When the economic crisis hit at the end of 2007, a raft of pundits proclaimed that New York City’s reign as the world’s leading global city was over.
Today, the degree to which New York has recovered from the recession is astonishing. In fact, it has rebounded not just from the most recent financial crisis, but from a series of blows over the past fifteen years or so—the terrorist attacks of September 11, the tech crisis of the early 2000s, and two significant hurricanes. Each time, the city emerged stronger than ever. Indeed, New York’s ability to attract investment and generate new, creative, high-tech industries has created such pressure on its real estate markets that its biggest problem is no longer an underperforming economy. Now, the city’s major concerns are its increasingly unaffordable housing market and the growing economic divide that helped carry Mayor Bill de Blasio into office in 2014.
For the past several years, I, along with my colleagues Steven Pedigo, Rosemary Scanlon, and Hugh Kelley at the NYU School of Professional Studies have undertaken a detailed examination of the factors underpinning the city’s remarkable economic comeback. The resulting study, titled “New York City: The Great Reset”, tracks the changes in the city’s economy at a granular level, tracing its industrial and occupational clusters, changing real estate patterns, and the evolving makeup of its class structure and demography. To get at this, we conducted detailed interviews and focus groups with 57 experts in finance, real estate, technology/start-ups, education, media, arts and culture, and philanthropy. In particular, we used detailed data from the Bureau of Labor Statistics and EMSI to track the industries and occupations that have driven the city’s transformation.
What we found is evidence of a comeback that surprised even us. Since 2007, New York has generated jobs and moved the economy forward in ways few would have anticipated even a couple of decades ago. From its nadir in 2009 to 2014, the city generated 423,000 new jobs—and this number continues to grow.
New York’s Key Occupations
So, what are the key factors that enabled New York to bounce back?
New York has always had a diverse economy, which lies at the core of its economic resilience. Today, the city’s ability to grow new industries and shift its economy can be seen in its ongoing evolution from a finance-driven economy to a full-blown creative economy. Its creative class—workers in science, engineering, art, design, media, and entertainment as well as finance, business, and law—spans 1.4 million workers. Making up 35.4 percent of the city’s workforce, the New York creative class generates $117 billion in wages, more than half (52 percent) of the city’s total.
The chart below, from our study, provides an in-depth look at the city’s creative economy and its key occupational clusters. The bigger the bubble, the higher the total employment. The x-axis represents employment growth from 2009-2014, while the y-axis represents the location quotient, or the concentration of occupations in New York relative to the rest of the nation.
Occupations in the upper right hand corner exhibit substantial growth and a large concentration of workers—as a result, they are key to New York’s competitive advantage. Check out, for instance, the size of the bubble for arts, design, entertainment, and media. It may not be as big as those for health care or business and finance, but it represents the field with the city’s biggest advantage. In contrast, the city has a large concentration of lawyers, but not a lot of growth in that sector. The same can be said of business and finance, management, and education.
The city has also seen substantial growth in startups and tech. Hundreds of startups have launched since 2007, and the city attracts roughly $3 billion in venture capital investment per year. It has the largest number of tech jobs in the nation, according to data from EMSI, and was recently named the world’s second leading startup ecosystem.
New York’s Economic Divides
This success has come at a cost. The city has become increasingly divided not just between rich and poor, but between its creative class and its sagging service and working classes. The creative class in New York earns a median wage of $90,200 per year—59 percent more than the median for the city as a whole and more than 2.2 times that of service class workers.
The larger service class, made up of 1.9 million workers or roughly half of the city’s workforce, works in comparatively low-paying, low-skill occupations such as administration, retail sales, food service, and health care, and earns a median wage of less than $40,000 per year. These jobs are growing even faster than those of the creative class.
Meanwhile, the working class sector made up of factory workers, truck drivers, and construction workers, which once comprised the backbone of the city’s economy, has shrunk to just 17 percent of its workforce—even during a construction boom.
The table above, also from the report, charts the class composition of the five boroughs. Creative class jobs are highly concentrated in Manhattan, where they comprise nearly a million workers—39 percent of the city’s creative class total. Brooklyn is home to just 166,902 creative class jobs, and those jobs pay on average $72,778 compared to $90,000 and above in Manhattan. Queens, where the creative class makes up 22 percent of the workforce, has 121,651 creative class workers, with the remainder in the Bronx (80,544) and Staten Island (26,045)—all with pay considerably less than similar jobs in Manhattan.
