New york: Despite the towering presence of financial giants on Wall Street, New York City is facing a quiet decline in its financial supremacy, a trend referred to as "definancialization." This shift poses a threat to the city's high-tax-funded welfare system and is prompting jobs and the ultra-wealthy to migrate elsewhere.
According to Anadolu Agency, the proportion of city workers employed in finance and insurance has dropped significantly, from 11.5% in 1990 to 7.7% as of August 2025. Analysis by The Economist, utilizing official data from various sources, reveals that of the 233,000 US finance jobs created over the last five years, New York State secured only 19,000. States like Texas, Florida, North Carolina, and Georgia outpaced New York, and even major firms such as JPMorgan employ more staff in Texas than in New York City.
Kathryn Wylde, who leads the Partnership for New York City, attributes this trend to a "double-whammy" of high costs and taxes. New York State's corporate income tax stands at 7.25%, compounded by the city's additional levy and a regional transit fee, resulting in some businesses facing local tax rates exceeding 18%.
Stringent regulations, including requirements for independent audits on AI hiring tools and prohibitions on inquiries about criminal or salary history, further increase expenses, prompting firms to consider relocation. Global investment firm Goldman Sachs has redirected managers to cities like Dallas and Salt Lake City, while Morgan Stanley ranks as the top employer in Alpharetta, Georgia. In July, Citigroup announced plans to hire 510 staff in Charlotte, North Carolina.
The trend of relocation extends beyond businesses to individuals, particularly workers and the affluent. From 2010 to 2024, the New York metro area saw a 32% increase in college graduates, totaling 3.6 million, the largest concentration of skilled workers in America. However, nationwide growth was 44%, with cities like Miami and Dallas experiencing over 60% growth, and Charlotte and Austin witnessing a doubling of their skilled workforce.
High living costs deter talent from settling in New York City. The city's median rent has surged to $3,600 monthly, more than double the $1,700 average in the 50 largest cities in the nation. Nursery care averages $26,000 annually, a 43% increase since 2019, while basic car insurance costs $1,729 yearly, $400 higher than the next most expensive state.
The Tax Cuts and Jobs Act, which capped state and local tax deductions at $10,000, has raised effective rates for high earners in tax-heavy New York. As a result, hedge fund leaders like Paul Singer of Elliott Management and Carl Icahn of Icahn Enterprises have relocated to Florida, as did former President Donald Trump in 2019.
New York's share of US million-dollar earners has declined from 12.7% in 2010 to 8.7% in 2022, as reported by the Citizens Budget Commission. This decline resulted in $13 billion in lost income tax revenue for the city that year. Goldman Sachs estimates that 10% of city households earning over $10 million changed their residency between 2018 and 2023.
Since late 2019, New York has added 268,000 roles in health care and social assistance, primarily low-wage home care positions, surpassing total employment growth of 220,000. Inflation-adjusted private-sector hourly wages have fallen 9% citywide since January 2020, compared to a 3% national increase, fueling voter dissatisfaction with living costs.
Technology employment in New York City surged by 64% from 2014 to 2024, according to the Center for an Urban Future. Google established a Hudson River campus in 2022, followed by OpenAI and Anthropic opening offices last year. Amazon, despite being rejected in a 2019 headquarters bid, now employs 2,000 people in Manhattan and leased 330,000 square feet of former HSBC space in April. However, the tech sector's 84,000 workers in computer systems design still pale in comparison to the 383,000 in finance and face similar cost barriers.
The financial strain is most acutely felt at City Hall. New York spends $9,761 per capita on welfare and education, 72% more than Texas and 130% more than Florida, funded by the growth of finance's elite, notes Bard College historian Daniel Wortel-London, author of "The Menace of Prosperity."
Democratic socialist frontrunner for mayor Zohran Mamdani proposes a platform aiming for $6 billion annually for universal child care, funded by raising the state corporate tax to 11.5% and adding a 2% levy on million-dollar incomes. Governor Kathy Hochul has vowed to block tax hikes, but Mamdani's focus on the cost of living resonates with the electorate.
Mamdani's housing agenda includes freezing rents on one million stabilized units and constructing 200,000 more over a decade, alongside easing regulations for all developers. The city council's December "City of Yes" zoning reforms, which ease office-to-housing conversions and height limits near transit, led to a 60-year high of 34,000 new apartments last year, though momentum may wane without tax incentives.
For low-income renters earning under $70,000, which is near the tenant median, rent now consumes 54% of income, up from under 40% for equivalent earners in 1991, according to the city housing survey. Even well-paid locals need an annual income of $151,600 to keep studio rent at 30% of their income, according to the Economist's Carrie Bradshaw index, which is 50% more expensive than in Boston or San Francisco.
Without a resurgence in the finance sector and a housing boom, Wylde warns that New York risks becoming an "economically ordinary" US city, burdened by soaring rents and unchecked welfare ambitions, especially if national markets take a downturn, stating, "I'm afraid we're going to find out."