I was intensely interested to see this post from Reihan Salam on the dynamics of wealth in cities. Particularly this part:
But the question of poor families in New York city proper is another matter entirely. I take a very different view from Felix, which probably reflects our different ideological starting points. There is a reason poor families choose to cluster in a place like New York city. Perhaps the most salient one is that New York city offers economic opportunity to large numbers of less-skilled workers, precisely because it has so many skilled, high-wage workers. A high-wage worker has a strong incentive, for obvious reasons, to outsource household production. This, in turn, creates an opportunity for workers who can specialize in child care, meal preparation, and other services.
While it is certainly true that the cost of housing and various amenities is higher than it might otherwise be as wealthy families bid up the price of urban positional goods, the legacy of density and a dense transit network mean that less-affluent families can access employmentopportunities without owning an automobile. So this makes New York city much more attractive than, say, a low-cost rural area where housing, etc., might be markedly cheaper, but access to the same kind of employment opportunities would be far more expensive.
This is exactly the point I was trying to make here:
The most relevant incentive for our burger joint employee is the demand for their employment. NYC is a global city. They’re hosts to major economic factors and thus require lots of high skilled, high wage employees. Those high skilled, high wage employees create demand for goods and services provided by low wage workers. They demand things like pet food and enjoy their niche burger joints and bars. They need to have their clothes dry cleaned, taxis to drive them to their destinations and people to clean their offices. Yet because they earn high wages and lots of them want to live in and around NYC the cost of living rises with them. Therefore low wage workers must be compensated at a level that is bearable for them to live close enough to provide those goods and services.
Now Mr. Salam proclaims the true problem is the inelasticity of the housing supply and restrictive zoning, which may very well be right, but my point (or our point?) still remains.
This is a concept I had to explain on a test once. A key characteristic of inequality in New York City, like most global cityscapes, is the presence of a dual labor market. The dual labor market consists of high-wage workers (bankers, lawyers, traders, etc) and the low-wage workers (janitors, baristas, etc) that support them. This dichotomy represents a global economic trend that has focused on the growth of high-wage earning speciality positions that in turn creates demand for low-wage services. Those in the bottom quintile, who in the past might have enjoyed upward mobility through manufacturing, only find themselves qualified for low-wage sector positions.
While of course any one person in the bottom quintile may earn high-wage positions through meritocratic virtue, the entire bottom sector is not going to monopolize those opportunities. They’ll have lots of competition from upper income brackets, who for various reasons have inherent advantages at such a contest. So while some may worry about how people earn those high-wage positions, I wonder about those left behind.