NYC: A Nice Place to Be Unemployed?by Richard Wells
The morning of Tuesday, February 3 was cold and gray, getting ready to snow. The gloom matched the mood sensible people were in, given the steady barrage of bad and getting worse economic news. Inside the Hyatt at Grand Central Station, host to a Crain’s New York Business forum on “The Future of New York City,” the atmosphere was different. In the corridor outside the main banquet hall, men and women in nice suits cheerfully networked over fresh pastries and Starbucks coffee. Once the show began, it became clear what those in attendance would get for a $250 a seat: reassurance.
We’ve been down this road before, a star-struck crowd was told by keynote speakers Jamie Dimon (CEO of JP Morgan Chase) and Mayor Michael Bloomberg. The financial sector had obviously taken a major hit. But Dimon confidently warned those in the press and in Washington looking to tar and feather Wall Street to back off. After protesters from Right to The City NYC barged in at the start of Bloomberg’s speech and demanded that working and unemployed residents of the city’s poorer communities have their say, the Mayor quickly returned to an upbeat script. Reminding the crowd that New York’s greatest asset was its entrepreneurial spirit, the Mayor offered this bit of counter-intuitive insight: Being “unemployed isn’t the worst thing in this city.”
The protesters had it right. The city’s future is too important to leave in the hands of Bloomberg and company. Still, it makes sense to examine the elite vision of the city’s recovery that came out of this conference. After all, Bloomberg is already testing it out, and this vision will certainly get play in the upcoming local political season. We need to know what to look for, in other words, and where pressure for change might be most effectively applied.
Beware Talk of the Creative Class
Sure, things are tough now, Bloomberg told forum participants, but there is no reason to panic. The media, hi-tech, bio-tech, and tourism sectors, along with a smaller, more nimble Wall Street, will have to pick up the slack. And this shouldn’t be a problem. Talented and ambitious men and women will continue to flock to New York not just for big payoffs, but because New York is the place such people like to be. Creativity magnet that it is, the city will come out of this rough patch just fine.
If only he was talking about creativity in a broad, humanist sense. Indeed, Richard Florida, the urbanist guru who popularized the notion of a creative class, is in the end pretty specific about what he means by the term. His earlier work was heavily inflected with a kind of new economy utopianism. Workers in the “knowledge” industries—his creative types—needed an offbeat culture inside the office and a diverse, hipster scene outside it. If cities wanted to thrive, he said, they had better cultivate both.
His basic advice to cities hasn’t changed since then; but the real movers of the urban good life seem to have become members of a still more selective group. As Florida suggests in the March Atlantic Monthly, cities that emerge from the current recession in good shape will be those with a healthy supply of “innovators,” or more plainly, entrepreneurs. Like Bloomberg, he also predicted that New York will be just fine.
Indeed, the whole conference seemed to be channeling Richard Florida, and what’s worse is that Bloomberg has already announced a plan to put the experience to work. On February 19, he gleefully approved the use of $45 million (three-quarters of which will come from the federal stimulus package) to seed what he called entrepreneurial “hatcheries” for out-of-work Wall Streeters. A few days later the Times homed in on the thinking. Heavy job losses in the financial sector have forced a kind of reckoning: how do we keep all this creative talent, or in the other catch-phrase of the moment, this “human capital,” in New York? As reporter Patrick McGeehan put it, instead of treating pink-slipped brokers, analysts, and traders “as losers in the casinos of capitalism [. . .] city officials are encouraging them to start over, the Silicon Valley way.” It’s a good idea, Kathryn Wilde, head of the pro-business Partnership for New York City, told the Times. After Wall Street’s implosion, she added, some sort of makeover of the city’s reputation is necessary. Initiatives such as this will begin to create a “global image of New York as a center that welcomes entrepreneurs.”
