Since 1990, the financial industry has seen average pay grow from $30,400 to $82,600, or 172 percent. Over the same time frame, financial industry employment is up from 6.8 million to 7.8 million, or about 14 percent. As anyone within the financial industry is probably well aware, the outpacing of pay over employment is not the same across all geographic areas. Let’s take a look at what the data looks like across the U.S.
At the top end of the average wage growth are Delaware at 484 percent growth since 1990’s. Delaware is followed by New York at 413 percent, Connecticut at 391 percent, Massachusetts at 294 percent, Minnesota at 249 percent, Illinois at 242 percent, North Carolina at 240 percent, New Jersey at 239 percent, Pennsylvania at 218 percent, District of Columbia at 215 percent, New Hampshire at 205 percent, and Iowa at 202 percent. That’s every state where financial firms increased average pay above 200 percent. (In terms of annual increase, the increase is about 8 percent for New York, whereas the annual increase is about 5 percent for Iowa.)
On the other end of the financial industry average wage increase are Alaska at 82 percent, Hawaii at 87 percent, West Virginia at 109 percent, and Oklahoma at 114 percent. That’s every state where financial firms increased average pay less than 115 percent. (As a note, a 115 percent total increase from 1990 to 2012 equates to about a 3.5 percent annual increase.)
Now, take a look at the colors represented in the graphs. The colors represent how employment has changed since 1990, with a darker green representing higher employment growth in percentage terms and the lighter the pink representing employment loss (the color is the same as the right side of the above graph). Interestingly, it looks like there might be a correlation between average pay per financial industry employee and employment growth. Here’s what the correlation looks like.
As suspected (and likely coming as no surprise to any executive of a financial firm), there’s a statistically significant negative relationship between average pay per employee (i.e. cost per employee) and employment growth (i.e. desire to add to a given firm’s payroll). The negative relationship may indicate that financial firms are becoming more mobile and willing to look for ways to shift typical financial industry tasks to less expensive areas.
This observation of mobility is likely not surprising to individuals living in states where financial firms are setting up shop, such as Goldman Sachs’ recent decision to expand employment in Utah – a place far away from the grandness of New York City. (As a note on this example, the state of Utah worked very hard to recruit Goldman Sachs and other financial firms to move to its state, promoting itself as a very capable, lower cost alternative to high tax, high regulation, high employee cost states such as New York. It looks like financial firms are listening to Utah’s and other states’ arguments, including New York.)
Overall, financial industry employment is becoming more mobile. When looking at employment growth by U.S. state in connection with average employee pay by U.S. state, the relationship is negative. The negative relationship indicates that as average employee pay increases, there may be downward pressure on adding employees to the payroll. It’s good news for less expensive but capable individuals living in states lacking big financial centers, while something to think about for individuals working for financial firms located in New York City, Chicago, Los Angeles, Philadelphia, and other financial centers.
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