Soundings

Scott Winship
The “Two Cities” Myth
Whatever Bill de Blasio may think, New Yorkers’ incomes rise and fall together.
Autumn 2013

As a campaign strategy, dividing voters into groups of rich elites and exploited workers is neither original nor bold. It has been tried frequently in recent years—most notably, by North Carolina senator John Edwards during the 2004 and 2008 Democratic presidential primaries. As part of his stump speech, Edwards contrasted “two Americas”—one affluent, the other struggling just to get by. Now New York City has Bill de Blasio’s “tale of two cities.” In his January announcement speech, the eventual Democratic mayoral nominee lamented that “this is a place that in too many ways has become a tale of two cities, a place where city hall has too often catered to the interests of the elite rather than the needs of everyday New Yorkers.” De Blasio’s crusade is not just against political inequality but economic inequality, as laid out in his policy book, One New York, Rising Together:

Nearly 400,000 millionaires call New York home, while nearly half of our neighbors live at or near the poverty line. Our middle class isn’t just shrinking; it’s in danger of vanishing altogether.

Addressing the crisis of income inequality isn’t a small task. But if we are to thrive as a city, it must be at the very center of our vision for the next four years.

Many Gotham voters are bound to be drawn to a candidate who promises greater equality and increased redistribution of wealth. After all, few people reach the top of the economic ladder, making for some attractive electoral math for a politician who can drive a wedge between the wealthy and everyone else. But does the evidence support de Blasio’s claims of mass poverty, a shrinking middle class, and diminished opportunity—all caused, at least in part, by rising inequality? The short answer: no.

Income inequality is higher in New York than almost anywhere else in the country. By one popular measure that compares the average income of households with the average income difference between households (known as the “Gini coefficient”), New York is the seventh most unequal of the 100 largest American cities. Manhattan has more inequality than any sizable county in the nation, and Brooklyn (King’s County) ranks third among big counties. The city’s Independent Budget Office estimated that the top 1 percent of income-tax filers in 2009 made 34 percent of all income earned by city residents. While the richest of the rich took a big hit during the recession, their share of all income has likely improved since then and moved back in the direction of the 2007 peak of 44 percent—itself nine points higher than the previous peak in 2000. National figures imply that the growing wealth gap is a trend dating back to the late 1970s.

Contrary to the tale-of-two-cities narrative, however, the incomes of the rich and of the rest tend to rise and fall together. Median household income in the city dropped 5 percent to 6 percent between 2007 and 2011, according to the official Census Bureau definition of the term, after adjusting for changes in the region’s cost of living. However, the Census Bureau definition of income fails to take into account many government policies that mitigate income losses. At the national level, median incomes dropped 7 percent from 2007 to 2011—but accounting for the value of noncash public benefits, employer-provided health insurance, and tax cuts intended to prop up consumer spending wipes out that loss entirely. So middle-class incomes in New York are probably somewhat higher in 2013 than they were before the recession (when they were as high as the city had ever seen).

The official poverty rate shows that 21 percent of New Yorkers were poor last year, up from 18.5 percent in 2007, but this figure also misleads. When a researcher with the liberal Center on Budget and Policy Priorities accounted for noncash benefits and tax breaks, he found that, instead of rising from 12.5 percent to 15 percent between 2007 and 2011, the national poverty rate increased only from 10 percent to 11 percent. Had he included health benefits in his calculation, the increase would have been even smaller and might have disappeared entirely. Meanwhile, the average income of the top 1 percent of New Yorkers fell by an amazing 44 percent between 2007 and 2009, and nationally, the average for the top 1 percent was still 14 percent lower in 2012 than in 2007.

Today, poverty in the city is no more prevalent than in the late 1970s, when the top began taking in a growing share of income, and median income is at least 25 percent higher. These trends are national in scope and reflect factors that are largely outside the influence of mayors. And where New York is concerned, if inequality is harmful, we would expect that the city would have some of the lowest incomes and highest poverty rates in America. In fact, New York ranks ahead of 68 of the largest 100 cities in terms of median income.

None of this is to dismiss the extent of poverty in the city today or the economic stress that middle-class New Yorkers face. But New York has not entered some new period where inequality has worsened the lot of “the 99 percent.” Prior to the recession, when inequality was steadily growing—particularly during the late 1990s boom—no one seemed terribly troubled by it.

“If the question is, should city hall be entirely focused on addressing inequality, the answer is yes,” said Bill de Blasio during his campaign. Despite what de Blasio may think, and notwithstanding the city’s real challenges, this is not the worst of times. But if the next mayor needlessly pits New Yorkers against one another, it won’t be the best of times, either.

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