Beyond the catch-phrases and beneath the makeover we find the same old ad hoc development policy on display since the days of Ed Koch: incentives and subsidies for the private sector, accompanied by promises that the jobs down the road will justify the public expense. Over the years such promises have often been unkept; there have also been “Payoffs for Layoffs,” as a 2001 Center for an Urban Future report put it. In February, Good Jobs—New York published a study documenting how over the last 20 years the city has handed out some $2.5 billion not only to firms now being bailed out by the feds, such as AIG, JP Morgan Chase, and Citigroup, but also to firms that effectively no longer exist, like Bear Stearns and Merrill Lynch.
A few days before the hatcheries plan went public, Bloomberg announced—with far less fanfare—that poor and/or unemployed New Yorkers would be eligible for a federally funded extension of food stamps only if they enrolled in the Work Experience Program (a.k.a. workfare). It might be bad for the city’s image, but what if, in order to earn their second chance, all those one-time Masters of the Universe needed to don the day-glo vests of the Work Experience Program? Instead of brainstorming in a sunny Tribeca loft, they might then be seen beside mothers from the Bronx toiling for their food stamps. Perhaps, at least, they would discover that for another class of people, New York is not such a great place to be unemployed at all.
Middle Class Woes
As Bloomberg amps up his third campaign, expect to hear about more plans geared toward innovators and entrepreneurs, and more self-congratulatory talk about what a creative, exciting place New York is (in that Richard Florida sense). Word is he plans to spend $100 million-plus to get his message out this time around, so he’ll be hard to beat.
But that doesn’t mean the neo-liberal urbanism he embodies isn’t vulnerable. After years of Wall Street-centric development, New York’s middle class—a key component of the coalition that elected both Giuliani and Bloomberg—has been moving out of the city altogether. According to an oft-cited report published in February by the Center for an Urban Future (CUF), these folks are doing so because real estate has gone through the roof. The suburbs beckon for other reasons as well: commutes from the outer boroughs (where housing is cheaper) are too long; decent child care is too hard to find; public schools are too much of an uncertainty; monthly utility bills are too high; jobs that pay enough to comfortably remain are too few.
These findings are open to interpretation. So the question is: How they will be mobilized politically? In an essay in Blueprint, a publication of the nationally based center-right Democratic Leadership Council, one-time Giuliani adviser Fred Siegel and Joel Kotkin (one of the co-authors of the CUF Report) put a good share of the blame for the high cost of living on “contentious zoning and regulatory policies,” “politically hyperactive public-sector unions” and not least, odious taxes. Siegel has been critical of Bloomberg in the past—mostly because he thinks the mayor has merely ridden the coattails of his successor to high acclaim. Still, the analysis that he and Kotkin put forth has a familiar feel, as it’s just the kind of spin you’d expect from Bloomberg were he to take up the issue of middle class flight.
There is another way to look at the “problems” they cite, though. These union contracts are a ticket to social and economic security, and have been for some time. Perhaps more to the point, the unions themselves are a source of power for ordinary New Yorkers, both on the job and in their lives more generally. Indeed, we all have a stake in the city’s economic future, and if more of us were unionized, we might actually create the kind of power that gives us some actual control over its design. It’s true that the unions, private sector and municipal, have many faults. But it is absurd to talk about them as if their power was equal, say, to the collective might of the Real Estate Board of New York, the Partnership for the City of New York, and all the rest of the business lobbies. Moreover, if municipal unions were such players, why didn’t they have a place at the Crain’s conference, alongside Bloomberg and the rest of the city’s economic elite?
What’s more, the issue is not that the municipal state, in its capacity to tax and regulate, meddles too much. The issue is rather the city government’s timidity in the face of private sector interests. Instead of controlling the Wall Street-driven real estate bubble, which blew up the cost of living more generally, the city encouraged it by giving developers what they wanted in the form of incentives and abatements. What New Yorkers got in return was radically uneven growth that has left us with an overflow of empty condos and vacant lots.
