“Now it’s busy, as you can see,” says Maggio Cipriani, the Cipriani dynasty’s 21-year-old magnate in training. “We’re picking up a lot.”
Nearly 100 blocks north, in the heart of central Harlem, the picture is noticeably different. Things are not picking up, at least not for Pamela Brown, 51, a poised mother of three who has recently moved into the neighborhood after losing her apartment in the Bronx. Sitting at a local Starbucks, her hair pulled into an elegant twist as if she was about to head to the office, she describes how she was downsized from her administrative job at Bank of America during the great meltdown of 2008 and has struggled unsuccessfully to find work ever since. Is her age to blame, she wonders? Race? The fact that she is still a few credits shy of a college degree?
Whatever the reason, she is getting by on food stamps and welfare, her monthly income reduced to $818 for her family of three. Soap and dry cleaning are luxuries; her youngest son has left his private school. As part of the 1996 welfare “reform” requirements, she spends her days sweeping streets for the city’s mandatory Work Experience Program. “[My friends] have this false sense that I must have done something wrong for this to happen to me,” says Brown. “But I did everything that I thought I was supposed to do.”
Such are the stories of recession and recovery wafting up from New York’s sidewalks these days. On the one side are tales of prosperity and excess, of New York as the poster child for an economic comeback so robust that Manhattan is now the fastest growing local economy in the country. On the other side are privation and struggle.
These disparate realities rarely elbow their way into the same conversation, but they are very much part of the same story, perhaps the story of recession New York. In this story, African-American men lost jobs at four times the clip of their white counterparts; their unemployment rate jumped 9 points, to 17.9 percent, the largest increase of any group during the recession. At the same time, the median salary of managers and professionals leaped 9.5 percent, while nonmanagers and nonprofessionals saw their wages tumble some 4.3 percent. And according to the New York City Coalition Against Hunger, the city’s fifty-seven billionaires (including its billionaire in chief, Mayor Michael Bloomberg) increased their collective net worth by $19 billion between 2009 and 2010, while the number of New Yorkers visiting food pantries ballooned by 200,000 during roughly the same period. Call it the trickle-down recovery that has yet to trickle down.
New York City is not an aberration; it’s just one of the more dramatic examples of the recession’s unequal grip. As labor economists Andrew Sum and Ishwar Khatiwada argued in a February 2010 paper, “A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent.” No wonder 2009 set records for income inequality. In that year, the chasm between rich and poor measured even wider than it did in 1928, the last time so much wealth was concentrated in so few hands.
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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.
“There was an over-focus on Wall Street and business, and not enough attention paid to the people that are actually integral to getting the economy going again,” says C. Nicole Mason, a political scientist and executive director of New York University’s Women of Color Policy Network. Sum is more blunt. “Low-income people needed the most help, and they got the least help,” he said. “Nobody’s bailed out the American worker.”
By now, the Wall Street component of this story is well-known. Determined to prop up the imploding banking sector, the government mainlined money into Wall Street’s ready veins, $193 billion through TARP alone. With scarcely a qualm, it gobbled up bad assets, restored the commercial paper market and saved the money market/mutual funds industry—to stunning effect. Banks did not merely survive; they earned record profits. The stock market swooped upward. And for a select sliver of New York’s population, the most obvious signs of the recession seemed to melt away.
Once again, the statistics tell the story. According to the Fiscal Policy Institute, during the third quarter of 2009, denizens of Manhattan’s tony Upper East and West Sides enjoyed a barely recessionary unemployment rate of 5.1 percent while residents of Brooklyn’s East New York neighborhood suffered near-depression levels of unemployment (the official rate was 19.2 percent). More shocking: the unemployment rate for white men in the west Brooklyn neighborhoods stretching from Brooklyn Heights to Red Hook floated at 3 percent while black men in the same neighborhood suffered an unemployment rate of 46 percent.
“If you’re sitting in financial services, you feel like it’s stabilized, you feel like we’re out of crisis mode,” says Adam Zoia, founder and CEO of Glocap Search, a financial services headhunting firm. Hiring is up about 30 percent from 2009, he reports, and the amount of assets under hedge-fund management is back to its prerecession high of $1.7 trillion. “The compensation levels have largely recovered,” he adds.
Unfortunately for those outside the finance sector and its satellite industries, the benefits of this comeback have largely been elusive. The American Recovery and Reinvestment Act, better known as the stimulus, certainly helped the working and middle class. The stimulus social spending—like the childcare money and the TANF Emergency Contingency Fund, which created a job subsidy program for parents receiving welfare—made palpable differences in people’s lives. The stimulus both created and saved jobs in New York City—some 22,000 in the third quarter of 2010 alone—and unemployment would have risen without it.
Yet the stimulus didn’t do nearly enough: it wasn’t big enough, direct enough or targeted enough to help the people who needed it most. In New York, as in much of the country, those who needed it most have tended to be the young, people of color, and low-income and blue-collar workers. They are women like Luz Villanueva and Belgica Malu, who stood shivering in yet another job fair line in November, hoping to end their yearlong job search. And they are women like Nancy, a 56-year-old domestic worker from Colombia whose age and limited English and education have conspired to keep her jobless for more than two years. Nearly one in four low-income Latinos reports losing a job or having hours or income reduced, according to the Community Service Society’s 2010 “Unheard Third” study, and these women certainly proved the point. Luz and Nancy can barely afford the subway.
They are also men like Chang Ahn, 62, a Korean immigrant with legs made spindly by polio, who lost his job in the classified department of the Korea Times in December 2008—a job he’d held for twenty years—and has been unable to find work since. He tried to find another media job and even asked fellow church members about washing feet at nail salons, to no avail. He blames his disability and age—and he’s probably right; in 2009 men between 55 and 64 held the record for long-term unemployment in New York City, with an average of thirty-nine weeks.
