When Mayor de Blasio assumed office January 2014, he promised to “take dead aim” at what he repeatedly referred to as a “tale of two cities,” a rich and a poor New York City.
Now, as his first term comes to an end, the results are in: According to federal census data, inequality stands today exactly at the same level as it was in 2013, when former Mayor Mike Bloomberg left office.
This does not mean that de Blasio has failed to undertake progressive policy initiatives. His administration has moved to build or preserve over 77,000 units of lower-income housing and to raise the city’s minimum wage toward $15 an hour.
According to federal census data, inequality stands today exactly at the same level as it was in 2013, when former Mayor Mike Bloomberg left office.
What it shows, however, is that income inequality is not a measure a mayor of any city can do much about — and that it does not necessarily tell us much about whether the lives of poor households are improving or not. In fact, the policy levers de Blasio has pulled stand to make inequality even more pronounced.
We can calculate income inequality in at least two ways. There is the Gini coefficient, a number between 0 and 1 that gauges the spread of household income across the spectrum, and the Theil Index, which measures the concentration of income across the range of economic sectors such as finance, fashion or fast food.
In 2013, New York had a Gini coefficient of 0.547 — indicating a level of inequality among the highest in cities across the country (the higher the Gini coefficient, the more unequal the income spread ). While that number is the same as 2016, the most recent data available, it’s actually lower than it was in 2014 and 2015, years with Gini coefficients of 0.548 and a 0.551, respectively.
Put simply, these figures mean that, over the first two years of a mayoralty pledged to reduce inequality, wealthy households garnered a great share of income; only in the third year did inequality revert to the level of a previous mayor charged with indifference to it — and the poor.
But while the Gini coefficient tells us the what, the Theil Index helps us understand why. Inequality in New York is dramatically influenced by the compensation trends of its dominant industry: financial services. New York’s hometown industry is the largest and most volatile single component of the Theil Index, paying out 18.4% of city wages to just 4.2% of workers.
Inequality in New York is dramatically influenced by the compensation trends of its dominant industry: financial services.
In other words, the state of our “superstar” industry — finance — has a greater impact on inequality than public policy, even policies viewed as progressive. The same is true in other cities — such as Houston, reliant on energy, and Los Angeles, reliant on Hollywood.
In fact, and ironically, liberal local policies can actually increase inequality. The more affordable housing the city permits, the more lower-income households will remain, or move into, the city. The greater the number of poor households included within city boundaries, the greater will be local statistics of inequality.
This tension between local displacement and inclusion applies to local minimum wages, too. As University of Washington economist and Manhattan Institute fellow Jacob Vigdor has recently shown in a study of Seattle’s $15 minimum wage, a mandated increase in hourly wages drives down overall compensation among low-wage earners as employers cut back on total hours. Depressing compensation can, of course, increase inequality, even as select households benefit.
The same sorts of surprising effects on inequality can happen when policies take aim at the wealthy. De Blasio has proposed to finance improvements to the city’s troubled subway system via a new millionaire’s tax on top of the city’s 3.9% city income tax.
But lifting city taxes high enough to actually level the local income distribution is also high enough to chase out the rich. So ever-higher city taxes could conceivably reduce inequality not by lifting up the poor, but by driving the rich out. One problem: There goes the city’s tax base.
Memo to the mayor: Income inequality is the wrong gauge for actually improving lives. New York, and all cities, should help those of modest means not by taking aim at the local rich but by providing top-quality public services — schools, parks and recreation, and public safety — for all citizens, rich and poor.
This piece originally appeared in the New York Daily News
Howard Husock is the Vice President of Research and Publications at the Manhattan Institute.