You may not think of the Buffalo Niagara region as a hotbed for financial services.
But it is.
It’s quietly become the biggest single part of the Buffalo Niagara economy, packing a bigger punch than manufacturing and even government.
A big reason why is because it’s cheaper to hire people to do financial services work here than it is on Wall Street, and even in most other places across the country.
A lot cheaper, in fact.
We have about 20 percent more financial services jobs in the Buffalo Niagara region than the national average. They’re good jobs, too, paying nearly $61,000 a year on average – about a third more than the average job in the Buffalo Niagara region, according to the federal Bureau of Labor Statistics.
But compared with other places, the Buffalo Niagara region looks like a bargain. The typical financial services job here pays about 31 percent less than the national average.
It’s not just financial services, either. Canisius College economists George Palumbo and Mark Zaporowski have noticed an interesting trend when you compare wages and hiring rates. Nearly all of the fastest-growing segments of the Buffalo Niagara economy had wages that were lower than the national average for that field. The only exception was in leisure and hospitality, where New York’s higher minimum wage is pushing up pay in a typically low-paying industry.
When there’s a big wage gap, it catches the eye of industry executives looking to save money. And it’s a huge carrot for local development officials to dangle as they try to lure work here, especially when the region’s colleges and universities also produce thousands of business school graduates each year.
“It’s not that we’re close to Canada. It’s not that we have the Buffalo Billion,” Palumbo said. “It’s that we have the relatively large entry-level labor force of young workers who are willing to work at relatively lower wages.”
Low wages and an ample supply of qualified workers are a recruiter’s dream. And, in the case of financial services, jobs that pay better than 30 percent more than the region’s average make them attractive, too.
It’s a big reason why Geico now employs around 2,800 people at its customer service center in Amherst and said this summer that it would expand to create 600 more. It’s a big reason why Citigroup’s back-office operations here have grown to more than 2,000 workers and why the company has close recruiting ties with Canisius, Niagara University and the University at Buffalo. It’s a reason why HSBC still has a sizable back-office operation here, even though it sold off all of its bank branches years ago because the Buffalo Niagara region wasn’t growing fast enough.
But slow growth is an advantage when a company is hiring. While unemployment has dipped below 5 percent since summer began, the labor market hasn’t tightened so much that it’s pushing wages up in a big way.
And because the cost of living here is lower than it is in big, sexy cities, like New York City, Washington, D.C., or Boston, those lower wages go a lot farther for the workers earning them. So it works out for everyone.
“It’s not that they’re doing anyone a favor or they’re being used,” Palumbo said. “But the salaries here can support a lifestyle. In New York, they’re starvation wages.”
That’s important, because it also tends to breed loyalty, especially when so many of the region’s college graduates are Western New Yorkers.
“They’re local and they want to stay local,” Palumbo said.
“You don’t hire them and train them and then have them want to leave,” he said. “They’re not trying to get back to Connecticut or New Jersey.”
Of course, below-average wages don’t always result in above-average hiring.
Our sluggish information sector is proof of that. Despite average wages that are 37 percent lower than the national average, our tiny tech sector shrunk by 5 percent from 2010-15, the professors found. Not even pay that’s 30 percent above the local average was enough to spur growth in an industry that can’t compete with big technology clusters, like the Silicon Valley.
Unlike technology, professional and business services are big here, accounting for about one of every seven private sector jobs. At $54,000, those jobs pay about 17 percent more than the regional average. But since the recession ended, that sector hasn’t grown at all.
And the trend also works in reverse. Local government jobs pay about 9 percent more than the national average, so it’s not surprising that we’ve lost about 6 percent of those positions since 2010.
The key, Palumbo said, is having enough of those entry-level jobs to keep the region’s young people happily employed.
“Here, we have a well-trained work force that is relatively young and willing to work for well below the national average. And it’s even more significantly lower than the wage costs in the money centers,” Palumbo said. “That’s a big advantage.”