Opinion: Crime worries New York, and inequalities should increase

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New York City Mayor Eric Adams stirred up a storm this week when he promised to take the mentally ill off the streets of the city and into hospitals, even if it is against their will.

Crime and homelessness have caused increasing distress in the city, and both issues can be linked to untreated mental health issues. If the mayor’s new initiative brings more safety to the streets — and that’s a big “if” — it will pose a challenge to cities like San Francisco and Seattle, where the problems are far greater.

But while visible issues like homelessness are a major focus of the mayor’s attention, there is another, less visible issue that should also concern him. It’s about the outlook for New York’s economy and the city’s workforce.

During the Covid lockdowns, many businesses and wealthy residents have moved to places where the tax burden is lower, like sunny Florida. This weakened the local tax base just as spending demands were increasing. The fiscal loophole was partially covered with federal aid — but in reality, this was only an apparent solution. Since then, some of the “migratory birds” have returned (but not all), offices have reopened, residential rents have regained their previous levels, and hotels have returned to capacity.

But commercial property occupancy is still lower than it was before the pandemic, and it looks unlikely to return to pre-Covid levels. Scholars at Columbia University and NY Stern Schools of Business estimate that New York’s commercial real estate sector has been reduced in value by $50 billion.

So Eric Adams faces the same problems as many other city leaders since the pandemic began: Can New York City be fiscally sustainable with half-empty offices? And what about your workforce?

The good news is that the city has significant starting advantages (apart from its reputation for aggressive daring and its knack for shady business). A recent report produced for the city hall by McKinsey consultancy presents the reality: the region has the second largest metropolitan economy in the world, second only to Tokyo. The per capita GDP easily exceeds US$ 150,000 (R$ 786,000) annually, higher than any other city in the country except Los Angeles.

The number of residents with college degrees is greater than any other American city, and New York has a long tradition of attracting throngs of ambitious migrants: One-third of the workforce was born abroad. Immigrant professionals are disproportionately present in the medical sector, but migrants also make up half of real estate professionals and a third of finance.

More importantly, the city is used to reinventing its economic base over and over again. At the beginning of the century, most of the highest paying jobs were in the financial sector. Today, according to a recent report from the mayor’s office, the technology sector is the biggest driver of growth for high-paying jobs, and New York is second only to Silicon Valley in its size. Wall Street is no longer at the top.

But the bad news is that the broader situation is changing. Since 2019, New York’s workforce has shrunk by 4%, in marked contrast to previous decades. This is partly due to the exodus due to the pandemic, but workforce participation was in decline even before Covid.

Furthermore, McKinsey calculates that while between 1991 and 2011 the city added nearly 900,000 new residents, it has since lost 452,000. Yes, you read that correctly: in the city where Lin-Manuel Miranda, author of the libretto for “Hamilton”, wrote the line “Imigrantes –a Gente da conta do Trabalho!”, the tide of migrants has reversed. Miranda noted this week that this saddens him, as he sees immigration (correctly) as something that strengthens the city.

But the broader labor problems are just as troubling. McKinsey predicts that by 2030 automation will have eliminated 350,000 jobs in New York in sectors such as office support and restaurants. The consultancy predicted an even greater wave of job creation in health, technology, law and business.

But the problem is that the second category of potential new jobs requires training and professional education, which was not the case for the first. So the future of the Big Apple looks dangerously bifurcated: Soon there will be a surplus of well-paid jobs for highly skilled (and highly mobile) professionals, while low-paid and low-skilled workers will struggle.

This suggests that the city needs to retrain its workforce with public money, public-private partnerships, or both. Some projects in this direction have already been started, but they are limited. And while former mayor Michael Bloomberg was adept at forming partnerships with businesses, Adams, so far, seems weaker in that regard.

To make matters worse, New York is facing a growing fiscal crisis. Adams’ team recently announced that over the next three years there will be a budget deficit of more than US$ 13 billion (R$ 68.1 billion), with a drop of 7.7% in the collection of personal income tax and taxes related this year. Given this, the team is right to cut costs. But it can’t cut too low without hurting even more infrastructure — and it can’t raise taxes on companies or wealthy New Yorkers, lest it trigger an even bigger exodus to places like Florida.

Thus, as has happened many times in the past, New York seems not only to be the face of the United States, but also an extreme microcosm of the national challenges. After the lockdowns, your economy may be booming and your entrepreneurial spirit may be at an all-time high, but all indications are that your economic and social divides are likely to deepen.

If Eric Adams can improve this situation, he will gain a greater presence on the American national political stage. If not, New York will face more problems.

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