Wall Street's hybrid work model likely to squeeze New York's budget
Some of Wall Street’s top financial firms are preparing for the implementation of a more permanent hybrid work week
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Wall Street’s hybrid work week is here to stay and the economic implications on New York City and New York State’s budgets could prove to be devastating.
Some of Wall Street’s top financial firms are preparing for the implementation of a more permanent hybrid work week in the post-COVID era, where many employees can spend a couple of days working from home depending on the job, FOX Business has learned.
A street sign for Wall Street is seen outside the New York Stock Exchange (AP Photo/Seth Wenig, File / AP Newsroom)
The rollout comes as New York City Mayor Adams calls for workers to get back to the office immediately because continued remote work is ultimately taking much-needed business away from the city.
But with remote work now fully embraced by the big banks, tax revenues in the city could fall dramatically; for the foreseeable future well paid brokers, bankers and salesmen will spend more time — and their disposable income — where they live in New Jersey, Connecticut and Westchester County, budget analysts concede.
If employees are only coming in a couple of days a week, renting a big office space in Manhattan doesn’t make much sense. In fact, investment management firm State Street recently announced it plans to close its two New York offices in order to transition to a hybrid work model.
"When you’re collecting a total of $5 billion a year in taxes from NJ and CT residents, losing even a small percentage to firms following State Street's lead could ding (city and state budgets) by a few hundred million dollars," said E.J. McMahon, Adjunct Fellow at the Manhattan Institute.
New York City has a budget of $95 billion and the state’s budget is $212 billion. Both are flush with cash from the federal government but struggling with high unemployment and an exodus of rich people to lower-cost states and cities.
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As of now, most of the Street’s big banks including JPMorgan and Morgan Stanley are recommending employees return to the office, but do not have a strict back-to-work mandate in place, and officials concede many people will continue to work from home a couple of days a week.
"Based on the external environment as well as medical and government authorities, Morgan Stanley is encouraging staff to return to the office in February," a Morgan Stanley spokesperson told FOX Business. "Return to office plans and timing will differ by division, business and teams, as well as by geography."
Back view of business woman talking to her colleagues about business plan in video conference. (iStock / iStock)
Morgan Stanley is taking a much softer approach than it did last summer when CEO James Gorman demanded New York employees get back to the office if they wanted to continue getting paid a New York salary.
JPMorgan is also preparing for more of its bankers to engage in a hybrid workweek as the summer approaches. An internal memo sent out last Friday said many JPMorgan employees were back in the office but did not specify whether that was on a full-time basis.
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Wells Fargo says it’s encouraging employees to return to the office in mid-March and American Express will start inviting employees back to its Manhattan office March 1st under a hybrid work-from-home model.
"Employers are aware that their workforce can be just as, if not more productive working in the office three or four days a week as they are working five," one banker told FOX Business.
A sign for Wall Street is carved in the side of a building in New York. U.S. (AP Photo/Mark Lennihan / AP Newsroom)
Financial institutions have found themselves competing against big tech companies who allow their employees to spend some, if not all their time, working remotely. This has forced many banks to adopt a more flexible working policy to avoid losing high-quality workers to other companies.
Indeed, corporate investment bank BNY Mellon recently announced it would leave it to department managers to decide which employees needed to be in the office on certain days.
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In a memo to employees dated February 3rd, BNY Mellon’s CEO said, "It gives our teams the freedom and responsibility to determine the mix of remote and in-office experiences that will enable them to perform at their best."