The Pandemic’s Aftermath: A Lingering Jobs Decline For NYC’s Shrinking, Beleaguered Middle Class
Highlights:
The pandemic accelerated the decline of New York City’s middle class, with significant middle-wage job losses and slower wage growth for such jobs. The result: greater middle class economic instability and heightened job and income polarization.
From 2019-2023, New York City lost a net of more than 76,000 jobs paying middle-income wages – almost five percent of the total of such jobs.
Middle-wage workers saw 5.4 percent real wage growth from 2019-2023. While this was higher than the national average (3.0 percent) for middle-income workers, it was lower than gains made by low-wage workers (6.0 percent) and much lower than gains for high-wage (18.2 percent) workers in New York City.
Black middle-wage workers experienced the highest real wage growth (8.1 percent) from 2019-2023, while Hispanic workers had the lowest growth (5.4 percent), contributing to a slightly narrowing Black-white wage gap and a widening Hispanic-white wage gap in the city.
New York City’s Black middle-wage men and Asian middle-wage women recorded the highest real wage increases and benefited the most during the 2019-23 period.
In a report published earlier this month, CNYCA detailed how the pandemic was a period of growing wage inequality between low- and high-wage earners in New York City. It showed that New York City’s middle-wage workers – those between the 41st and 60th quintiles of the wage distribution – experienced lower real wage growth than both low- (6.0 percent) and high-wage (18.2 percent) workers.
This raises questions of paramount importance in next week’s national elections, and also for New York City’s future. So, this Economic Update takes a deeper dive into the numbers, analyzing the impact by race and gender on middle-income workers in New York City, comparing the years 2019 to 2023.
Middle-wage job decline since the pandemic
We identify low-wage industries as those that pay an average real wage of less than $65,000 annually, while middle-wage industries have jobs where the average real wage is between $69,000 and $105,000. High-wage industries pay an average real wage between $113,000 and $362,000.
From 2019 to 2023, employment in high- and low-wage industries grew by 2.7 percent and by 1.5 percent, respectively. In stark contrast, employment in middle-wage industries declined by 4.7 percent.
Figure 1 illustrates which middle-wage economic sectors faced the largest decline in total jobs. Administration (excluding building services and security), government, and construction experienced the largest declines. This is particularly alarming, given that these three sectors together constitute 52 percent of the city’s total middle-wage jobs.
The only middle-wage sectors to see job growth during this time period were health care (excluding home health and nursing) and elementary and secondary schools. However, combined they only account for 24 percent of the city’s middle-wage jobs.
Figure 1
Black workers fared relatively better after the pandemic
Nevertheless, race and gender groups tend to sort into jobs in specific industries and occupations and, were, therefore, impacted by the middle-wage job decline differently.
For example, when looking at real hourly wage distribution by quintile, Black middle-wage quintile workers saw real wage growth of 8.1. percent during the 2019-23 period, while wages for Hispanic middle-wage workers increased by only 5.4 percent. Black workers likely benefited from the growth of the health care sector during the pandemic, where they constitute an estimated 28 percent of the employed workers. In contrast, Hispanic workers suffered from the weakness of the construction and manufacturing sectors, where they respectively constitute about 45.4 percent and 31.5 percent of employed workers.
As Figure 2 shows, Black workers and female workers are the only groups within the middle class that saw their real wage grow faster during 2019-23, than during the 23 years (1996-2019) before the pandemic. In contrast, Hispanic workers, white workers, and male middle-wage workers experienced higher annualized real wage growth during 2013-19 than during 2019-23, Asian, Pacific Islander, and “other” middle-wage workers experienced better real wage growth in 2019-23 than during the prior period, but it was less pronounced than the wage growth they experienced in the 1996-2013 period.
As a result, the Black-white wage gap among middle-wage workers narrowed slightly after the pandemic (from 70.4 percent in 2019 to 69.5 percent in 2023), while the Hispanic-white wage middle-wage gap widened (from 79.6 percent in 2019 to 85.7 percent in 2023).
Figure 2
In Figure 3, we disaggregate the data by race and gender in New York City. All race and gender groups in the middle-class experienced real wage growth during the pandemic, despite record high inflation. Black men and Asian women experienced the strongest real wage growth and Hispanic and Asian men experienced the least real wage growth.
White and Hispanic middle-wage male workers experienced stronger real wage growth in the 2013-2019 period while Black men and Asian men fared better during the 2019-23 period.
White and Hispanic women experienced slightly more (0.2 percentage points) real wage growth in 2019-2023 than in the previous period. Conversely, Black middle-wage women experienced slightly more real wage growth (also 0.2 percentage points) in the years 2019-23 than during 2013-19. Middle-wage Asian women experienced the strongest wage growth among women in the 2019-23 period and the most significant wage growth gains for women (2.4 percentage points) in the same period than the years 2013-19.
Figure 3
NYC’s Middle-Wage Job Erosion: National and International Comparisons
The city’s middle-wage workers fared better than their counterparts in the rest of the nation. Real middle-wages increased by 5.4 percent in New York City, compared to just 3.0 percent nationally. When looking at the demographic distribution, the pattern observed in New York City matches the national trend with the exception of middle-wage white workers. Gould and DeCourcy from the Economic Policy Institute report that Black workers experienced the strongest real wage growth during the 2019-23 period. However, the Black-white wage gap narrowed at a faster rate nationally, declining by 14 percent for the 2019-23 period, compared to a decline of just one percent in New York City. Similarly, the Hispanic-white wage gap reduced by six percent in the rest of the U.S., while increasing by eight percent in New York City for the same period.
However, the overall negative job growth in middle-wage industries contributed to the slower wage growth of middle-wage workers and to a gradual erosion of New York City’s middle class.
The potential erosion of New York City’s middle class strikingly reminds us of Branko Milanovic’s famous “elephant curve,” a worldwide phenomenon. It shows that low- and middle-income earners in developing economies, e.g. China and India, significantly benefited from globalization and saw their income grow at a fast rate since the 1980s. In contrast, lower middle-income and middle-income earners in advanced economies, (e.g., the U.S.), experienced no increase in their income for the same time period. However, the wealthiest global one percent (or high-wage earners) recorded significant income gains and are the winners of globalization, capturing the greatest share of global income growth. In other words, middle-income earners in advanced economies are the biggest losers of globalization. The curve has since been updated and still holds.
This phenomenon is mostly due to the international trade and financial institutional arrangements that particularly favored the top earners of the income distribution. One of its harmful effects is to amplify political polarization among domestic and foreign citizens, a subject of great importance in New York City and in the upcoming presidential election.
Mohamed Obaidy is a senior quantitative analyst and economist in the economic and fiscal policies unit of the Center for New York City Affairs at The New School.