A Reason Wealth Inequality Matters

I intended to follow up on my previous post regarding wealth disparity much sooner than this, but sometimes life gets in the way.

I rent an apartment in Manhattan. If you know anything about the five boroughs of New York, Manhattan is the borough the Muppets, Jason, several superheros and Cloverfield have all either taken or destroyed, and is also known as one of the most expensive places to live despite the several times it has had to be rebuilt. Well, the non-Hollywood part is true, at least.

I work in a part of Manhattan called "The Financial District," a very small area of real estate where each weekday enough money flows through the virtual coffers of the banks and trade floors to fund small countries.

Last Friday I was sitting in the back seat at the coffee bar with some developers who, despite having Internet access cut off at the office, decided to stick around and socialize a little. A small part of the conversations involved a nearby apartment building whose rent, they said, ran around $40,000 a month.

That's $480,000 a year. Nearly half a million dollars.

I said I couldn't imagine what it's like to have so much money in the bank that I could afford to spend that as rent. I'd love not to have that kind of financial worry in my life...and then I wondered, what is it like for people who do make that kind of money?

Someone said that they knew someone who had lived near there a period of time and said it was a nice apartment, but the location sucked. My first reaction was, "How?" but someone else reminded us there aren't really any supermarkets nearby.

That's true...groceries would almost exclusively be delivered.

(I know there are some markets in the financial district; they tend to be small and pricey, though, even for Manhattan.)

This isn't to say that if you have groceries delivered in Manhattan that it means you are wealthy. It's quite common; there are several people I know that are getting various grocery-type items delivered who aren't what I would consider top income earners. But it is an added luxury that does add up over the course of a year, especially when you add in the cost of having laundry picked up and delivered (it usually costs a dollar or two a pound, although pricing for dry cleaning and specialty treatments can quickly increase costs. The convenience of having grocery and laundry items delivered as a service is, to me, like cable or satellite television...nice to have, but something I can do without, especially after actually sitting down and doing the monetary math.

Manhattan is a kind of illustration of the wealth disparity in America. There are pockets of affordability; it's safe to say that my apartment is nowhere near forty grand a month in rent. But it certainly is far north, for what I get in relation to what I pay, to what I could afford back home with the same amount of cash. Other people get by finding roommates on Craigslist to afford rent, or making do with tiny studio apartments that suits a more frugal lifestyle.

And by tiny, I mean 500 square feet or less.

And by pockets of affordability, I mean I can cross a street or two and there are apartments that will cost the upper side of four figures, or possibly five figures, per month. Even near our office I've heard rumor of apartments that are slightly below $3,000 a month in rent being a block away from apartments that are tens of thousands per month.

The cost of living isn't getting any cheaper, either. Rent costs, along with transportation, and service industries, are creeping higher. Couple that with the news that middle class income is essentially stagnant, and you end up with the most common option for people who work in New York and need to afford housing; they have a longer commute.

The truly affordable housing tends to lay in the concentric zones farther from Manhattan; on the far north side of the island is Harlem, or people move into Brooklyn or Jersey, across the river. The rent is lower, but the commute tends to jump from a 25 minute subway ride in train-dense Manhattan to 45 minutes or an hour once you factor in multiple train hops, or in some cases and hour and a half. That's the tradeoff for affordable living if you enjoy your job (or in this economy, just want to keep the job you have.)

In the course of the conversation I recounted an account I read in a book on New York "tunnel dwellers," people who lived in the subway tunnels. It was remarkable; it described how you could walk within three feet of someone, and not even know they were there. One fellow interviewed worked more or less full time at McDonalds, and said his coworkers had no idea he lives in the subway tunnels. It was sad and surprising given the amount of spin and vitriol, especially during our recent presidential campaign season, towards the laziness of the poor who are portrayed as lazy ne'er-do-wells sucking tax dollars in exchange for sitting on the couch watching daytime TV.

Here's the thing; much of the city thrives on the poor and middle class to do the jobs the upper (and upper middle class) rely upon, but wouldn't want to do.

I don't see too many bankers who would want to be out in crappy weather delivering Seamless and GrubHub orders to hungry folks. Or doing laundry or custodial services, or waiting tables. Even the artists performing on Broadway often share rooms with multiple roommates to make ends meet. These are people eking out a living, hoping they don't become ill or badly injured lest they end up going bankrupt with a visit to the hospital or ending up not being able to go into work from illness, meaning no income since many of them are hourly workers (which, by the way, is a terrible way to prevent the spread of disease, when you think about how many people come into contact with someone who had to go to work in order to make ends meet while still contagious...think about that when you are commuting on the subway or eating prepared food.)

