Even before the Great Recession, all was not as sunny as it seemed in New York City. For the lucky minority, the boom years of the 1990s and 2000s were glorious times. As the twin forces of financial deregulation and corporate-friendly tax policies loosened the economic floodgates, Wall Street surged, lifting all yachts if not all boats. Between 1990 and 2007, average Wall Street salaries (including bonuses) ballooned nearly 112 percent, from just over $190,000 in 1990 to more than $403,000 in 2007, according to a startling new study by the Fiscal Policy Institute. During the same period, the top 5 percent of income earners—those making more than $167,400 a year in 2007—nearly doubled their share of the city’s total income, from 30 percent to 58 percent.
But for the remaining 95 percent, life was not so charmed. As unions came under assault, the minimum wage stagnated, manufacturing jobs were shipped overseas, New York’s poor and working class struggled, and its middle class wasted away. As the Fiscal Policy Institute study shows, the median hourly wage shriveled 8.6 percent between 1990 and 2007. The gap between rich and poor yawned wider—while the rich claimed ever larger chunks of the pie, the poorest 50 percent claimed less than 8 percent of the city’s annual income and the once robust middle claimed just above 34 percent, earning New York the honor of being the most unequal large city in America.
“If New York City were a nation, it would rank fifteenth worst among 134 countries with respect to income concentration, in between Chile and Honduras,” writes James Parrott, chief economist for the Fiscal Policy Institute, in his report “Grow Together or Pull Further Apart? Income Concentration Trends in New York.”
Such was the world that existed before the recession even struck, and it bore an uncanny resemblance to the Big Apple on the eve of the Great Depression, when the gap between rich and poor was epicly wide. New Deal policies helped usher in an age of unprecedented (if still relative) equality after the Depression, but it seems unlikely that the same result will come from this meltdown. In fact, it seems to be exacerbating inequality.
The reasons for this are many and tangled. They lie in the foreclosure crisis, which fell disproportionately on minorities. They lie in the fact that the hardest-hit industries—construction, manufacturing, retail trade and administrative support services—were those that employed the poor, the working classes and struggling middle. They lie in the apparent willingness of professionals and managers to slash everyone’s job but their own (Andrew Sum found no net loss in the combined number of managers and professionals employed in the country during the recession). But fundamentally, the reasons lie in policy: in a bailout that went too far and a stimulus that didn’t go far enough.