LIBN: State of the Union
Business Review paper asks UCOMM about union wages following the 2008 crash
10 years after the 2008 Financial Crash, the Long Island Business News takes a look at the economy and job market following "The Lost Decade." Kris LaGrange, of UCOMM Media Group, is quoted towards the end of the story where he discusses the impact of the recession on unions.
David was a high ranking executive specializing in finance at a company in New York City in 2006 when he found a job at a large medical supply maker on Long Island with more than 500 employees. Things were on a roll.
But after he worked there a little more than a year than a year, the firm was acquired and he along with many others were let go in 2008 as the Recession hit. The timing couldn’t have been worse.
“A lot of interviews went well. Some went through corporate recruiters,” David, who is in his 50s, said. “I’d get a call. ‘They love you. Expect a call by the end of the week if not sooner.’ Due to the economic conditions, they were rescinding new positions. Everything was no more hires.”
Hiring freezes and cuts didn’t help as he went on interviews for jobs in accounting departments, often as comptroller or assistant comptroller.
Eventually, David got an offer from a New York City firm for about $75,000, far less than the nearly $130,000 he had been making.
“I know a few people in the recruiting business. I asked them for advice,” David said. “They said, ‘Take whatever you can get. Little is better than zero.’ So I took a huge pay cut.”
He left that firm just before it was acquired and is earning more at another New York City firm. But his income remains far from what it was before the recession.
“Once you go from one to the next, they won’t pay you $130,000 anymore,” David said. “They’ll give you an extra ten grand and Instead of 75, you’ll make 85. Once you get knocked back, it’s hard to get back to where you were.”
Lost and Found
A decade since the recession, Long Island has moved on and rebounded. Many people are earning more and the region has generated many jobs. But the recession is far from in the rear view mirror for many others.
The Long Island Index for 2018, produced and released by the Rauch Foundation, tells a story of an economy only now returning to pre-recession levels. For some Long Islanders, this has been, economically, a lost decade.
Average wages overall on Long Island are roughly the same as they were in 2008 in constant dollars in one potentially shocking statistic and other types of growth often only just returned to where things were a decade ago.
“I knew we were in a stagnant phase, but I am surprised,” said Nancy Rauch Douzinas, president of the Rauch Foundation. “I think the changes we have to make are structural, big and difficult.”
Long Island’s assets remain the same: a robust educational system, proximity to New York City, tech and financial firms, research and hard workers as well as beaches, golf courses and more.
But the region’s economy took hard hits from the dot.com bubble’s burst, 9/11, Superstorm Sandy and a mortgage and stock meltdown.
“Long Island has underperformed the national economy in the first part of the 21st century,” according to the Long Island Index report.
Long Island’s $194 billion economy has been expanding by an average of 1.2 percent per year since 2000, slower than the nation’s 1.6 percent, according to the report. So how are we doing?
Unemployment ups and downs
Long Island’s unemployment rate has rebounded, nearing the 3.8 percent in 2006 and 2007, essentially zero, before the recession hit.
Unemployment rose to 4.9 percent in 2008, spiking at 7.5 percent in 2010 and remaining at 7.4 percent in 2012 before dropping as low as 4.1 percent in 2016 and edging up to 4.4 percent in 2017.
The number of unemployed Long Islanders rose and tumbled, near the 56,000 unemployed Long Islanders in 2006 and 2007. That topped 100,000 by 2009 and neared 110,000 by 2010, before falling to 62,000 by 2016 and edging up to nearly 65,000 in 2017.
Long Island’s private sector added 16,100 jobs and grew by 1.4 percent year over year to 1,132,600 as of March, outpacing the state’s 1.3 percent growth, but lagging the nation’s 1.8 percent, according to recently released data.
Long Island’s private sector job count, not seasonally adjusted, increased by 11,600 between February and March in line with the average gain of 12,000, said Shital Patel, an analyst with the New York State Department of Labor.
“This month’s report looks pretty good,” she said. “This is in line with average growth since 2014.”
The wages of fear
The region has walked a long and winding road since the recession, rebounding in terms of generating jobs: The problem, though, is incomes have not recovered in many cases.
“There’s no question that wages have been stagnant for a long time,” said Mark Portnoy, CEO of Portnoy, Messinger, Pearl and Associates in Jericho. “On Long Island, the problem I see is the cost of living has gone up.”
The average wage for Long Island jobs grew by 9.5 percent from 2001 to 2016, about the same as the 9.6 percent nationwide. The graph for average annual wages in 2016 dollars on Long Island, and the nation, however, is virtually flat from 2001.
While there was a slow rise from 2001 to 2007, that number dipped in 2008 and only returned to the 2007 peak of roughly $60,000 by 2015.
“It’s happening everywhere. It’s surprising a lot of people. When we have such a tight labor market, wages aren’t increasing as much as people expect them to,” Patel said. “From a labor economist’s perspective, it doesn’t make any sense.”
Wage growth for many workers flatlined: Money is being invested, but not going into wages at the same rate.