If prices keep rising, more people move farther away, until the strain of the commute will basically price them out of the city. They move on. It's a process that is basically an extreme form of gentrification, only with the economy being what it is, it's not only pushing out the poorest people. The lower middle class and middle class feel the strain as well.

Of course there is a counterbalance to this that econ 101 teaches us; prices will level out at a point where people will pay what they can afford. The pendulum is supposed to swing to a point where once it is noticed people are moving away, the overall economy suffers, jobs aren't being filled, and the politicians and businesses start offering incentives for people to come in again, hopefully in the form of "this apartment is pretty crappy so we'll make the rent affordable."

Only I wonder if that's what is actually happening. My employer is actually paying a very decent salary, and I'm still wondering how long it will be before I will have to look at moving to Brooklyn. The city has raised transportation fees, which doesn't affect me personally (thank you again to my employer offering Metro cards as a job perk) but does cost money when my wife and son come to visit; most people on the island are beginning to notice the nickel and diming adding up for them to get to work.

So what happens?

I wonder if you'll see a push of poor and middle class out of the city. Jobs will become more difficult to fill as people move away; at least, the jobs that keep trash cans in offices emptied, clothes laundered and food delivered. Business will end up having to pay more in order to get workers, squeezing small businesses closer to going out of business.

Quality workers may become more scarce. I see this effect in education; as the job perks slip away and the negatives become a heavier burden, teachers who are good teachers, people who care about the work of being a teacher and not a cog in the education system, they leave. They see that the reality of teaching is far removed from the job description and certainly doesn't match what they thought was happening when they were sitting at the desks on the receiving end of an education.

Instead I saw, over time, more B-stringers getting their chance to become teachers. These are people who are less passionate about teaching and more fitting into the dysfunctional system that is in place; real teachers become disenfranchised and demoralized, and soon enough begin looking for work outside the education field. The B-stringers just stop caring or are comfortable working at a mediocre level within the broken system.

Ever notice how hard it is to find teachers who are passionate about their jobs? The people who would be passionate are driven away from the field.

So what happens if a city becomes largely dysfunctional, and the people who would be passionate about it leave? Does it end up become like Detroit?

I doubt that a place like New York City will ever be like Detroit, but then again, it wasn't long ago that you wouldn't have thought Detroit would become today's Detroit. I hear stories about what has become of the Vegas suburbs after the economy tanked, and California, as a state, is having larger scale issues that are creeping into the lives of its citizens. Florida is having interesting economic effects on its citizens largely in part from Tea-Party political ideas put into effect, and Florida already has an economy heavily funded by retirees and spring break tourists.

Only time will tell. But one thing I'm sure of is that as long as people look only for themselves, there will be looming problems. The myth of the job creator paints a picture of a wealthy citizen waking in the morning and feeling the burden of keeping his employees employed; the truth is we have more people who are willing to step on whoever is in his or her path to financial gain in order to have more financial gain. There is a disconnect wherein the wealthy can't relate to the middle class, let alone the poor. I read an article outlining tips to save money for bankers and their wives, and the disconnect couldn't be more stark; it made what was common sense for middle class families sound almost novel or shocking. If these ideas hadn't occurred to them before, no wonder they don't care about the financial situation of people around them. And worse, the advice felt like the equivalent of, "Instead of driving the Ferrari, take out the Benz!"

I read the tone of the article summed up in the lines,
“I still go to New York  five or six times per year, but now I forego business class to travel in premium economy,” he said. “With the new flexibility to plan ahead – which was impossible when I worked for a bank – you can get good fares. And if you’re smart about it, the airlines still give you all the perks.”

 and,

“The wife is doing the ironing,” another banker told us. “She’s not loving it, but she doesn’t want to get a job herself so is having to accept it.”

It's a novel idea to have to scale back and still have perks many people will never have.

We need to care about our neighbors. We need to understand that when people become miserable and stressed, there are repercussions. This doesn't mean handing out free checks to everyone (although this is done in Alaska...) to boost incomes but it does mean acknowledging that maybe a single minded pursuit of everything that's best just for ourselves will come back to bite society in the ass. Benefiting everyone still means everyone will benefit, not just the poor or middle class. And we need to stop stigmatizing the desire to help others.

Otherwise you end up in a system where only the most connected and financially powerful will call the shots, and gradually they get into positions where laws are created that will only benefit the most connected and financially powerful, snowballing their accumulation of wealth until there's nothing left for anyone else.

Sound familiar?