Tag Archives: poverty

Should Great Cities Roll Out the Welcome Mat for Great Fortunes?

Who will replace Bill De Blasio (pictured above) as NYC's next Public Advocate? (Photo: CC/Flickr/Bill De Blasio)

New York has a new mayor who wants to remake his deeply unequal city into much more than a playground for the super-rich. The experts who track global wealth trends think he’ll fail.

A recent report from Knight Frank, a global consultancy firm, is predicting that by the year 2024, New York will replace London as the mega-wealthy’s top go-to urban destination.

That turn of events would certainly please Michael Bloomberg, the billionaire predecessor of new New York mayor Bill de Blasio. The more billionaires New York attracts, Bloombergpronounced last year, the better.

Bloomberg's Billionaires

azipaybarah/Flickr

“We want the richest people to come here and patronize our stores and live here and bring their businesses here and pay their taxes here,” Bloomberg opined. “And that does create a greater income disparity, but that’s also where the tax base comes from to fix the school systems, which will eventually help those people who are struggling get up the ladder.”

Current London mayor Boris Johnson feels the same way. London hosts more millionaire fortunes than any other city, and Johnson wants to hang on to that distinction. The super-rich, he said last November, deserve “our humble and hearty thanks.”

If the rich didn’t “employ eau de cologne-dabbers,” Johnson added, ordinary families “might otherwise find themselves without a breadwinner.”

Johnson and Bloomberg believe that billionaires bring cities cash, cachet, and culture. Mayors should cater to them. But not every observer of our urban scene agrees. Cities that lay out the welcome mat for the super rich, these skeptics note, are dooming their non-rich to chronic aggravation.

Any city “in thrall to money and greed,” as one British newspaper recently editorialized, is inviting “nightmarish consequences” that range from wildly inflated housing costs to municipal corruption.

These consequences show up most clearly in London. The city has become a “honeypot for global capital,” says architect Peter Murray. In 2012 alone, London gulped down $8.3 billion in new luxury home investment. A mere four-bedroom apartment in one of London’s new luxury towers is now listing for nearly $32.5 million.

Bidding wars for properties like this are driving up housing prices throughout London. TheFinancial Times reports that a quarter of the city’s neighborhoods have become unaffordable even for income-earners who make it into Britain’s most affluent 5 percent.

Workers who service the city’s wealthy have things much worse. Many have had to go so far outside London to find affordable housing that they’re now commuting two hours each way to get to work.

But the global ultra-rich don’t just drive prices up. In the cities they invade, they suck the vitality out. These rich people don’t actually live in the lush condos they buy. They only visit them. Billionaires on average, the Swiss bank UBS reports, own four homes. They spend their year skipping from one to another, when they aren’t staying in hotels. In London, entire neighborhoods can seem deserted.

And in this London of the rich, the creatives who do so much to give urban spaces their cultural vitality have less and less place. Developers recently converted one old London factory that had been home to 400 artist studios into luxury apartments.

But what about Bloomberg’s claim that the taxes the rich pay offset any negatives from the inequality their presence creates?

That claim might hold some water if the rich were pulling their tax weight. In New York, theyaren’t. In 2010, the city’s top 1 percent — taxpayers making at least $493,579 — grabbed over a third of the city’s income, 33.8 percent, but accounted for only a quarter, 25.2 percent, of city tax revenue.

Mayor Bill de Blasio wants to raise the taxes rich New Yorkers pay. But he’s getting intense pushback from local powerbrokers. They’re arguing that any tax hike would have the ultra-rich departing New York in droves.

Maybe New York should let them go.

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This article was originally published via OtherWords.

OtherWords columnist Sam Pizzigati, an Institute for Policy Studies associate fellow, edits the inequality weekly Too Much. His latest book is The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class. OtherWords.org 

One Third of Americans in poverty for at least two months from 2009 to 2011

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Census Bureau Reports Almost One in Three Americans Were Poor at Least Two Months from 2009 to 2011 (via YubaNet.com)

By: U.S. Census Bureau January 7, 2014 - According to the U.S. Census Bureau, 31.6 percent of Americans were in poverty for at least two months from 2009 to 2011, a 4.5 percentage point increase over the prerecession period of 2005 to 2007. Poverty…

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Wall Street Bonuses vs the Minimum Wage

Raising the minimum wage would give our economy much more bang for the buck than we get from the financial industry's yearly windfalls.

 

Purveyors of Ferraris and high-end Swiss watches keep their fingers crossed toward the end of each calendar year, hoping that the big Wall Street banks will be generous with their annual cash bonuses.

New figures show that the bonus bonanza of 2013 didn’t disappoint. According to the New York State Comptroller’s office, Wall Street firms handed out $26.7 billion in bonuses to their 165,200 employees last year, up 15 percent over the previous year. That’s their third-largest haul on record.

Wall Street Charges Ahead, an OtherWords cartoon by Khalil Bendib

Wall Street Charges Ahead, an OtherWords cartoon by Khalil Bendib

That money will no doubt boost sales of luxury goods. Just imagine how much greater the economic benefit would be if that same amount of money had gone into the pockets of minimum-wage workers.

The $26.7 billion Wall Streeters pocketed in bonuses would cover the cost of more than doubling the paychecks for all of the 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

And boosting their pay in that way would give our economy much more bang for the buck. That’s because low-wage workers tend to spend nearly every dollar they make to meet their basic needs. The wealthy can afford to squirrel away a much greater share of their earnings.

When low-wage workers spend their money at the grocery store or on utility bills, this cash ripples through the economy. According to my new report, every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy. Every extra dollar a high-income American makes, by contrast, only adds about 39 cents to the gross domestic product (GDP).

And these pennies add up.

If the $26.7 billion Wall Streeters pulled in on their bonuses last year had instead gone to minimum wage workers, our economy would be expected to grow by about $32.3 billion — more than triple the $10.4 billion boost expected from the Wall Street bonuses.

This immense GDP differential only speaks to one price we pay for Wall Street’s bonus reward culture. Huge bonuses, the 2008 financial industry meltdown made clear, create an incentive for high-risk behaviors that endanger the entire economy.

And yet, nearly four years after passage of the Dodd-Frank financial reform, regulators still haven’t implemented the modest provisions in that law to prohibit financial industry pay that encourages “inappropriate risk.” Time will tell whether last year’s Wall Street bonuses werebased on high-risk gambles that will eventually blow up in our faces.

Low-wage jobs, on the other hand, endanger nothing. The people who harvest, prepare, and serve our food, the folks who keep our hotels clean, and the workers who care for our elderly all provide crucial services. They deserve much higher rewards.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is the author of the new report Wall Street Bonuses and the Minimum Wage. This article was originally published by Otherwords.

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