A Tightening Middle-Class Squeeze – And Other Tales of Post-Pandemic New York
Urban Matters: Mohamed, in recent weeks reports by you and your colleagues at the Center for New York City Affairs have sketched in the city’s post-pandemic jobs profile. The good news: Job growth is now faster here than it is nationwide. But there also have been big shifts in the kinds of jobs available. Tell us about that.
Mohamed Obaidy: New York City has made a strong comeback in terms of job recovery, although it’s been slower compared to other major cities. It has also brought about changes in the types of jobs available to New Yorkers. There has been more job growth in high-wage industries, like finance and tech, as well as in low-wage industries, particularly health care. Meanwhile, there has been little to no job growth – and even some job losses – in middle-wage industries, such as construction, manufacturing, and education. This shift is what economists call "job polarization."
Looking at it through a pandemic lens, industries that allow remote work, typically higher-paying roles, and essential services, generally lower-paying jobs, have seen the most significant job growth and resilience. On the other hand, jobs that require face-to-face interaction, often in the middle-income range, have been disappearing.
UM: You’ve also identified another major discrepancy between the national and local job markets. Since the pandemic, national economic inequality – as measured by worker earnings – has shrunk. But in New York City just the opposite is true. What’s going on here, and why do you think that’s happening?
Obaidy: At the start of the pandemic, most economists expected income inequality to increase, predicting that high-paying jobs would recover faster than low-paying ones. Surprisingly, data from 2019-2023 show a different trend. Nationally, wages for the lowest 20 percent of earners grew faster than those for the top 20 percent, marking the strongest wage growth for low earners since 1979.
In New York City, however, low-wage earners saw their wages grow three times slower than high-wage earners, while high-wage earners outpaced their national peers. Two key factors explain why. First, a tight labor market, with more available jobs than workers willing to fill them, drove up wages in low-paying sectors nationwide, unlike in New York City, where high unemployment kept wages down. Second, many states raised their minimum wages, which helped low-wage earners negotiate higher pay. But in New York City, there was no minimum wage increase during this period. Coupled with the strong performance of high-paying industries, that led to increased income inequality.
UM: Last month you also published an analysis showing that there are about five percent fewer middle-income jobs – those paying $69,000-$105,000 annually – in the city now than there were in 2019. That’s roughly 76,000 jobs. Is this just the latest chapter in the long story of New York’s middle-class travails?
Obaidy: The pandemic certainly sped up the decline of New York City’s middle class with significant losses in middle-wage jobs and slowing wage growth in those sectors.
In 2019, 35 percent of jobs here were low-wage, 36 percent were middle-wage, and 29 percent were high-wage. By 2023, middle-wage jobs fell to 34 percent, while high-wage jobs grew to 30 percent, and low-wage jobs remained the largest share at just above 35 percent. This slight shift shows that New York City’s workforce now includes fewer middle-paying jobs and slightly more high-paying ones, while lower-wage jobs still dominate. It’s a prime example of job polarization, where middle-wage jobs decline, while growth occurs in high- and, to a lesser degree, low-paying sectors.
And as to wage growth: Although middle-wage workers here saw wages grow slightly above the national average, they lagged behind low-wage and high-wage earners.
UM: So, it seems that inequality is growing and job quality for a lot of New Yorkers is worsening. Are these just passing problems? Or if they’re deeper, longer-term trends, what should state and local government be doing to turn them around?
Obaidy: Income inequality and job quality have both been concerns for a long time in New York City. The pandemic has only accelerated them. Unfortunately, the increasing income gap, coupled with job polarization, makes it difficult to envision a future where economic inequality decreases, unless significant public policies support low-wage earners.
These challenges are not just temporary. They’re structural problems in New York City that echo a global phenomenon seen in other wealthy cities. Economists like Thomas Piketty and Joseph Stiglitz argue that rising inequality and declining job quality are becoming defining features of modern capitalism. This is not novel. Classical political economists like Adam Smith, David Ricardo, and Karl Marx also warned that persistent inequality between wage earners and profit earners constitutes the driving force of capitalism. Interpersonal income inequality was less of a concern then, but the structural problem they describe remains pretty much the same.
This is where I see the importance of state and local government intervention. Policymakers need to expand the social safety net, particularly for low-wage workers, to increase their resilience and quality of life. Additionally, state and local governments could better help industries transition into a greener and knowledge-based economy to avoid job destruction. With the advances in technology, it’s simply unacceptable to have job quality issues and widening economic inequality.
UM: Final question. Mohamed, prior to joining CNYCA earlier this year, much of your previous work, with UN agencies, involved promoting equitable growth in developing-economy countries. How does that experience inform what you see happening in New York City today?
Obaidy: During my time at the UN, I saw firsthand how developing economies struggle to escape poverty and strive for sustainable economic growth that is strong, inclusive, and environmentally friendly. Developed economies face similar challenges – just on a different scale, as they aim to consolidate their economic gains and maintain their living standards.
Take New York City, for instance. It’s one of the wealthiest cities in the world, with a Gross Domestic Product that would place it somewhere between the 10th and 14th wealthiest countries globally. Yet, New York City is not immune to rising inequality, a high cost of living, and a shrinking middle class. Because of this, I find that the conceptual tools I developed while working with developing countries are still applicable, adjusted to suit the complexities of New York City's economy. It’s a fascinating comparison that highlights the interconnectedness of global economic issues, no matter where they occur.
Mohamed Obaidy is a senior quantitative analyst and economist at the Center for New York City Affairs at The New School.
Photo by: Tony Fischer