Inequality in New York City

This article is an excerpt from the Manhattan Institute Report Poverty and Progress in New York I: Conditions in New York City’s Poorest Neighborhoods by Stephen Eide.

Since the Occupy Wall Street demonstrations, income

inequality has featured prominently in policy debates and in economic reporting. At the national level, President Obama has said that addressing “a dangerous and growing inequality and lack of upward mobility” is the “defining challenge of our time.” Locally, Mayor de Blasio argues that New York City’s inequality “fundamentally threatens our future.”

Inequality is certainly remarkably high in New York, even compared with the U.S. as a whole. At the national level, the share of income received by the top 1 percent rose from 10 percent in 1979 to 24 percent in 2007, which matched the previous high, set in 1928. It then fell through 2009—yet by 2012, the top 1 percent was receiving 22 percent of income and was headed back up to its previous heights. 

In New York State and New York City, inequality followed the same trend. In 2007, New York and Connecticut had the second-highest and highest levels, respectively, of income concentration across the states (New Jersey was further down the list). New York City saw the share of income received by its top 1 percent rise from 12 percent in 1979 to a remarkable 44 percent in 2007. Since 2009, it has partly recovered, to 39 percent. 

Drilling down still further, from 1996 to 2000, a period in which the top 1 percent of New York City residents received about 30 percent of income, the share of parent income received by the top 1 percent of Manhattan’s parents reached 54 percent. This was far ahead of San Francisco, the runner-up among the 250 largest counties, at 37 percent. Brooklyn was ranked 32nd (21 percent), while the other boroughs had shares of 9 or 10 percent. (Westchester County ranked 11th, with 25 percent, and Nassau County was 35th, with 20 percent.)

Another way to measure inequality, one that focuses more on income differences within “the 99 percent,” is to compare the average income gap between households with the average household’s income—a measure based on the “Gini coefficient.” In 2012, the average gap in New York City was slightly larger than average household income (108 percent). That was high enough to place it 19th among U.S. cities and seventh among the nation’s 100 largest cities. Manhattan and Brooklyn, considered “counties” by the Census Bureau, rank first and third among sizable counties in the U.S.

Despite such high levels of inequality in New York, it is far from obvious that the poor and middle class have been hurt. Income growth, after all, is not a zero-sum game, particularly at the local level. Indeed, if the city’s financial sector were ever to relocate to Connecticut, this would hardly benefit “the 99 percent.”

For context, New York City ranks ahead of all but 27 American cities in the largest 100, in terms of median income. Meanwhile, its poverty rate (20 percent) puts it squarely in the middle of the pack (ranked 56th). As inequality rose, median income in New York City increased by at least one-third between 1979 and 2007, while poverty fell. In fact, the income concentration figures cited above are overstated, for a variety of technical reasons, with the median income and poverty estimates understated. Finally, new data show that four of the five boroughs (all but Staten Island) rank in the top 40 among the 250 biggest American counties, in terms of intergenerational mobility. In the New York labor market, moreover, mobility was no lower among children born in 1993 than among children born in 1980.

It is not clear that the de Blasio administration can do anything to reduce inequality, given the national and global forces driving income concentration—to say nothing of the growing importance of Wall Street in the American economy. But even if it could, it is, likewise, far from clear that this would be desirable.

Scott Winship is the Walter B. Wriston Fellow at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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