Inequality in New York

Ed Glaeser, Matt Resseger, and Kristina Tobio have a new paper out on urban inequality (ungated version here), which declares Manhattan (New York County) to be the most unequal county in the US:

While Manhattan is the physical embodiment of big-city inequality and has a Gini coefficient of .6, the Gini coefficient of Kendall County, Illinois is only about one-half that amount.  Kendall is a small but rapidly growing county on the outskirts of the Chicago area that combines agriculture with a growing presence of middle-income suburbanites.  In Kendall, 9.2 percent of households earned more than 150,000 dollars in 2006, and 9.3 percent of households earned less than 25,000 dollars.  In contrast, 20.4 percent of households in New York County earned more than 150,000 dollars, and 26.5 percent earned less than 25,000.

If you read the comments on this blog, you'll be told with great vehemence that it's really hard to live on $200,000 a year in Manhattan. If that's true, how on earth is more than a quarter of Manhattan's population managing to live on less than $25,000 a year? The paper addresses that question:

Prices differ across metropolitan areas, but if prices were the same for every type of person in every area, then prices should not impact inequality, at least as measured by the coefficient of variation or the Gini coefficient.  However, as suggested by Black, Kolesnikova and Taylor (2007), prices may be quite different for people at different places in the income distribution.  New York may be much more expensive for a relatively rich person than it is for a relatively poor person.  Indeed, the very fact that poor people continue to live in New York suggests that the area may not be as expensive for them as average prices would indicate. 

I think there's a lot of truth to this. Childcare, for instance, is expensive in Manhattan -- but if you don't pay for childcare, then it doesn't really matter how much it costs. The same can be said for just about any services (massages, psychotherapy, taxis), as well as things like brand-new children's clothes and toys.

Meanwhile, the poor get enormous benefit from the quality of public services in Manhattan, from the police and fire departments to the public libraries -- which are basically paid for by the rich. They also live in housing which is priced well below market rate: if you added the implicit housing subsidy onto cash income, there would be barely anybody in Manhattan living on less than $25,000 a year.

What interests me is the way in which the poorest quarter of Manhattan's population has become increasingly invisible even as inequality has grown substantially over the past 25 years. My own neighborhood of the East Village (f/k/a Alphabet City) is a prime example of an area where there's still a very large poor population, but where visible life only ever seems to get more and more expensive, with retail-level stores catering to poorer people closing down and being replaced by those catering to yuppies.

That kind of change breeds resentment, of course, and the paper shows a correlation between inequality and not only the crime rate but even the murder rate. "People are less happy when they live around richer people," say the authors; I wonder whether the destruction of personal wealth which is going on in the Financial District might make poor New Yorkers happier. I hope so.

(Via Avent)