Economic Downturns Economic Downturns

POVERTY IN THE CITY

Poverty is an essential factor of wealth and income inequality. During the 70’s, the poverty rate rose greatly due to the NYC Fiscal Crisis, and continued to rise after the Great Recession in 2008. According to Mark K. Levitan and Susan S. Wieler in Poverty in New York City, 1969-99: The Influence of Demographic Change, Income Growth, and Income Inequality, the poverty rate of NYC was 14.5% in 1969. This quickly progressed to 20.2% after the City faced its worst financial crisis in history and cut back on many of the social program after Koch began his  neoliberal policies. Many were left without homes as their only housing such as SRO’s were turned into luxury housing for the rich. Despite the progress that the city made during this time, there was almost no decrease in poverty over time as the rate rose to 21.9% in 1999.

Although NYC did not seem to have been as affected as many other areas in the world, our poverty rate did increase. According to NYC’s Center for Economic Opportunity, the poverty rate for 2008 was 19%. This increased to 19.8 for 2009, 20.8 for 2010, and 21.2 for 2011 and 2012. The increase is due to the Great Recession that occurred after 2008.  For 2014, the latest poverty rate was 20.7%. Although it has slightly decreased since 1999, 1 out of every 5 people in New York City still lives in poverty. We can see that some of those liberal social programs that the city had before the crisis actually were helping since the poverty rate was only 14.5 %. Although neoliberal policies have helped the City get out of an economic slump, they have not helped the citizens.

 NYC FISCAL CRISIS

New York, often considered the most attractive urban center in the world, at one time seemed like it was about to go down the drain. The Fiscal Crisis of 1975 is one of the most important events to have happened in New York City history. New York just scraped the ice as they were about to default on their loans. The city struggled for the next year coming up with plan after plan to save the city from declaring bankruptcy. This led to the cutting of much of the social and municipal services under the mayoralties from Edward Koch all the way up to Michael Bloomberg.

Progression of the Fiscal Crisis

Much of what did happen to New York was due to the changing economy of the City. Manufacturing had declined and much of the white middle class had left the City in an event most attributed as “White Flight.” In The Old Neighborhood by Ray Suarez, we can see that the population of New York City declined from 7,894,682 in the 70’s to 7,071,639 by the beginning of the 80’s, giving the City a decrease of a little over 800,000 residents across a period of 10 years. Many of these people were often leaving to the suburbs as they were considered much safer than living in the City. New York had become known for much of its crime such as drug dealers and prostitutes working openly across many parts of the city such as in Park Slope and in Times Square. Heroine and crack cocaine became the popular drug choice amongst many of the residents that did stay in New York. Much of this is what led to the decline in other parts of the city such as in in the South Bronx. Banks and the cities financial leaders had refused to sell or market the City’s debt preventing New York from access to private capital.

The state was willing to help out if the city gave up its power to handle its own finances. This led to the creation of the Municipal Assistance Corporation (MAC) which consisted of many of the City’s elite such as Simon H. Rifkind and Felix G. Rohatyn. Many of these economic elites on the MAC board disapproved of the New York liberalism that had become so prominent but also detrimental to the city. In his book Working Class New York: Life and Labor Since World War II, Joshua Freeman states “financial leaders…wanted less and less costly government, fiscal probity, and the desocialization of services and protections for the working class and the poor” (Freeman, 2000, pg. 258). Rohatyn specifically wanted the city to freeze wages for its workers, laying off thousands of people, charging tuition at CUNY, raising the subway fare, and closing some of the City’s public hospitals.

Due to the lack of capital coming into the city and its “blacklisting” from private money by big banks, the city could only resort to the use of city worker pension funds. The Teacher’s Retirement System is essentially what saved the city from going bankrupt. Even after the City’s teachers narrowly saved the City from defaulting, the federal government, in the form of President Gerald Ford, refused to give any help to the city.

The Fiscal Crisis of 1975 is what led to the rapid fall of New York. The City’s switch in politics from liberalism to neoliberalism helped out in many ways, but this came at the expense of much of the populace that had stayed, or was stuck, in New York rather than fleeing to the suburbs. As the city cut back on social services, the City’s homelessness rates continued to rise. Much of this was a result of the disappearance of the Single-Room Occupancy houses. Before, almost anyone living in poverty would be able to rent out one of these rooms. Due to the change to neoliberal policies that began under the Koch administration, the city created the J-51 tax abatement program. The City would give a tax exemption and abatement to developers looking to convert many of these Single-Room Occupancy areas into luxury housing. This left the homeless in the city without a place to stay for the night, allowing the problem to become more evident. Many other people were also kicked out of their buildings as the developers were granted the tax abatement and would buy out their building owners.

