For decades pundits (including myself) have been predicting the eventual demise of New York City, yet the city continues to defy the prognostications. With its world-class financial, entertainment and advertising sectors and its burgeoning entrepreneurial tech sector, the Big Apple has demonstrated such a capacity for reinventing itself that it remains one of the great wealth-creating centers of the world.
How long NYC can continue to prosper, however, is an open question. The region has a huge weakness: It is hemorrhaging people and tax base. Aaron M. Renn explores the trend in the current edition of City Journal:
Though the region and New York City itself continue to grow overall because they have more births than deaths, the Census Bureau estimates that the metro area lost almost 2 million net domestic migrants during the 2000s; that is, 2 million more people left the area for other parts of America than moved there from other parts of America. The region offset part of that loss with a nation-leading net gain of more than 1.1 million international immigrants over the same period. But it wasn’t enough: the region’s total net loss of people to migration amounted to 858,000. And the trend has continued into the new decade, with the New York metro area hemorrhaging another 254,000 net domestic migrants since 2010, even as the economic downturn has slowed migration generally within the United States.
When people leave, they take their income with them — about $49 billion during the 2000s. “The cumulative loss as the years pass and people keep heading for the exits, is staggering,” Renn writes.
(While Miami and Orland were the top destinations for New Yorkers, the Washington region was No. 10 on the list, absorbing more than 35,000 people over the decade.)
Renn concludes:
The high net outflow of people from the New York metro area bodes ill for the region’s future, as it represents a huge drain of spending power and a diminution of the tax base. People are voting with their feet to leave New York. Some may move for retirement to warmer climes, but others are doubtless leaving for a lower cost of living and lower tax rates. New York is losing out, and there’s much work to do in fixing the policies that drive up its costs and taxes.
Bacon’s bottom line:
As much as I would like to confirm my conviction that New York’s Blue State governance philosophy is an economic-development train wreck, I’m not sure there’s a huge problem here. New York is not losing its most productive citizens. Hint No. 1: $49 billion in lost income sounds like a lot of money but when it’s spread over two million people, it amounts to an average income of only $24,500 per person — just a tad more than the region’s 1999 per capita income of $22,000. Hint No. 2: The two top destinations are Miami and Orland, both retirement destinations.
In other words, NYC is not losing its creative class — its wealth creators — who continue to place a premium on the ability to interact with others like themselves. It appears that the city is leaching away its middle class, particularly its retirees.
Don’t get me wrong, losing your middle class is not a good thing. Increasingly, New York will become a city of high-productivity, high-income haves” and low-productivity, low-income “have nots.” If the trend continues, class divisions will intensify. And the city’s regressive tax base will become even more dependent upon revenues generated by the wealthy — and even more vulnerable to an economic downturn. But New York is no Detroit in the making. I’m not willing to write off the city’s future as an economic engine based on this unfavorable demographic trend alone.