New York is one of the globally recognized cities due to its high economic development. The city’s economic growth has undergone several developments from the previous decades to date. This essay highlights most of this progress. The first section explains the city’s overall economic performance.
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The second section focuses on the city’s current state with respect to sectoral distribution. The third part highlights the evolution of the city’s economy in the immediate past. The fourth part describes the drivers of the economic changes.
The fifth section focuses on the part played by public authorities in the city’s structural changes. The sixth part is about the city’s main problems and suggested economic strategies that can be applied in addressing the problems. The final part is the conclusion.
The overall performance of New York City’s economy
The improvements of New York City’s economic development have benefited both households and firms. This is from 1975 during which New York encountered a serious financial crisis. From that time New York ceased depending so much on debt finance, lowered property based taxation besides improving its financial reports.
Although the overall tax burden has been high, there has been a sharp reduction in the amount of tax used in offsetting short – term loan. Firms and households have also greatly benefited from development in the city’s public transport network which occurred especially towards the end of the nineteenth century.
A location’s attractiveness especially to investment is enhanced by public safety. During 1980s when New York City experienced an economic boom, crime rate was quite high but reduced drastically in 1991 during a recession. This trend went on for the next decade.
Study shows that a sharp decline in the city’s crime rate was experienced in its poorest areas (Okuyama & Chang, 2004, p. 59). Although there has been an enhancement of land and labor prices as a result of the developments in the commercial and residential settings, the city’s amenities have not been without some liabilities.
Key among these include high taxation on businesses, public schools and residences. However, statistics reveal that improvements have overwhelmed liabilities over the recent years.
As far as the city’s industry mix is concerned, the focus has mainly been on the financial services industry. The growth of the city has been enhanced by investment in this sector, with most of the firms preferring to be close to each other.
Moreover, patterns in the broader economy tend to be beneficial to regions with many growth industries. A comparison in the performance of these industries with those of other nations shows that a good number of local industries have expanded more in job growth than in income growth.
Compared to other parts of the nation, the potential of the city’s expansion is low due to land and space limitations. Recently, rapid job growth at a national level has been evidenced by industries that are highly concentrated in the city. This trend is expected to continue in the coming years.
Specifically, nationwide job and earning growth has resulted from industries that deal in services such as securities, education, motion picture, management, social and legal services (Okuyama & Chang, 2004, p. 60).
On the other hand, there is a lower representation of industries that deal in manufacturing services since their performance in employment and earning is quite weak. This is apart from the industry of apparel manufacturing that is among the city’s industrial leaders.
Since the city has been focusing on businesses and industries that are high-value-added, comparing the city’s employment patterns with those at the national level tends to underestimate New York City’s genuine performance.
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Research shows that the high demand for its goods and services is the reason behind the metropolitan area’s outstanding income growth (Okuyama & Chang, 2004, p. 61-63).
Further research has depicted that the average income per worker has shown consistent growth in New York City compared to other parts of the nation. If this trend has to continue, the city has to register more income growth as compared to job growth.
The present structure of New York City’s economy, as identified by the sectoral distributions of output and employment
The service sector of New York is comprised of an industry mix that is broad and favorable. However, the financial sector emerges as the main driver of the city’s economy. In 2000, 5% of the city’s employment and about 20% of its earnings were from the securities industry.
This is the time that the shares were compared to other periods in history and were approximately eight times the respective national figures. It is thus no wonder, the local economic landscape is dictated by the trends in the financial sector.
Recent study shows that the greater local economy’s cycles is greatly influenced by the performance in the financial sector, especially the securities industry.
The city’s medium term growth projections seemed to have been threatened by the contraction in Wall Street employment. This contraction was as a result of the September 11 attack, national recession and certain weakness in the financial markets.
The slight fall in securities employment in the other parts of the country shows that these losses in jobs are due to both industrial and city specific factors. Financial services form a key sector that should be monitored weighing the general health in both the lower Manhattan and the greater regional economy.
In the long term, the great financial services industry is likely to continue being greatly influenced by the internet and advancement in Information and Communications Technology (Okuyama & Chang, 2004, p. 63).
The New York firms are much different from those in other cities such as Chicago and Los Angeles. This difference is with regard to their kind and degree of specialization. For example, research has revealed that most of the legal firms in New York have been highly specialized in international expertise.
