The U.S. Census Bureau released 2005 economic data from its American Community Survey data yesterday, and having looked at those numbers and having analyzed similar numbers professionally for 20 years, the first-day stories in the newspapers surprised me. As far as I am concerned, everyone got it wrong – so wrong that they must have written the stories before they came out and plopped in the numbers when they arrived.
The story as reported is that poverty is unchanged, and this shows that New York City is not a good place for the poor. The view appears to have been pushed by poverty advocates, who are advocating for more money to be sent their way. The reality is that poverty has declined significantly, but this isn’t necessarily good news for the poor either, because the advocates and analysts fundamentally misunderstand the factors that influence the poverty rate at the local level. At the national level, the poverty rate is determined by changes in the economy, in society, and in public policy. The national poverty rate was significantly higher in 2005 than in 2000, though slightly lower than in 2004. At the local level, on the other hand, the poverty rate it is a function of who moves in (or is kept out), who moves out (or is pushed out), who is born and who dies off. Local changes in the poverty rate may have nothing to do with whether individuals are getting richer or poorer whatsoever.
The city’s own history proves this. From 1945 to 1965, New York City was a great place to be poor, with lots of services, massive subsidized housing, entry level jobs, mid-level jobs, and a high-quality education system that allowed the children of millions to advance up the economic ladder. Did that reduce the city’s poverty rate relative to the national average? No, because the formerly poor beneficiaries of those policies moved to the suburbs and Sunbelt, taking the fruits of the city’s contributions with them.
Meanwhile, millions of poor people from places that were not good for the poor, especially the minority poor, moved in, mostly from the South and Puerto Rico, bringing their problems with them. They arrived at a bad time, as entry level retail and service jobs followed the middle class to the suburbs, while middle income jobs either disappeared (manufacturing) or went to suburbanites (cops, firefighters). According to 1980 census data, one-third of those who moved to the city from 1975 to 1980 were on welfare in the latter year. The city’s poverty rate soared to about 20 percent, and stayed there for nearly 25 years. The bottom line is New York City had affordable housing and lots of services for the poor, so it attracted them. You can’t call for more and more places for poor people to live in the city, as many poverty advocates do, and then complain when the city has many poor people. The places that have low poverty rates have no subsidized housing, and use zoning to drive up the price of market rate housing. New York City has pretty much done the reverse.
Even so, for most of those 25 years, New York City was a terrible place to be poor, with few job opportunities and horrible schools (except for special deal schools the poor couldn’t go to) and lots of crime and violence. Social services expenditures were increasingly directed to the elderly, even the non-poor elderly, the residual population from better times. In 1990, 70 percent of those age 65 and over were non-Hispanic whites, and 70 percent of those under 18 were not. Guess where the money went? But just as New York City did not get the benefit from its prior generosity to the poor, it isn’t paying a price for its more recent stinginess. Poor New Yorkers may be worse off, but the poverty rate is going down.
According to the 2000 census, the city’s poverty rate was 21.2%. According to the 2005 American Community Survey, this had fallen to 19.1%m the lowest level in forever. More than half of that decline came in just one year, with the ACS having recorded a 20.3% poverty rate in 2004. Not a significant decline? That’s one year! Keep that up for another five years, and the 2010 census will record a 14.3% poverty rate for New York City in 2009. By 2010, the ACS will record a poverty rate below the current national average. Of course the ACS is not a census, and there is a potential for error based on the randomness of who is and who is not surveyed. If the 2004 survey missed by the full standard error on the upside, the 2005 survey missed by the full standard error on the downside, then the poverty rate would have been 19.5% in both years. But the odds of both to those being true are just about zero, as is the sense in saying nothing has changed.
Does that mean formerly poor people are becoming non-poor? Some, no doubt, but other factors are more important. The census found that 17.8% of city residents over 65 were poor in 2000, but 20.3% were poor in 2005. That isn’t because the old are getting poor, it is because the poor are getting old. Remember that “welfare generation” that moved in the 1960s and 1970s? Well if they were young adults then, the first of them will be over 65 about now, and more and more of them will become over 65 over the next 20 years. Some will die off and others move out. When you spend a lifetime on welfare, you “retire” to SSI, and are ineligible for Medicare but end up on Medicaid (an uh-oh for the city budget). Since SSI pays the same everywhere, many of those seniors would be better off living in low cost areas – like the places they came from hoping, in vain, to get jobs so long ago. Some of these places are now better for the poor than NYC.
Meanwhile, just 15.6% of NYC adults age 18 to 64 were poor in 2005. That is the future, and the rate will go down as more of the “welfare generation” crosses the 65 threshold. Other ACS data show that the share of NYC adults who are college-educated is soaring, the share that dropped out of high school is plunging. No thanks to the city’s schools. Rather, the less educated people are dying off or, because they cannot afford to live here, moving on (or in some cases becoming homeless). Meanwhile, highly educated people from all over the nation and all over the world are moving in, transforming neighborhoods in the demographic blink of an eye. Some are even having children, pushing the share of NYC children in poverty down from 30 percent in 2000 to 27.7 percent in 2005, still higher than for the seniors but lower than it was. Perhaps there will be decent schools here a decade from now after all, if more of those who attend them are the children of people who matter. Other data show the number of children under 5 is soaring in Manhattan. Those kids are not poor.
So what do I make of this? Well, given that many of the costs of poverty are localized, places with a high concentration of poverty are generally unable to offer jobs, education, and a decent life to the poor. So I will not be disappointed if New York City has fewer poor people. On the other hand, it would be a cruel irony if at the moment that New York City became as better place to be poor (and the ACS shows the share of the population working has also soared), the poor were priced out of the NYC housing market and missed the benefits. As the city’s poverty rate approaches the national average, I’ll start to get concerned. By then the poverty advocates will have presumably stopped complaining about the poverty rate not going down, and started complaining that not enough poor people can live here (now they do both, but that’s stupid).
In fact, if the working poor as well as the dependent poor (or instead of the dependent poor) are priced out of the city, the rest of us might feel the pain as well – the same pain now felt by the suburbs with their exclusionary zoning, labor shortage, priced out offspring, and working poor reverse commuters from New York City who are sent home at night (can you say Soweto!). We’re still a long way from that, but at the current rate of decline we could be there in a decade. So I’ll leave you with a quote from the housing bubble blog, about the housing price explosion, now about to reverse (as is ours), in South Florida.
“I’m sure Miami-Dade wants to attract upper and middle class people, but they forget that for every upper class person to actually live here, you also need three middle-class people to run their businesses, teach their kids, and keep them safe, and for each of them three lower-class people to mow their yard, take care of their parents and kids, and wipe their asses. Try to alter the capitalist formula by raising the cost of basic living to intolerable levels in a geographic region, and it all falls apart. This is where So FLa is headed. We need the peons!”