What to Do
A total reversal of business-friendly development regime is unlikely, given balanced budget requirements on the city and state level. But in the spirit of not letting a good crisis go to waste, we might start with this question: If the cost of living is driving out people making $100k-plus, imagine what it might be doing to people making a lot less? The circumstances of each group may be quite different; indeed, during “normal” times they’d hardly give the other much thought. But now, in the face of crisis, we can see that each has been impacted by the same misguided, “pro-growth” policies. It’s a good time, then, for a grand and progressive New York coalition.
How might we get this started? For starters, we need to expand the debate by once and for all taking on the conventional wisdom about how best to balance a budget. Ever since the 70s, when the squeeze hits the city—as in now—items on the expense side of the budget get singled out: union contracts, schools, hospitals, parks, CUNY, etc. If blame gets bounced up to Albany, the same expense side logic is deployed. As Barbara Bowen, president of the Professional Staff Congress—CUNY, put it in a recent editorial in the union’s newspaper, the “real crisis in New York State is a revenue crisis, not a deficit crisis.”
It’s the right analysis, and we need to get behind the coalition of labor unions, including the PSC-CUNY, and community groups pushing for the Fair Share Tax Reform Act of 2009. Over the last few decades, Bowen reports, the top income brackets in New York have had their rates cut in half. Right now, New Yorkers earning $15,000 pay 12.6% of their income to the state and to municipalities. Those making $1.6 million or more pay half that. James Parrot and Frank Mauro of the Fiscal Policy Institute write in the Gotham Gazette that from 2004 to 2008 public spending grew less than 2.9%, barely the rate of inflation. But the tax cutting spree between 1994 and 2000 “reduced the state’s tax revenues by about $10 billion a year.” The Fair Share Tax Reform Act will add three new top level brackets, at $250,000, $500,000, and $1 million. It should go some way to correct the imbalance.
We have heard the warbling about millionaires heading for greener pastures; when Bloomberg joined the chorus, the Wall Street Journal gleefully said he was “channeling” its editorial columns. Parrot and Mauro point out that when the rate for the top bracket was temporarily raised in 2003, the number of millionaires in New York actually increased. But that’s almost beside the point. Progressive tax reform, say Parrot and Mauro, is the only approach that’s actually consistent with all the talk of common cause and shared sacrifice emanating from the seats of power. And while we’re at it, why not open a discussion about switching some of the spending on CUNY, public schools, child care facilities, hospitals, clinics and parks from the operating budget to the more deficit-friendly capital budget? With all the excited chatter about “human capital,” is anybody prepared to say the phrase does not apply to the public sector, too?
It is also past time to take a hard look at the incentive programs that over the years have passed off billions in public money to the private sector. Unfortunately, as a development strategy they are unlikely to go away. But we should follow up politically on a Good Jobs—NY study that examined Federal Policies vis-à-vis subsidies. While not well enforced, regulations insisting on transparency, the right to “clawback” payments or terminate relationships outright if the job promises aren’t kept or a business up and leaves town, are already on the books. Obama’s insistence on state and local accountability when it comes to federal stimulus money might be helpful in bringing such possibilities to public attention. We can’t totally rely on the Obama Administration, though. We must insist on local mandates to ensure that, when it comes to incentive packages, some measurable public benefit actually accrues.
Last, we need to be wary of divide-and-conquer tactics. Judging from what we’ve seen so far, Bloomberg and Co. will use fuzzy language about creative energy and entrepreneurial spirit to put an inclusive spin on a policy program that, if its past application is any indication, will have pretty exclusive results. The protestors from Right to the City NYC wanted the rest of us to understand what the invited speakers and paying audience at the Crain’s conference knew implicitly. The forum wasn’t about jobs for the people of Harlem or the Bronx; it was about jobs on a re-tooled Wall Street, in Silicon Alley, or in a new midtown bio-tech confab along the East River. The Mayor knows he’s not convincing everybody, especially the politically astute and active among the city’s working poor; the key demographic for him and his allies among the city’s power elite is that vague, insecure middle class, who voted for him before. He is betting that they’ll be receptive to his paeans to the creative city, and join with him instead of those that have risen in protest.