-redistribution program. The same principle applies to government-funded “infrastructure” projects that often do not provide anything like meaningful infrastructure but do provide a lot of “job creation,” as the politicians like to say.

Jobs doing what? Don’t think about that one too much.

As globalization continues to increases the rewards for the highest-performing workers and entrepreneurs and to put pressure on the wages of those in the middle and at the bottom, the Manhattan model will become more and more attractive: “Create jobs” performing tasks of questionable value — seriously, composting advocates? — and pay them what a decent lawyer in a small city might expect to make. It’s a handy way to operate a welfare program without the unpleasantness of honestly accounting for the costs or the stigma or receiving an obvious handout.

It’s working, for now, in New York. Detroit had a little less luck with it, because there are not very many 26-year-olds earning $600,000 a year who want to live in Detroit. How will it work at the national scale? Between Sanders-ism and Trump-ism, it seems likely that we will find out.

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