The City That Doesn’t’ Work No Longer?

I was surprised to read in the newspaper that the June 2011 employment-population ratio, the ratio of people age 16-plus who were working to the total population that age, had fallen to the lowest level since June 1983, when I graduated from college into unemployment. Part of this is cyclical – this is the worst recession since the early 1980s debacle, and has arrived just into time for the children of the benighted 1970s generation – the first to be worse off than those who came before – to repeat that young adulthood experience. But I believe there is also something structural going on.

In the past 15 years (the business cycle adjusted for), I am aware, New York City’s employment-population ratio and its labor force participation ratio – the share of its residents age 16-plus who are either working or looking for work – have been moving up. This is significant because one of New York City’s chief economic liabilities for the past half-century has been its need to carry a large economically inactive population. Through 1960, New York City residents had been more likely than the U.S. average to be working or looking for work, mostly because its women were more likely to work outside the home. But during the mass population migrations of the 1960s and 1970s this changed, giving New York the status of the city that didn’t work. Is it changing back? I downloaded the data in the linked at the end of the post spreadsheet to find out (had trouble attaching).

A look at the chart in the tab EmpPopGap summarizes the story. In June 1976, with New York City in the depths of a fiscal and economic crisis shared by older central cities throughout the nation, just 48.3% of its “adults” (age 16+) were working compared with 57.5% for the U.S, a gap of 9.2% percentage points. Remember that the city’s share of adults who were working had been higher in 1960, according to the Census of Population that year.

Other aspects of the city’s economy – income, those working in the city, the city’s fiscal situation – staged a strong recovery in the 1980s. In terms of the “middle class jobs” that those in think tanks financed by unions talk about, in fact, one might say that the city’s economy was stronger then than it has been since, as the wipe out of “pink collar” back office jobs by office automation and outsourcing had yet to occur. But much of the benefit of the city’s 1980s increase in economic activity fell to the suburbs, both because the best jobs were held by those commuting in, and because many city residents did their shopping in the suburbs generating low-skill jobs there – far from the city residents who needed them. The NYC’s employment-population ratio it continued to trail the U.S. average by around ten percentage points, and when the deep 1987 to 1995 recession hit, the gap soared to peak of 12.6%, as 50.8% of the city’s adults were working compared with 63.4% of U.S. adults in June 1995.

The gap began moving down slowly until 2000, when the U.S. June employment-population ratio peaked at 64.9% and the city was 9.2 percentage points behind, then fell rapidly in the 2000s to just 4.4% in 2010 and 2011. Looking at the labor force participation rate tells a similar, if slightly less dramatic story, because in the past city residents were not only less likely to be in the labor force, but also city residents in the labor force were more likely to be unemployed – a double whammy for the local employment-population ratio.

At first the shrinking gap was a good news story in the city – more people were working locally. But more recently bad news for the U.S. as a whole has been part of the story as well. Compare peak-to-peak and trough-to-trough to eliminate the effect of booms and recessions. From 64.9% in 2000, the June U.S. employment-population ratio managed to reach just 63.5% in the following peak, in June 2006. And whereas the June 2003 low point for the U.S. employment-population ratio had been 62.7%, the June 2011 figure is just 58.5%. Not only are more U.S. adults not working, more and more are out of the labor force entirely and no longer even trying to find a job. The June U.S. labor force participation rate hit a low of 66.5% in June 2004, and a significantly lower low of 64.5% in 2011.

Now compare that with NYC’s numbers. From a low of 50.3% in June 1992, the city’s employment-population ratio hit subsequent lows of 53.8% in June 2003 and 54.1% in June 2011. And from a high of 53.3% in June 1990, the city’s employment-population ratio reached subsequent highs of 55.7% in June 2000 and 56.7% in June 2008.

So what explains these trends? Myopic local pols might point to local public policy, but migration accounts for most of the city’s relative trend. In particular, what matters is the movements (or lack thereof) or four groups of people, two of whom increase economic activity and reduce social burdens, and two of whom decrease economic activity and increase social burdens:

1) Young new labor force entries with skills and relatively bright employment prospects, particularly in this era recent college graduates;

2) Middle class married couple families with workers and children;

3) Non-affluent seniors who no longer work, either because they were retired or pushed out; and

4) The economically disadvantaged and socially troubled: high school dropouts, teen single parents, paroled ex-offenders, substance abusers, and the physically, mentally or psychologically handicapped.