“What happened on Long Island has been happening across the country,” Patel said. “It’s not just a Long Island-specific problem with respect to wages.”
Rauch Douzinas said flat income with rising costs squeezed many Long Islanders. “It’s the same and expenses have gone up,” she said. “There’s the whole problem of affordability.”
Where the jobs are
If wages for many aren’t rising, that may be because the job mix is changing with lower paying jobs growing rapidly.
In the last seven years, Long Island added 100,000 jobs, an 8 percent increase, twice the 4 percent in the seven years prior to the recession. “Part of the reason for the stronger growth since 2009 was catching up to pent-up demand,” according to the Long Island Index.
Jobs in Suffolk County grew by 12 percent from 2000 to 2016, while jobs in Nassau County grew by 5 percent.
Since emerging from the recession, 80 percent of Long Island’s job growth has been in recreation, construction and health care, according to the Index.
Recreation – largely restaurants and hotels – added 25,200 jobs, growing by 23 percent in just six years.
Construction grew by 19,500 jobs or 26 percent and health services added 14,000 jobs or 10 percent over six years.
The Long Island Index indicates jobs in “health services are driven by an aging population and growing demand.”
“I can gauge what the economy is doing by the kind of work we get,” Joshua Baron, president of Dix Hills based CMYK Print Group, said. “I started doing a lot of work for hospitals.”
Health jobs range from home aides to physicians, but many new jobs are among those that pay less.
Manufacturing is shrinking and shifting, as local companies make pills more than planes. Firms like Amneal Pharmaceuticals have hired hundreds of workers.
“That’s all connected to the health sector,” Rauch Douzinas said. “And that’s connected to biotech.”
Patel said some companies are having trouble hiring for higher paying jobs, because they can’t find people with the right skills.
“We’re still adding jobs,” Patel said. “My major concern is companies want to hire. There aren’t enough people here to take those jobs. That could be a reason job growth overall has been constrained.”
The shrinking middle
While there has been some wage growth, it has gone largely to those in the upper echelons.
“Both nationally and regionally, wage increases have been concentrated at the top of the wage scale,” according to the Long Island Index. “Income disparities are growing, with wealthier Long Islanders seeing the largest gains in income.”
The median Long Island household had an income of $94,000 in 2015, lower than the inflation-adjusted $96,300 median income in 2005.
“This reflects relatively slow growth in wages generally, a decline in real wages in lower-paid sectors, and declining participation in the workforce,” according to the Index.
The average income for the bottom 10 percent of households was $22,200 by 2015, down 4 percent since 2005. Meanwhile, the average income for the top 10 percent of households increased by 10 percent to $252,100.
The average bonus paid to securities industry employees at New York Stock Exchange firms rose 17 percent to more than $184,000 in 2017, according to the New York State Comptroller. The average Wall Street salary was about $375,000.
The middle class has been caught in the shrinking middle as numbers grow on both ends of the income scale. “It speaks to the middle class and what’s happened to the middle class,” Rauch Douzinas said. “Nothing’s happened. It’s stagnation.”
More with less
Companies often are asking workers to do more, not staffing up as technology helps. But the fear of losing a job and concerns over finding new ones are holding back workers from seeking new work.
“One of the biggest things happening is they’re farming a lot of things out to third world countries, India and China, for the back office,” David said of one trend. “A lot of those jobs are not in the United States.”
Companies have formed to help outsource back office operations such as finance, accounts payable and receivable, customer service, benefits and human services
Portnoy said some companies are “doing substantial hiring,” while “others might be farming out some work to other places.”
Even Wall Street hasn’t hired back to pre-recession levels. Its head count is down 6 percent from 2008. “It is great work, if you can get it,” New York State Comptroller Thomas DiNapoli said. “And there’s less of that work today than a few years ago.”
While many people sought rising income, they’re instead seeking security: They want their job to be there tomorrow even if the raise isn’t.
“I’m looking for something that’s stable,” David said, noting his employer offers that security and strength. “I’d be more apt to sit in a stable environment than take a risk outside.”
The recession also impacted retirement plans long-term. People are retiring later, in part because many are healthier, but for economic reasons as well.
“Not many people are looking to retire these days. The Baby Boomers have pushed the retirement age back to 72,” said Liz Bentley, president of Cold Spring Harbor-based Liz Bentley Associates, a consulting and coaching firm. “Many people are working well beyond that age, even into their 80s.”
Some continue to work because they can and enjoy it. But many have to. Bentley said 55 percent of Baby Boomers “provide financial support to their adult children, so many of them still need the income.”
Harvey Feinberg, managing director at Syosset-based Generation Wealth Advisors, said older people were hit hard by the recession, sometimes losing money relied on to retire.
“People who were young moaned and groaned about the loss. They lost what they lost, but it wasn’t that big a percentage. They didn’t build up their portfolios,” he said. “People planning on retiring in a few years perhaps had to continue to work until their portfolio came back.”
Younger people face another impact. Working longer is creating a problem for those seeking to advance.
