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New York, Still the Opportunity City

eye on the news

New York, Still the Opportunity City

Though you wouldn’t know it from reading the New York Times, new census data show a vast expansion of Gotham’s middle class during the 1990s. June 7, 2002
Economy, finance, and budgets

In late May, the federal government released economic data from the 2000 census that provoked a spate of press commentary that only the rich benefited from New York City’s 1990s economic boom. But the press got it dead wrong. Look more carefully at the newest census data, and you’ll see that something spectacular happened in New York during the decade: a vast expansion of the middle class in each of the city’s boroughs. Far from being the decade of the rich, the nineties saw hundreds of thousands of modest New York households substantially improve their economic station—even as more than a million immigrants, many of them poor, flooded into the city.

Typical of the misleading coverage was a New York Times story that noted that median household income had declined during the nineties in every city borough except Manhattan. Nowhere in the story or the chart accompanying it did the Times mention a key detail: the paper had adjusted the 1990 data it presented for inflation. Now, there’s nothing wrong with adjusting for inflation to compare income from different eras, if you tell readers you are doing so. By neglecting to inform readers about the adjustment, however, the Times made it seem as if people were earning more dollars in 1990 than they are today—which isn’t the case. More than one person I spoke with who read the Times story mistakenly believed that the actual income of residents in the city fell during the 1990s, an impression that certainly helps cement the notion that only the rich are getting richer.

I’d like to believe that the Times just made an innocent mistake. But a few weeks later, when the Census Bureau released the same data for the whole country, the paper responded with a similarly misleading piece, with a lead and a headline stressing that not everyone benefited from the 1990s economy—thus implying, as any Times reader would infer, that the poor got left behind and inequality increased. The Times’s approach to the national story differed radically from those of other major newspapers, including the Washington Post, the Philadelphia Inquirer, and the Christian Science Monitor, all of which accurately emphasized the sharp across-the-board income gains that most Americans enjoyed, along with the decline in the number of those living below the poverty line. After the second Times census piece, it became clear that the paper of record can’t be trusted on the subject of economic mobility.

To understand exactly what happened during the 1990s, consider these facts. The 2000 census shows that New York City welcomed a staggering 1,224,524 foreign immigrants over the course of the decade. It doesn’t take a demographer to know that a large number of these folks were poor; indeed, one important reason people have always come to the city from overseas is to improve their station in life. Internal Revenue Service data show that people who immigrate to New York State and pay taxes have an average income of just $24,000 the first year they’re here, well below New York State’s median income of roughly $43,000. (There are no comparable stats for Gotham, but since the vast majority of immigration in the state occurs in the city, the number is likely to be similar.)

What the data show is that immigration constantly replenishes the ranks of lower-income New Yorkers, and that this was especially true during the 1990s. Though many of these immigrants did better simply by coming here from dirt-poor Third World countries, they also sparked unprecedented competition for low-wage jobs in the city, causing wages at the bottom of the city’s economy to decline slightly—again, only when adjusted for inflation but not in absolute terms. This decline is what constrained the city’s overall income gains.

But given this influx of immigrants, what’s truly remarkable is that poverty didn’t soar and incomes at the low end of the scale didn’t plunge. Why didn’t these things happen? Simple: while poor immigrants streamed into the city, the New Yorkers already here, including many lower- and middle-income residents, were swiftly pulling themselves up the economic ladder. The census shows that the number of households in the Bronx earning under $25,000 a year—poor households, in other words—fell 8 percent during the 1990s. Yet the Bronx welcomed 167,666 immigrants in the 1990s, many of them presumably poor. Shouldn’t the ranks of the poor have swelled dramatically in the borough? They didn’t expand, though, because many people already living in the Bronx were vaulting into the middle class: in every income category above $25,000 a year, the number of households increased in the Bronx. The number of Bronx households earning between $50,000 and $75,000 a year increased 18,318, or 38 percent, while households in the borough making between $75,000 and $100,000 jumped 87 percent, to 30,029. These are real, substantial gains made by households that are hardly rich, especially in an expensive city like New York.

What happened in the Bronx was typical of the rest of the city. In Queens, the households earning between $50,000 and $100,000 jumped 58,000, or 38 percent. In Brooklyn, the gains in the same category were similar, up nearly 59,000 households, or 40 percent.

Where did all of these new middle-class households come from? Not from outside New York. Domestic immigration data consistently show that the city loses more middle-income earners than it gains. That almost certainly means that most of the new households appearing in these middle-income categories were in the city already at the beginning of the 1990s, and the Opportunity City gave them the chance to pull themselves into the middle class.

The data also reveal that the ranks of the well-off exploded in the city. The number of households citywide earning between  $100,000 and $150,000 a year rocketed upward by 126,492, an astounding 117 percent gain. And more than 75 percent of that growth occurred outside of Manhattan—with about 97,000 new households in the outer boroughs earning between $100,000 and $150,000 a year. Many of these newly well-off New Yorkers, we can be pretty certain, didn’t come from outside the city, since Gotham has a perpetual net drain in people earning more than $100,000 a year. For the most part, they must have been New Yorkers, probably those previously in the $50,000- to $100,000-a-year category now vaulting up the ladder of economic mobility. In other words, it wasn’t just the rich getting richer in the 1990s, but the middle class getting rich, too.

The overall picture of economic gains in the 1990s, then, is astounding in its breadth and scope. Households making more than $50,000 a year in New York grew by 429,993, or 56 percent, in the 1990s. By comparison, the total number of households in the city grew by just 7 percent, to 3 million. While some of these increases might be due to “bracket creep”—income levels rising merely to keep pace with inflation—inflation alone could never account for such big gains. And while it’s true that the ranks of the rich increased robustly, the biggest gains were in more modest income categories. A gain of more than 40 percent in the middle class is the best news in Gotham since the middle-class exodus began in the mid-1960s.

What was at work in New York during the 1990s, in short, is something that the American economy, and especially New York’s economy, has traditionally specialized in: vigorous income mobility. And that’s something that one simple statistic like median income can’t possibly capture, because it doesn’t account for people ascending the economic ladder and being replaced by others moving in below them. One Treasury Department study of national census data from the 1980s, including data on income levels of individuals that aren’t available to the public, found that two-thirds of everyone in the lowest 25-percentile income category at the start of the decade had moved up into another economic class, in many cases significantly, by its end.

It doesn’t take a fancy study, though, to convince most New Yorkers of what’s right before their eyes. The city is filled with recent arrivals who, within just a few years, are improving their lot. And the city’s professional classes overflow with the sons and daughters of immigrants or low-wage workers who, in just one generation, have realized the American dream. That dream was still at work in New York in the 1990s—and not just for the rich.

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