It’s easy to take the safety and prosperity of present-day New York City for granted, but over the last 15 years, any number of events could have derailed its success. The dot-com recession of the early 2000s hit the city’s tech industry hard. The 9/11 attacks could have sent people and businesses fleeing permanently. Rudolph Giuliani could have been succeeded by a mayor who rolled back the city’s remarkable progress. The 2007 financial crash could have dealt a body blow to the city or triggered the kinds of budget crises and service cuts that affected many other cities. Hurricane Sandy could have been even worse than it was. And so on.
Despite these setbacks, New York has continued to boom. According to a new NYU report, “New York City: The Great Reset,” the city’s problems are for the most part “problems of success” rather than failure. The report’s title is a nod to coauthor Richard Florida’s 2011 book, The Great Reset. “In its economic DNA [New York City] has always been able to reinvent itself, engage in creative destruction, be resilient and reset,” says Florida.
New York’s five boroughs have added 423,000 jobs since September 2009—more than the number of total jobs in most other cities. Though the city’s finance sector received a major bailout from the federal government after the 2007 crash, finance hasn’t led Gotham’s jobs recovery. While the industry remains a key part of the city’s economy, it hasn’t yet recovered peak employment, and its share of total city wages shrank from 33.5 percent in 2007 to 26.7 percent in 2013. (The budgets of both New York City and State remain heavily dependent on taxes collected from Wall Street, despite the financial sector’s lackluster job growth, however.)
A diverse set of industries powers New York’s economy in 2015, including finance, high-tech, tourism, and a creative cluster consisting of media, fashion, arts, and culture. In tech, the city is now second only to the San Francisco Bay Area for venture-capital investment. By far the country’s top destination for international tourism, New York attracted 56.4 million total visitors in 2014, prompting a flurry of hotel construction. Seventy-four new hotels are scheduled for completion by 2017. In fashion, advertising, and public relations, New York dominates other American cities.
Not everything is rosy, however. Housing prices have soared, driven in part by the trend of wealthy foreigners snapping up city real estate. “The blue-collar working class has all but disappeared,” the NYU report notes. Despite a massive construction boom, just 16 percent of the city’s workforce possesses jobs in transportation, production, and construction. The fastest-growing workforce cluster is the service class—especially food service—which includes some highly paid workers but also a vast number of workers doing low-skill, low-pay jobs. In the outer boroughs, service-class workers only make about $30,000 per year on average. Citing a report by city comptroller Scott Stringer, NYU notes that 1.2 million New Yorkers—more than a quarter of the city’s total workers—would be affected by an increase in the minimum wage to $13.13/hour.
How to build a broad-based engine of upward mobility among low-wage workers? The NYU report offers only a few recommendations. Some are solid, such as the call for more investment in the city’s transit infrastructure. But the report unfortunately latches onto the $15-per-hour minimum-wage bandwagon. The perils of raising the minimum wage are well known. A better short-term approach to growing incomes for low-wage workers would be increasing wage subsidies, as proposed in a recent report from Manhattan Institute Senior Fellow Oren Cass. The real problem is not the need for a higher minimum wage but that so many of Gotham’s jobs are low-value and low-wage. The evisceration of the middle-class economy is what makes New York a two-tier city. New York’s economy needs more middle-skill, middle-wage jobs that entry-level workers can aspire to. Simply pretending that low-end work is something other than what it is won’t do. Florida agrees: “If [service class] work is relegated to cast-off work, crappy work, we-can’t-improve-that work, and you’re forced to toil in these low wage conditions, I think we’ve ended the society of opportunity.”