The latter two groups can be accommodated in the labor force when times are good, labor is scarce, and employers are willing to accept those who require more training, present other problems, and have lower productivity. These groups, along with young people without work experience, are pushed out of the workforce when the economy is weaker. And the economy is now weaker than it has been since the 1930s, which is why the employment-population ratio is the same as in 1993 even though the labor force participation rate is slightly lower.

New York didn’t become the city that didn’t work in the 1960s and 1970s because its schools and economic opportunities were relatively poor in the 1950s and 1960s. The reverse was true. A large population of economically active young adults who had grown up in the city did quite well for themselves. But they moved to the suburbs, and then to the Sunbelt, over the course of 30 years from 1950 to 1980, taking the city’s investment in their youth with them and not looking back. Those who stayed behind in the city, meanwhile, increasingly lived as if they were in the suburbs, shunning mass transit, driving everywhere, and doing their shopping in suburban malls with national retailers then absent from the city. Many stayed only because they were part of the city’s political class, and from time to time some of them were discovered to actually reside in the suburbs or on “politician row,” a street in the Bronx cut off from the rest of New York City by Pelham Bay Park and accessible only from Pelham.

Those young people who left NYC from 1950 to 1980 often left their aging, less well off parents behind to be cared for by the City of New York, and the city’s population skewed much older. This presented a burden because under the New York Medicaid funding formula of the time, 25% of nursing home costs were covered by local governments. (The local share was cut once the burden of seniors shifted from the city to the suburbs and Upstate, so city residents could cover more of the burden elsewhere in state taxes). The city ended up with relatively high spending on seniors, and relatively low spending on bad schools. And no wonder: in 1990, according to the Census that year, the vast majority of city residents age 65 and over were non-Hispanic Whites, while the vast majority of children under age 18 were NOT non-Hispanic whites.

During the 1950 to 1980 period, an economically disadvantaged population moved into New York City from Puerto Rico and the South Atlantic states – taking the place of the young adults who moved out. Some point to the city’s loss of manufacturing jobs as a reason for their subsequent poor history here, but an analysis by the City Planning Department showed they never lost those jobs because they never got them to begin with. Instead the jobs (and the schools) disappeared as they moved in, and they ended up on welfare. In 1980 and 1990, only a small share of NYC heads of households with public assistance income (welfare or disability) had been born in New York State. Most has been born in the South Atlantic states, from Virginia to Florida, and Puerto Rico. The South Atlantic states, it seems, didn’t suffer economically from decades of poor schooling and discrimination, just as NYC didn’t benefit from the reverse. Migration shifted those with economic assets south (along with the jobs), and those who were troubled north.

In a partial reversal, young college graduates from the suburbs and the rest of the country have been moving to the city since the Baby Boom generation began to come of age, starting in the 1960s and 1970s in Manhattan and moving into Brooklyn starting in the 1980s. But until recently those with advantages – married couple families and the college educated – flooded back out of the city when their children reached school age. A City Planning analysis of 1990 census data by place of residence five years earlier that I was a part of showed native-born college-educated people moving to NYC in large numbers in their 20s, and then moving out when their children were 5 years old, from and to the suburbs and the rest of the United States. This matches the experience of my college classmates: many lived in Brooklyn and worked in Manhattan in the years immediately after graduation. A few years ago, only a handful remained (although a quick search of the alumni website shows the number is actually rising as those our age approach empty nesterhood).

A larger reversal would come later. The anecdotal evidence implies that the immigrants and young college graduates who arrived in New York City in the late 1990s and 2000s have been more likely to stay when their children reached school age. Unfortunately (and not for lack of attempts) I have as of yet been unable to obtain the training in SAS/SPSS required to analyze Public Use Microdata Sample (PUMS) from the Census Bureau, but hopefully the City Planning Department’s population division will repeat the analyses they did for me after the 1990 census and see if that is the case. The comparison is those moving in compared with those moving out (using national and regional PUMS files, in each case based on place of residence five years earlier) by demographic, economic and social characteristics. In addition to the values and lifestyle preferences of a new generation, lower crime and a (temporarily) improved transit system and school system have played a role.

What is also the case is that the city allowed national retailers to move in after 1995, and the city’s outer borough commercial streets filled up, demonstrating that the city is capturing a larger share of the consumer-based economic activity created by the income of its own residents. As many of those jobs are low-wage and low-skill, there is more opportunity in NYC for those at the bottom of the ladder than there had been in the horrific early 1990s recession. Welfare reform also had the effect of pushing those who might have fallen into dependency into the labor force.