“Because they are not retiring, Baby Boomers are creating a bottle neck in the workplace, not allowing for growth and opportunity in many organizations,” Bentley said.
Long Island faces many ongoing issues, including youth’s exodus to other regions due to a lack of housing they can afford.
“Are we starting to address it with apartments, building downtowns?” Rauch Douzinas said. “The Long Island Regional Economic Development Council is a big step forward diagnosing problems, competing for grants.”
And the region and the nation may have adjusted to a new norm as firms seek to get more done with fewer employees.
“Business owners have seen they can get as much done with fewer people. You had ten people in a department,” David said. “Now you have five and you get the same work done.”
Is Long Island coming off a lost decade at last, though? At least in terms of wages, there hasn’t been as much motion as many would like.
“Lost decade? Yes, in terms of the stats,” Rauch Douzinas said. “But for a place that was known for never working together and total silos, I think there’s been a change. That needs to happen for bigger changes.”
The big picture with small business
Long Island is a land of small businesses and entrepreneurs. Despite that, the number of companies in the region has remained roughly the same for a decade.
“The number of businesses on Long Island stayed largely flat on Long Island between 2005 and 2015,” growing by only 0.5 percent, according to the Long Island Index.
The number of restaurants and hotels grew by 1,000, while 750 healthcare businesses opened as retail shrank by 900 and manufacturing by around 700, according to the Long Island Index.
“The lack of expansion in the number of businesses is consistent with other suburban parts of the New York region,” according to the Long Island Index.
The number of New York City businesses, meanwhile, increased by more than 12 percent in what the Long Island Index called “another sign of how much recent economic growth has been concentrated in the city.”
“I’d say it’s certainly good for Long Islanders,” Nancy Rauch Douzinas, president of the Rauch Foundation, said of a strong New York City. “It’s historically been good for Long Island. A lot of our higher paying salaries are people who commute.”
She also believes that growth in New York City could fuel growth on Long Island, with its own large population.
“Where’s there opportunity for us? The growth in New York City, types of jobs and income,” Douzinas said. “The chances of not only our being able to access those jobs in the city. Possibly locating those jobs out here.”
Recession leaves lingering effect on investment
While the recession and economic troubles have left an impact on wages, they also have impacted investors. The stock market soared earlier this year, but for a number of years, the market was soft as the economy gradually came back.
Security more than growth has become the most important thing for many investors, even as they left money in the stock market, due to low interest rates.
“People are looking for safer vehicles. I think people got cold feet to the investment world,” said Harvey Feinberg, managing director at Syosset-based Generation Wealth Advisors. “People are still in the market. The American way is you have to participate in the stock market. But they’re looking for other ways to diversify.”
Some people have ridden the Wall Street wave, doing well in the stock market in recent years. Many people, though, haven’t recovered money lost in the stock market meltdown.
“You could almost call it lost and found,” Feinberg said. “There was a huge meltdown. People who lost a lot of money didn’t necessarily get it back.”
Many people had so much of their assets in the stock market: They were on auto pilot until the market crashed.
“I met people who said, ‘I don’t participate in the stock market. I’m in mutual funds,’” Feinberg said. “People became wary of their 401(k) and the whole concept of the 401(k). People put all this money into the 401(k) and all of a sudden it was gone.”
Feinberg talks about a retired dentist with about $3 million in assets that quickly shrank to $1.9 million, throwing off less cash.
“The dividends were smaller. Until he adjusted his lifestyle, he tapped into some of that principle. People say it came back,” Feinberg said. “It came back for some people. Even though their portfolio came back, they didn’t get any growth. They still had a journey ahead of them. Some people had to change their lifestyle.”
State of the union
Unions constantly fight to maintain or increase wages and benefits through collective bargaining. But they are facing more pressure at a time when many employees’ wages have stagnated.
“The labor unions are not as strong as they were,” Mark Portnoy, CEO of Pornoy, Messinger, Pearl and Associates in Jericho, said. “I think that’s had a lot of effects on the standard of living for a lot of people.”
Kris LaGrange, president of Ucomm Media Group, a labor focused communications firm based in Bay Shore, said workers’ wages may be rising, but far less than top executives’.
“Union wages are the only wages in this nation other than minimum wages which are bargained,” LaGrange said. “Union wages are increasing, but not at the rate of CEO compensation.”
Cuts to government funding could work their way down to government workers who already have been seeing benefits’ costs rise, similar to those outside the government sector.
“Democrats and Republicans want to balance budgets on the public employee contracts,” LaGrange said. “To be very frank, we are not exercising muscles that we used to have in the 50s and 60s. Our membership is not starving per se. You’re seeing more gains in industries where their membership is.”
The minimum wage in Nassau and Suffolk Counties rose to $11 with hikes of a dollar a year slated until they reach $15 in 2021, movement in what had been a stagnant number. But the minimum wage had been frozen for years.
“That’s a gain,” LaGrange said. “But it took massive people in the streets railing and lobbying to get that.”