Middle Class Flees New York. Who Needs ‘Em?

I_love_NYby James A. Bacon

For decades pundits (including myself) have been predicting the eventual demise of New York City, yet the city continues to defy the prognostications. With its world-class financial, entertainment and advertising sectors and its burgeoning entrepreneurial tech sector, the Big Apple has demonstrated such a capacity for reinventing itself that it remains one of the great wealth-creating centers of the world.

How long NYC can continue to prosper, however, is an open question. The region has a huge weakness: It is hemorrhaging people and tax base. Aaron M. Renn explores the trend in the current edition of City Journal:

Though the region and New York City itself continue to grow overall because they have more births than deaths, the Census Bureau estimates that the metro area lost almost 2 million net domestic migrants during the 2000s; that is, 2 million more people left the area for other parts of America than moved there from other parts of America. The region offset part of that loss with a nation-leading net gain of more than 1.1 million international immigrants over the same period. But it wasn’t enough: the region’s total net loss of people to migration amounted to 858,000. And the trend has continued into the new decade, with the New York metro area hemorrhaging another 254,000 net domestic migrants since 2010, even as the economic downturn has slowed migration generally within the United States.

When people leave, they take their income with them — about $49 billion during the 2000s. “The cumulative loss as the years pass and people keep heading for the exits, is staggering,” Renn writes.

(While Miami and Orland were the top destinations for New Yorkers, the Washington region was No. 10 on the list, absorbing more than 35,000 people over the decade.)

Renn concludes:

The high net outflow of people from the New York metro area bodes ill for the region’s future, as it represents a huge drain of spending power and a diminution of the tax base. People are voting with their feet to leave New York. Some may move for retirement to warmer climes, but others are doubtless leaving for a lower cost of living and lower tax rates. New York is losing out, and there’s much work to do in fixing the policies that drive up its costs and taxes.

Bacon’s bottom line:

As much as I would like to confirm my conviction that New York’s Blue State governance philosophy is an economic-development train wreck, I’m not sure there’s a huge problem here. New York is not losing its most productive citizens. Hint No. 1: $49 billion in lost income sounds like a lot of money but when it’s spread over two million people, it amounts to an average income of only $24,500 per person — just a tad more than the region’s 1999 per capita income of $22,000. Hint No. 2: The two top destinations are Miami and Orland, both retirement destinations.

In other words, NYC is not losing its creative class — its wealth creators — who continue to place a premium on the ability to interact with others like themselves. It appears that the city is leaching away its middle class, particularly its retirees.

Don’t get me wrong, losing your middle class is not a good thing. Increasingly, New York will become a city of high-productivity, high-income haves” and low-productivity, low-income “have nots.” If the trend continues, class divisions will intensify. And the city’s regressive tax base will become even more dependent upon revenues generated by the wealthy — and even more vulnerable to an economic downturn. But New York is no Detroit in the making. I’m not willing to write off the city’s future as an economic engine based on this unfavorable demographic trend alone.

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12 responses to “Middle Class Flees New York. Who Needs ‘Em?”

  1. naw… there are cities all over this world and more than 1/2 of the worlds population now lives in cities…

    picking one city to forecast boomergeddon is cherry picking without rhyme or reason.

    show how NYC is so different from other cities that it’s “self-destructing”.

    I don’t see it.

  2. Larry, where did you read in my post that anyone was forecasting Boomergeddon for NYC? I concluded: “New York is no Detroit in the making. I’m not willing to write off the city’s future as an economic engine based on this unfavorable demographic trend alone.”

    1. seems to me that many European and Asian cities have great numbers of middle income folks.. no?

      re: boomergeddon – well.. when you are forecasting a city of mostly “haves” it certainly gives the impression of downstream failure.

  3. DJRippert Avatar

    Exactly the same thing is happening in Washington, DC. Neighborhoods get gentrified forcing out the middle class. If you are poor and have few options you live in an impoverished, high crime neighborhood. If you are wealthy you buy a townhouse near Capitol Hill, renovate it and move in. If you are middle class you leave.

    Washington, DC is now the city with the greatest wealth inequality in America.

    Increasing inequality of income and wealth in a limited geographic area rarely ends well.