While New York City can point to some public policy successes, however, migration is a better explanation for its revival. With its housing no longer cheap, and with the city now willing to push back against troubled people from elsewhere shipped to NYC from less generous jurisdictions, the influx of people from elsewhere into the welfare system ended in the 1990s, according to 2000 census data. I remember an analyst telling the New York Times this was a “historic reversal.” Once the seniors who had been left behind in the 1950s through the 1970s died off, the city’s population began to skew younger compared with the national average. Those who fled the city at the time are reaching old age elsewhere, although the city is still paying for them, as local Medicaid funding percentages for seniors have been predictably adjusted to its detriment.

Census data shows a rising share of city residents have college and gradate school diplomas, with the city’s population now more educated than the national average, although the city still trails when it comes to high school graduates. But that is not because those who grew up in the city in the 1970s, 1980s and 1990s reaped the benefits of a fine education and economic opportunity. No, the city’s college graduates and graduate school graduates are moving in from elsewhere, the cream of Ohio and Michigan, and India and China and Russia, and even California. In a reversal, instead of paying a price of 30 years of educational failure, the city’s labor force quality has increased – even as other places contend with an aging population with fewer working age taxpayers to support them.

Based on what I read in the newspaper, the changing lifestyles of young workers moving to New York over time is like a reversal of the Monty Python sketch the Four Yorkshiremen. In that sketch four men who grew up in the tough times of the Great Depression, but were later successful in the more prosperous times that followed, brag about their tough past, and complain that the young have it soft. But whereas the young adults of the 1960s and early 1970s might have complained about a fourth floor walk up apartment in Manhattan, my living arrangements included one room in a shared apartment in the Bronx. But today’s 20-somethings might say “Room, that’s luxury, you were luck to have a room! All I have is an upper bunk an apartment with three other roommates in the room and seven others in the apartment!” And just remember, the best off members of the younger generation are moving to NYC. In general across the U.S., each generation has been worse off economically on average since the 1970s, and those left behind elsewhere in the U.S., along with those laid off in late middle age, are in much worse shape.

Jobs have followed the young college graduates to a few favored parts of the U.S., and the recession seems to have accelerated the trend. In the 1960s, corporations fled the fiscal costs and fiscal ills of the city’s poor to suburban office parks in places like the I-287 corridor in Westchester, near their labor force. Now those corporate campuses are empty and, like the nearby population, aging. And businesses that want to hire young college graduates are moving into Manhattan to be near them.

One “business climate” survey after another shows New York City to be just about the worst place in the country for business. Taxes and real estate costs are high, and pandering to the egos of wealthy executives by the local political class is relatively low. And yet NYC has suffered less economic damage than average in the recession. At some point, comparative tax burdens, commercial real estate costs and housing costs will choke the city’s economy, but that point has apparently not been reached. Because regardless of what business executives say in surveys, measures of what they do show a radically difference set of preferences.

I’ll summarize the current trend in economic development this way. Those places with a growing concentration of the economically advantaged young adults win. Those with a growing concentration of the economically disadvantaged older adults lose. And once Generation Greed gets through pillaging the country, those reaching old age will be increasingly disadvantaged, troubled and dependent compared with those who came before. To the extent that their burdens are localized, the places where they are concentrated might die off before they do.

So what does the labor force trend for the U.S. say about the country, and about New York City? Way back when I predicted that there was a good chance the 1970s would be repeated in NYC, because the same public policies (debts and pension deals selling out the future) were being repeated. But it was a certainty that the 1970s would be repeated elsewhere, with large parts of the country facing large-scale downward mobility, pension crises, and collapses of public education and other public services, for the first time. And that is what seems to be happening.

Perhaps the difference between the 1970s and today is that this time city residents will have nowhere to flee, because there will be rising poverty, rising crime, rising state and local taxes, declining schools, and failing infrastructure in large areas of the country. Just as in the 1960s and 1970s in NYC, more and more money in the whole of the U.S. is going the seniors, and more and more of those of working age are worse off than those who previously lived there. So while it would be nice of NYC’s employment-population-ration and poverty rate eventually closed the gap with the U.S. average because the city was better off, it seems more likely that the gap will close because large areas of the rest of the U.S. will become worse off.

Try getting the attachment here.