Due to the cutback on many other programs such as CUNY, many of those low income people who could no longer afford the tuition were also left out from further economic advancement. As wealthier residents and gentrification became an actual term, New York’s wealth and income disparities continued to rise. Crime was lowered due to the influx of police officers under Mayor Dinkin’s “Safe Streets, Safe Cities” program and the continuation of said program under Giuliani. The use of “broken windows” policing led to the arrest of many for petty crimes leading to the further income inequality as those arrested were often low income residents of poor neighborhoods.  Many of these changes led to the great wealth inequality we can see today.

The shift from liberalism to neoliberalism in city politics and the creation of the Municipal Assistance Corporation (MAC), ensured that the economic elite would settle themselves into the bedrock of the city’s power structure. The Fiscal Crisis not only served to help people leave the city but also eventually created the NYC we know today, one of segregation not only racially but economically as well. The tax abatement programs set in place by the Koch administration brought in wealthy residents and created the poverty and income disparities only more apparent.

Labor unions at first offered an opportunity for workers to united against their often times, money-hungry employers. The collective bargaining offered up by the unions only served to make them stronger and gave them ability to get most of their demands approved. Nowadays, we can see that union membership has declined nationwide but most importantly in the City of New York, one of the cities where union culture was created, and we learn about the strength of unions since grade school, has also decreased in membership. Leading to further exploitation by employers; especially a city where a company, from fast food to banks, will do almost anything to maintain a presence in.

THE GREAT RECESSION

Prior to the 1960s, there wasn’t a great deal of academic or public interest in inequality. In wake of the most recent national recession which existed between 2007 and 2009, New York City opened its eyes to the existence of a lopsided economy which is synonymous to the inequality.

On average, income growth in New York City grew 60.5% between 1979 to 2007. Sounds great, right? Well, not quite.

The top 1% accounted  for a disproportionately massive share of the growth-67% to be exact. The growth of the top 1% far surpassed the growth of the bottom 99%, whose contribution to the growth was marginal. Unfortunately, income growth was not leveled out after the Great Recession. While the incomes of the top 1% were recovering, the incomes of the bottom 99% weren’t. The incomes of the working class were hit particularly hard by the recession and faced historically weak recovery, the state of working in NYC was extremely disappointing as many faced a fall in income. This fall for the working class has resulted in their stagnated income growth and a widening gap between them and those at top, whose income was 48 times greater.

A September 2013 paper titled “Striking It Richer,” reported that 95 percent of the gains of the growth between 2009 and 2012 were captured by the richest 1 percent. Due to the prolonged period of lopsided income growth, the share of all income held by the top 1% in recent years has approached and will continue to surpass historical highs. It is especially skewed in New York City.

So what’s the problem? The consequence of these trends is that the New York City economy is lopsided as income distribution has become increasingly polarized. According to the latest Census Bureau data for 2011, there has been no lessening of New York City’s extreme inequality since 2007, and data from the New York City Comptroller’s Office only affirms this. Statistical data below creates the impression that the rich have and are being served the economic pie  of this city at an alarming rate. Even though they only account for a third of all income, the difference between this one-third with the remaining two-third speaks volumes.

In NYC, the 99%’s share of the economic pie is shrinking, the rich just kept getting richer, inequality was higher than ever, and nearly all of the gains from economic recovery have gone to the top 1 percent.

Scroll through the graph above to view the colossal differences in gross income between the Top 1% and the Bottom 99%.
Data Source: New York City Office of Comptroller: “Income Inequality in NYC”

Data Source: New York City Office of Comptroller: “Income Inequality in NYC”

There is no doubt that the issue of wealth and income disparity in New York City is extreme.The economic populism, in the shadow of the Great Recession was manifested by the Occupy Wall Street movement. Occupy brought the income disparity to the frontline of the public awareness and consciousness by aiming to protest what was happening: disparities in the trend for wealth and income distribution which fostered the growth of the rich at the expense of the poor. The issue that persists is that the voices of the people of NYC are ignored and remain “unheard”.

Read on: People of NYC