Economic contribution of the New Jersey securities, commodity contracts, and investments sector
October 19, 2020
Managed Funds Association (MFA) and the Securities Industry and Financial Markets Association (SIFMA) commissioned EY to prepare a report, which presents estimates of the overall economic contribution of New Jersey’s securities, commodity contracts, and other financial investments and related activities sector, which may be impacted by a potential New Jersey financial transaction tax (FTT).
The key findings of the analysis include:
- The New Jersey securities, commodity contracts, and investments sector conducts electronic transactions. Firms in this sector engage in, among other activities, investment banking, securities trading, stock exchanges, and fund management, and electronic trading infrastructure which is collocated with major exchange data centers in Northern New Jersey.
- The securities sector employs more than 38,000 workers in New Jersey. This represents direct securities sector jobs, but the certain companies impacted by the FTT employ workers in other activities which are not counted in this figure. In all, the financial services and insurance sector employs nearly 200,000 total New Jersey workers. As a result, jobs outside of the securities sector may also be impacted if companies reevaluate current or future jobs given sector-specific taxes. For several New Jersey securities sector firms providing information to EY, employment related to electronic transactions accounts for 20-30% of their overall New Jersey headcount.
- The sector’s indirect and induced contributions support, in addition to those above, almost 55,000 New Jersey workers. The economic activities of the sector in New Jersey support 25,700 employees indirectly in supplier businesses such as professional services, building services, utilities, and transportation. Additional induced economic contributions, which relate to the economic activity supported by the consumption spending of employees, supports an additional 29,100 jobs which are concentrated in sectors such as restaurants, retailers, and personal services.
- Employment in the securities, commodity contracts, and investments sector is greater than many significant New Jersey industries. The sector’s 38,300 workers outnumber the number of New Jersey workers in each of the transit and ground transportation (23,000), telecommunications (22,700), and utility sectors (14,600).
- The average annual wage paid to securities, commodity contracts, and investments sector employees is 2.8 times the statewide average. The average annual wage paid to workers in the affected sectors is $188,000, compared to a statewide average for all sectors of $67,000 (incl. financial services).
- Total wages paid by these New Jersey businesses are 1.8% of all wages paid in the state. This wage contribution is greater than the sector’s 0.9% of New Jersey employees.4 For 2019, the $7.2 billion of wages paid by these businesses compares to $409 billion of total wages earned in New Jersey.
- The sector’s employment multiplier of 2.43, is higher than many other industry aggregates. The securities sector’s employment multiplier, which is number of total New Jersey jobs supported by the sector per direct job in the sector, is greater than the multiplier of the average New Jersey industry. The overall state average employment multiplier for all industries is 1.90, meaning that the employment multiplier for the securities sector is 28% higher than the statewide average.
- New Jersey financial services companies bear a significant corporate tax burden. The financial services and insurance sector accounts for 7% of New Jersey state GDP but pays 12% of total corporate business tax (CBT).
- The sector contributes nearly $1.4 billion in New Jersey state and local taxes. Direct New Jersey state and local tax contributions of the sector’s firms and their employees total nearly $1 billion. Additional taxes related to New Jersey suppliers and businesses supported by employee consumption total approximately $400 million, bringing the sector’s total tax contribution to $1.4 billion.
- Nearly 80,000 New Jersey residents are employed by the securities sector in New Jersey or other states. Beyond the employment at New Jersey businesses in the securities sector, 1.5% of the New Jersey resident labor force is employed by the securities sector either in New Jersey or another state. Many of those residents are employed in the New York City metro area, meaning that the continued importance of the New York city metro area as a hub of securities sector activity is likely important to the continued employment of these residents.