High Costs Prompting Exodus
NEW York's middle class is hurting - and a new report from a centrist think tank only begins to tell the tale.
The primary authors of the report from the Center for an Urban Future, "Reviving the City of Aspiration," are Joel Kotkin and Jonathan Bowles. They note that New Yorkers suffer the highest costs of living, the least affordable housing and the longest commutes of any big US city.
Worse yet, even during the boom years of 2003 to mid-2008, wages outside of Manhattan were essentially stagnant at best for the middle class - even as the costs of housing, electricity, water and phone service rose sharply.
Once you adjust New Yorkers' seemingly high incomes for the cost of living, the middle class fares poorly. The report shows that you can live in Houston for $50,000 a year at the same standard as you would in Manhattan with a $123,000 income or in Queens with $86,000.
All of which has led to a middle-class outmigration from the city in recent years, even as the local economy enjoyed financial-sector profits unlikely to ever be seen again.
"Astonishingly," the report notes, more residents left the five boroughs for other locales (such as greater Atlanta, Lehigh County, Pa., and Charlotte, NC) in each of the five years between 2002 and 2006 "than in 1993, when the city," suffering from staggering job losses and high crime, "was in seemingly far worse shape."
Overall, more than 42,000 people with a four-year degree, often those with small children, left the city in 2005-6 - even as the city was, by some measures, thriving.
The CUF conclusions are backed up by a Brookings Institution study that found that, while 25 percent of the city was middle class in 1970, by 2008 that had dropped by more than a third to 16 percent.
The future of Gotham's increasingly hourglass-shaped economy is problematic. The local industries expected to grow in the decade ahead employ low-wage workers almost exclusively. Only two of the 10 occupations expected to grow most rapidly between now and 2014 pay wages greater than $28,000 a year.
A recent Crain's New York Conference suggests a few bright spots: The video-game industry is flourishing in lower Manhattan in the area around Broadway and Houston. New jobs will appear for retrofitting old buildings to make them more energy-efficient, and there's some hope for a biotech industry built on the city's research universities.
But even if biotech companies do thrive, they, like the once-promising tech firms of Silicon Alley that generated such excitement a decade ago, are unlikely to stay once they grow beyond 25 or so employees.
The fledgling tech firms left for the same reason middle-class New Yorkers are leaving: The costs of living and working in New York were far too high. The combined city and state tax of 17.6 percent on corporate profits is the nation's highest, while start-ups are hit by the city's highest-in-America's 10.5 percent income tax, plus Gotham's nearly unique 4 percent unincorporated-business tax.
Yet neither the Center for the Urban Future study nor the Crain's forum dealt with the central role of taxes in driving away people and jobs.
The CUF report discusses the high costs of maintaining a low-quality school system. But it misses the irony of teachers complaining that the city is too expensive even as their salaries rose 43 percent in the last seven years: It is the high cost of maintaining New York's vast public payroll (and benefits, which since 2000 grew twice as fast as those in the private sector) that makes the city so expensive.
In other words, the public-sector middle class is increasingly chasing its own tail - even as the costs of government drive away private-sector jobs.
The costs of paying for public-sector compensation come back to haunt the city in the form of higher sales, property and income taxes - which were unaffordable even before the crash.
The CUF report has some sound advice - pay more attention to basics such as improving MTA service, and to encouraging the economic potential of the outer boroughs and their ethnic entrepreneurs; do more to cash in on the growth of the Port of New York and New Jersey.
But the report avoids the underlying issues. New York's dysfunctional tax structure reflects a politicized economy in which the friends of those in power get tax breaks and subsidies for their projects, while the politically dominant public-sector unions extract more than their fair share of resources. The unorganized middle class gets squeezed out in the process.
We might have been able to afford that folly for a time, while Wall Street was printing money - but no more.
All this should set the policy table for the upcoming mayoral elections. Voters will be able to judge the candidates on the basis of how they respond to crisis of the city's middle class.
Original Source: http://www.nypost.com/seven/02102009/postopinion/opedcolumnists/nycs_ailing_middle_154300.htm