    If the current trends continue, will some incident spark a violent outburst by those with little against those with a lot? Historically speaking you can bet on it.

    1. reed fawell III Avatar
      reed fawell III

      I agree with Don’s comment. Washington DC is one of the most solidly up and down Democratic voting towns in America. I say this not to blame democrats. Nor do I suggest that the great and growing disparities of wealth between DC citizens would be improved if DC was a solidly Republican town.

      I suggest that a primary driver of this problem is the dysfunction of land use and economic development decisions in DC going back as far as I can remember.

      1. don’t most cities in the US vote Democratic?

        aren’t the Urban areas of the countries the Democratic base?

    2. reed fawell III Avatar
      reed fawell III

      Don –

      I suggest the problem in DC adversely impacts all but the very affluent. The poor have been leaving DC for decades, pushed out by the middle class. Now all but the very affluent are being pushed out of many neighborhoods. (Very affluent might be defined as a working couple making $400,000+ a year.)

      Starter homes can range over a million dollars in many neighborhoods. This continues despite the long term recession we’re in. Should we bust out of that, prices could rise dramatically, given pent up demand and lack of new residential for reasons that thwart it irrespective of demand. Hence my comments re land use.

  4. DJ is truly a world traveller. I’d be interested in hearing his view on this issue with respect to not only US cities but cities he has visited around the world.

    how about it DJ?

  5. DJRippert Avatar

    It seems to break down into three layers –

    1. Some cities have just decided to provide wealth redistribution at scale. There is generally high unemployment – especially among the young. However, there is also a very generous safety net. I’d cite cities in Germany and Scandinavia as examples. The peace is bought and paid for by the safety net. Lots of grumbling, not much violence.

    2. Some cities have almost military style police that keep any thoughts of violence at bay. Few people have sufficient courage to get into a tussle with authorities. The peace is kept by a militarized police force. Cities in India and China seem to follow this path. Truly wealthy people have their own personal security as well.

    3. The rest are somewhere in the middle. These cities run the gamut from American cities like DC where there is an uneasy peace (which may not last for long). Cities in France see occasional riots but more often have widespread and routine strikes. In Brazil and Mexico it is very dangerous. Kidnappings are common, people buy cars with bulletproof windows, etc.

    If America can’t get its middle class “back in the game” then I think widespread income redistribution is inevitable in the cities. Wealthy urbanites won’t stand for a militarized police force. They will simply pay ever higher taxes and buy the peace with an expansive social net.

  6. Peter Galuszka Avatar
    Peter Galuszka

    I lived in New York City for four years and worked for a NY_based company for 18 years so I went there a lot.
    It is impossible to use the same matrix to compare. NYC is really five big cities that are very different plus a huge outlying area.
    I worked in Manhattan and lived in Brooklyn. While Manhattan is overwhelming in its complexity, so, too is Brooklyn although Brooklyn doesn’t really have a “center.” The old downtown Brooklyn was supposed to be but its big plans died with the 1929 crash. It has come back, but there’s no real “center” to it. Same for Queens and the Bronx and Staten Island.
    It is impossible to consider the them in the same way you may other cities. Each has an enormously complicated inter-weaving of ethnic groups with different languages and customs. They may be linked, virtually via Skype, etc., economically and culturally to Odessa, or Shenzhen or Tel Aviv or Salvador more closely then they to anywhere across the Hudson.
    It isn’t something you can understand by reading wonk reports. You have to see it.

    1. DJRippert Avatar

      I lived in Manhattan for 2 years. Had friends in Queens and Brooklyn. All of the five boroughs are different although I see some similarities between Brooklyn and Queens.

      Brooklyn is an interesting place. Brooklyn Heights has been upscale for years. However, the rest of the borough seems to be gentrifying fast. I wonder what will become of the old affordable neighborhoods.

      Even a city as big and diverse as New York can gentrify out the middle class. Just ask the folks in London how that happens.

  7. I suspect things like schools, transit, police, etc as well as taxes are all done at the NYC HQ level not separate and independent levels of the boroughs – though and that would include the debt…..

    further.. is there a similar complaint about NYC not allowing enough density for efficient settlement patterns?

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