And then there is David Ward, a 24-year-old father of two, who stood outside the city’s intake center for homeless families on a chilly November day, preparing to enter the homeless system for the first time. “I never expected to come here—never wanted to—I always expected to do things on my own, with a job,” he says. But after failing to find work more than two years after losing his job at Rite Aid, he finds himself shoved toward an unexpected bitter reality. In this reality, young men with limited education and even more limited means can spend years trying to find a job, with no luck. In this reality, only one in four black men in New York City between 16 and 24 is employed, as a recent study by the Community Service Society reveals. And in this reality, the jobs that were created by the stimulus, many through infrastructure projects, went largely to people with more skills, education, work experience and access.
A targeted approach to job creation—in the form of affirmative action hiring, direct job creation or wage subsidies for companies that hire particular groups of workers—would have helped moderate this trend. But for the most part that didn’t happen. The stimulus money was simply released, with little direction and even less accountability.
“I think the administration was very reluctant to create targeted programs,” says the Women of Color Policy Network’s Mason. “But you cannot just ignore [these communities] and say, ‘Well, everything will work itself out.’ This is the same problem with the trickle-down economics,” she continues. “If I have a broken leg and you have a small cut on your finger, it doesn’t make sense to put a patch on both those things. They’re different remedies, and they call for different types of responses.”
And there’s another problem. Some of the most effective stimulus programs were either too narrow in scope or too poorly funded to make the difference they could have. The summer youth employment program is one example. An enormously useful way to introduce young people into the workforce, this program provided jobs and training to more than 35,000 young New Yorkers during the summer of 2010. But it was not funded adequately enough to meet the full need, and its three-month time limit undercut its purpose. “The summer program by itself is not enough to change people’s lives,” says Sum. “You’ve got to do year-round job creation.”
More distressing is the case of the TANF Emergency Contingency Fund. This program created some 240,000 jobs nationwide for low-income parents receiving welfare and was considered so effective that even some Republicans were gaga for it. So what happened? Congress let its funding lapse on September 30—leaving people like Pamela Brown, the former Bank of America assistant, stuck cleaning streets for the welfare department. “They’ve never looked at my résumé,” she says.
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Outside the precincts of New York, the story is not much cheerier. As Andrew Sum and Ishwar Khatiwada’s study demonstrates, nationwide, suffering during the recession followed a straight Euclidean line from poorest to richest, with the poorest enduring catastrophic job losses, those in the middle enduring significant though less pervasive job losses and the richest enjoying scarcely a blip. Or put differently, New York is a near perfect allegory for the cruel geometry of this recession.
A glance at more recent unemployment data that Sum and Khatiwada updated for The Nation tells the story. Between January and October 2010, average unemployment rates for workers in the lowest income decile (those with a household income of $12,499 or less) hovered at 29.4 percent, a figure that surpasses the Great Depression’s nationwide unemployment high of 25 percent. For those in the second-lowest income decile ($12,500 to $19,999), unemployment hovered at 20.1 percent. Among those in the third-lowest ($20,000 to $29,999), it was 14.9 percent—and on and on in an increasingly cheerful progression to those in the top two deciles ($100,000 to $149,999 and $150,000 and above), who enjoyed the impressively low unemployment rates of 4.1 and 3.4 percent respectively. “See those last two groups?” asks Sum. “We call that full employment.”
Sum and Khatiwada did similar analyses for underemployment rates and underutilization rates (a figure that combines the unemployed, the underemployed and those who are not looking but still want work). In each instance the data follow the same distressing pyramid pattern. Underemployed workers in the bottom decile were working part time or at reduced hours at almost ten times the rate of those in the top decile, or 19.5 percent compared with 2 percent. Underutilized workers in the bottom decile were “underutilized” at roughly seven times the rate of those in the top income decile (and two and a half to three times the rate for their own group in the 1990s). Which is to say: while 49 percent (or one out of every two) of the poorest Americans were “underutilized” during the first ten months of 2010, only 6.8 percent of those in the top income decile shared this fate. Overall, nearly 30 million workers were “underutilized.”
“This [disparity] is worse than the worst third world country I’ve ever seen in my life,” says Sum. “And nobody wants to openly admit this because they want this little myth that we’re all in this together—the jobless is everybody. No, it is not. It is overwhelmingly among low income and then low-middle income.”
For Sum, the solution to this skew is at once obvious and challenging. At its most basic, it primarily requires good old-fashioned, WPA-style job creation, particularly for young people, the group hit hardest by the recession. “I would take all the stimulus money and put it directly into job creation,” he says. But in an important twist on what the government did the last time around, this stimulus would be “very targeted.” There would be guidelines requiring any company or agency that gets stimulus money to hire real people—not just stash the money away in their budgets, as so many did—and to hire unemployed people more specifically. Moreover, there would be incentives, in the form of wage subsidies and tax credits, to induce companies to hire low-income workers, young and adult. And there would be training and education. Call it a trickle-up recovery.
But how does any of this happen now? In the wake of Republican victories, it’s hard to imagine that we’re in for a change in policy anytime soon. And yet there are faint stirrings of hope: in the coalitions of the unemployed; the 99er unions; the grassroots groups that have come together to fight for job creation, unemployment insurance, TANF funding and more. They have not given up.
Pamela Brown was never an activist during her years in the banking trenches, but unemployment and welfare have made her a self-described dissident. In 2009 she joined Community Voices Heard, a grassroots group of low-income New Yorkers, and became a leader in its fight for jobs and welfare rights. “The only way we’re going to change our lives collectively is to get politically engaged,” she says. “It’s that simple.”