Bill de Blasio, with his victory in last Tuesdays Democratic mayoral primary, became the locus of New Yorkers’ hopes and fears. His supporters believe that he will be the first mayor in decades to do something about inequality, which he has called “the central issue of our times.” His detractors raise the spectre of class warfare. But decrying inequality on the campaign trail is one thing. Actually doing something about it is infinitely harder.
In part, this is because New York’s economy is absurdly dependent on its main driver of inequality—the finance industry. Finance accounts for roughly forty per cent of all the wages paid in Manhattan, and almost a quarter of the city’s G.D.P. (That’s not even to mention the myriad businesses— high-priced law firms, say—that service the financial hub.) Wall Street’s importance limits what a mayor can do to reduce inequality from the top down. The same is true of the city budget’s dependence on the wealthy—the top one per cent of earners pay forty-three per cent of the city’s income tax. In other words, the rich we will always have with us.
The key to battling inequality therefore lies, as de Blasio has argued, in expanding New York’s incredible shrinking middle class. Whereas the percentage of New Yorkers in poverty is still roughly what it was in 1980, the percentage of New Yorkers who are part of the middle class has fallen dramatically in the past few decades. Middle-wage jobs have become harder to find: they dried up during the recession and (unlike high- and low- wage jobs) didn’t come back during the recovery. As a result, the city’s income distribution increasingly looks like an hourglass: big at the top and the bottom, narrow in the middle.
Unfortunately, no New York mayor can do much to counter the forces that have eroded the middle class. There’s the disappearance of manufacturing jobs, the classic route into the middle class. Between 1969 and 1999, New York lost four hundred thousand such jobs, and as the jobs vanished so did the workers. (The population decreased by eight hundred thousand during the seventies.) The decline in manufacturing was partly the result of the factors that deindustrialized cities across the Northeast and the Midwest, as new transportation networks and cheaper labor lured industry first to the Sun Belt and then abroad. But it was also driven by city policies that were designed to foster the growth of the financial and real- estate industries, and the effects of those policies are more or less irreversible. The city has tried to regenerate manufacturing in places like the Brooklyn Navy Yard, but deindustrialization continues: between 2001 and 2011, New York lost fifty-one per cent of its remaining manufacturing jobs.
Creating middle-wage jobs is also a struggle because the cost of doing business here is so high. Energy costs and taxes are steep, and rent is three times the national average. This isn’t a problem for businesses (like banking and law) that make big profits per employee; and businesses that have roots here (like publishing and fashion) often just suck it up. But, for any business with a choice of location, the cost of New York looks prohibitive.
Can this dynamic be changed? The Bloomberg administration offered a host of initiatives to diversify the mix of industries in the city. There were some successes: television production and tourism rose sharply in the past decade. But the rate of growth in new businesses has not been impressive, and the high-tech industry, which everyone hopes will be the next big thing, still accounts for just 2.5 per cent of all jobs. It’s hard to see how a new mayor will do better. Raising taxes on the rich—as de Blasio has proposed doing, in order to fund universal pre-K education—may be good social policy, but it’s not going to create jobs. And universal pre-K obviously won’t have any impact on the job market for a couple of decades. There are other proposals on the table: rezoning, more loans to small business. But none of them are going to move the needle much.
Another reason that middle-class New Yorkers are struggling is the city’s high cost of living, particularly housing. Thirty per cent of New Yorkers pay more than half their income in housing costs. That’s one thing a mayor can do something about, mainly by encouraging more housing development. Politics makes that hard, though, because support for developers is often seen as anti-middle class. Any attempt to reform the property-tax system would encounter a similar problem. Currently, taxes are very low on single-family homes and very high on big apartment buildings. That raises apartment rents and discourages apartment construction. But, because changing the system would help rich landlords and hurt middle-class homeowners, it’s politically hopeless.
The prospect of de Blasio’s becoming the new mayor has many rich New Yorkers in a tizzy. Yet it’s hard to see how they have much to fear (unless you think that higher taxes are a disaster). A de Blasio administration would be very different in tone from Bloomberg’s, and would push for some useful changes: slightly higher taxes on the rich, an end to unnecessary corporate subsidies, perhaps a living-wage ordinance. Most likely, though, New York’s economy in the near future will look much the way it does now. Voters may have been looking for dramatic change when they went to the polls last Tuesday. They aren’t likely to get it.
New Yorker magazine, Sept 23, 2013