The service class makes up a somewhat larger share of the workforce in the outer boroughs. It comprises 53 percent of the workforce in Staten Island, 50 percent in the Bronx, 51 percent in Brooklyn, and 52 percent in Queens, compared to 48 percent in Manhattan. Manhattan’s service class wages are the highest at $44,916, compared to $30,389 in Queens, $29,641 in the Bronx, $29,211 on Staten Island, and $28,840 in Brooklyn.
While Manhattan has transformed into a post-industrial hub, Queens and Staten Island retain a relatively large blue-collar working class. The working class makes up 26 percent of the workforce in Queens and 21 percent on Staten Island, compared to just 13 percent in Manhattan. Blue-collar workers take home a median salary of $45,266 on Staten Island compared to just $37,151 in Brooklyn.
This class divide is etched in the city’s geography, as shown on the map below (based not on where each class works, but where they live). On the map, the creative class is marked in brown, the service class in teal, and the working class in light green.
In terms of residency, the creative class is massed in Manhattan and adjacent parts of Brooklyn and scattered in small clusters in the other three boroughs. The service and working classes cluster in the remaining neighborhoods, which tend to be further from amenities, transit, and Manhattan employment centers.
The service class predominates in Brooklyn, Queens, and Staten Island, with a few pockets in Manhattan, the Lower East Side, East Harlem, and Washington Heights.
The working class is mostly located in South Brooklyn and the Rockaways, Staten Island, Queens, and the Bronx, and the number of blue-collar jobs across New York is declining.
Toward Inclusive Prosperity
How can the city continue to grow, overcome its divides, and generate a more shared and inclusive prosperity?
First and foremost, it’s time for New York to raise the minimum wage, received by 1.2 million New Yorkers, from a meager $8.75 per hour to $15 per hour, and then index it to the local Consumer Price Index (CPI) maintained by the Bureau of Labor Statistics. In addition, the city can generate more good jobs by cultivating its entrepreneurial ecosystem and making it more inclusive. It needs to start investing in training, upskilling, and other forms of assistance for workers in retail, food service, and health care as opposed to technology and small businesses alone. New York would also benefit from creating on-ramps into startup and high-tech fields, such as teaching coding or making scholarships and internships available to promising students. The city must also recognize that only half of its 300,000 technology jobs are held by college graduates, and many high-tech companies are in need of customer-service representatives and logistics professionals in addition to coders.
Second, the city needs to build more housing and expand its affordable housing options. New York City Mayor Bill de Blasio has made it his goal to “build and preserve” 200,000 affordable housing units over the next ten years. His “five-borough, ten-year plan” includes a $41 billion capital budget, and aims to address the needs of low- and middle-income housing. This is an excellent place to start, but more can certainly be done. Targeted rezoning, for instance, could lead to residential conversions, new construction, and densification, all of which could help increase the number of affordable housing units. Private “land trusts” in underutilized neighborhoods could also supply high-density, affordable, walk-to-work housing by buying out existing landlords. Tax rebates or direct subsidies for renters can also be used to boost the amount of low- to moderate-income housing.
Third, it’s time for the city to substantially expand transit and improve connectivity to improve access to jobs, increase mobility between poorly-served neighborhoods, and stimulate more housing construction. There are less expensive ways to do this than adding new subway lines. New York needs to repair and update its infrastructure and invest in transit corridors. More dedicated bus lanes, connections between neighboring subway stations, new bus routes, faster service for buses and trains, “smart” buses, and even expanded ride or bike-sharing technology could also significantly improve transit-deficient neighborhoods. Mayor de Blasio’s expanded express bus service, for instance, is a step in the right direction, as is New York’s decision to invest its own capital dollars in a citywide ferry system.
Although New York’s comeback has been enviable, its success has brought a series of new class divides, growing inequality, and gaping unaffordability. As the world’s most powerful and dynamic city, New York must now leverage its newfound economic growth to create a more inclusive and shared prosperity of which all classes and all neighborhoods can be a part.