Eric Adams, New York’s media-savvy mayor, caused a storm this week by pledging to take mentally ill people from the city’s streets into hospitals, on an involuntary basis.
Homelessness and crime have sparked rising angst in the Big Apple, and both can be linked to untreated mental health issues. If this new move by Adams delivers safer streets — and it’s a big “if” — it will throw down the gauntlet to cities such as San Francisco and Seattle, where problems are dramatically worse.
But while visible issues such as homelessness are the focus of mayoral attention, there is another, less visible, question that should also worry Adams. Namely, the outlook for New York’s economy — and its workforce.
During the Covid-19 lockdowns, many wealthy residents and businesses decamped to low-tax locations such as sunny Florida, undermining the local tax base just as spending demands surged. The fiscal gap was partly plugged — or, more accurately, papered over — with federal aid. Since then, some (but not all) the migratory birds have returned, offices have reopened, residential rents rebounded and hotels become crammed.
But office occupancy remains lower than before the pandemic and seems unlikely to climb to pre-Covid levels. Academics at Columbia and New York Stern business schools estimate that $50bn has been lopped off the value of New York office real estate.
Adams, therefore, confronts the same issues as many other city leaders since the pandemic began: can New York be fiscally sustainable with half-filled offices? And what about its workforce?
The good news is that the city starts with significant advantages (aside from being famously brash and skilled at hustling). A recent report produced by McKinsey for the mayor’s office lays it out: the region has the second-biggest metropolitan economy in the world, only bested by Tokyo. Gross domestic product a head is well over $150,000 — higher than any other city in America except Los Angeles.
The number of residents with degrees is also greater than in other US cities, and New York has a long tradition of sucking in hordes of ambitious migrants — a third of the workforce is foreign born. While immigrants over-index in medical services, they also account for almost half of real estate workers and a third of finance workers.
More important still, the city is accustomed to repeatedly reinventing its economic base. At the start of the century, most highly paid jobs were in finance. Today, according to a recent report from the mayor’s office, the tech sector is the biggest engine of highly paid job growth and New York is second only to Silicon Valley in size. Wall Street no longer rules supreme.
But the bad news is that the wider climate is now shifting. Since 2019 the workforce has declined by 4 per cent, a stark contrast to previous decades. That is partly due to the pandemic exodus but workforce participation was falling even before Covid.
Moreover, McKinsey calculates that while there were almost 900,000 net population inflows between 1991 and 2011, there have been 52,000 net outflows since then. Yes, you read that right: in the city where Hamilton writer Lin-Manuel Miranda penned the line “Immigrants — we get the job done!”, the migrant tide has reversed. Miranda observed this week that this saddened him, since he (rightly) considers immigration a source of strength.
But the wider labour issues are equally concerning. McKinsey predicts that by 2030, automation will have destroyed 350,000 New York jobs, in sectors such as office support and restaurants. It also forecast an even greater wave of job creation in healthcare, tech, law and business. But the rub is that the second category of potential new jobs require training and education — while the former do not. The future of the Big Apple thus looks dangerously bifurcated: there will soon be an excess of high-paying jobs for high-skilled (and highly mobile) workers while low-paid and low-skill workers will struggle.
This suggests that the city needs to retrain its workforce with public money or public-private partnerships, or both. Projects have started but they are still small. And while the former mayor Michael Bloomberg was deft at building partnerships with business, and skilled at delivery, thus far Adams seems weaker in this respect.
Moreover, New York faces a swelling fiscal crisis. Adams’s team recently announced that there will be a budget shortfall of more than $13bn in the next three years, amid a 7.7 per cent fall in tax revenue from personal income and related taxes this year. They are right to cut spending in response. But they cannot slash too far without further hurting infrastructure — and they cannot squeeze wealthy residents or businesses for more tax without sparking an even bigger exodus to places such as Florida.
Thus New York — as so often before — resembles not just the face of America but an extreme microcosm of its challenges. Post-lockdowns, its economy may be growing and its entrepreneurial spirits soaring, but its economic and social divides seem likely to worsen.
If Adams can ameliorate this, he will rise on America’s national political stage. If not, the Big Apple faces more blight.