While large firms that are based in other US cities have expanded to New York, “the large New York firms on the other hand, have set up other major foreign international financial centers as well as Washington, D.C, this city being a step in the international chain of transactions (Sassen, 2001, p. 154).”
Increase in investment banking has been the main spring of growth of these services in New York. A third of the national legal services employment is based in New York with up to half of the profits from this sector being generated from the city.
As compared to other major US cities, New York has the largest number of law farms. This is due to a number of reasons. First, due to increasing concentration of top notch international law firms, the expense of expanding internationally is not feasible for most of the firms.
Secondly, a law firm has other options through which it can attend to its foreign clients which is by directly exporting legal services and forming contracts with local firms for delivery of services. There is an increase in the degree of specialization in a number of the advanced services.
For instance, a number of legal firms that are corporately specialized tend to be used by large firms. Moreover, the rise in management consulting has tended to specialize more in institutional investment.
Earlier, there was competition in the sector of management consulting from other cities like Boston and Los Angeles but the dynamism in the financial industry has made New York to be at the top in this sector.
This high degree of specialization has led to the need for reliance on other resources and services. Firms contact a lot during the production stage. These firms can target diverse markets at the regional, national and international levels but still exhibit agglomeration economies at the production point.
Therefore, in spite of higher operational costs, New York vividly emerges as a desirable location for sectoral distribution of output and employment (Sassen, 2001, p. 155).
How the Economic Structure Evolved in the Immediate Past
The average yearly rate of GDP over sometime is normally used to represent the national economic growth. Due to the absence of an official output measure at the level of a city, the trend in the growth of real income and jobs is normally used to gauge the growth in economy.
In most places, these measures go together but for the case of New York City, the case of economic growth is presented in very unique perspectives.
For three decades, the city has had a constant average total employment. Despite the increase in jobs in the 1990s, the total employment was almost the same for all the years apart from 1999 that had a slight increase.
The highest level of total employment was highest in 1969. On the other hand, the income of city workers has been rising at the rate of about 3.5% per year.
Restructuring in industry and occupation is said to be the cause of the city’s trend in brisk employment and an increase in real earnings. A shift towards jobs that offer better income and increase in productivity growth in the current jobs are the main causes of rise in average earnings in the city.
In the 1980s, the city’s rise in the average real earnings was due to the growth of jobs in the Finance, Insurance and Real Estate (FIRE) sector. The recession of early 1990s caused a temporal reversal in most of the job gains.
Nevertheless, real earnings in the city were boosted by job expansion in some service sectors that were highly paying together with the economic recovery of the city since the mid 1990s. At this time, there was a national rise in earnings per job while in New York City there was a rapid increase in earnings per job.
Therefore, the city had greater earnings in comparison to the rest of the country which was enhanced by the productivity of existing employment and getting hold of a rising share of jobs that were highly productive (Okuyama & Chang, 2004, p. 54).
Moreover, as from 1976, there has been an increase in New York City’s cost of housing. This implies a rising cost of living in New York relative to other parts of the nation with a steep rise especially in the last half of the 1990s.
Statistics on New York City’s land price and wage show that before September 11, the patterns in these two aspects were favorable because there had been an increase in land price and income over all horizons.
The city’s attraction to both firms and households accounts for the increase in land price while income rise show that the New York location is greatly valued by businesses as compared to households. However, change in demographic characteristics with time can be another explanation for increases in wage (Okuyama & Chang, 2004, p. 57).
As many people ushered in the new millennium (2000), the city’s economy was booming as its real estate market and other local government surpluses expanded. Compared to the 1970s, the condition of the city had improved in many respects. The city’s economic growth rate was anticipated to increase by about 6%.
The problem of unemployment was reduced due to the rise in job opportunities in the service and business sectors. In 1999, the profits registered by Wall Street had grown by more than a third in comparison to the situation for the two previous years (Sites, 2003, p. 63).
The context impelling Changes in New York
The changes in the growth of New York City’s economy is a product of a number of factors. First, there is the September 11 attack. A lot of cyclical and long-term trends that were underway were accelerated by the terrorism attack.
The adjustment in structure can be observed in the finance sector which constitutes the economic sector that was affected by the attack to a large extent.
For purposes of cost reduction, the finance sector has been carrying out its activities away from its location for quite a long time. Nonetheless, the rate at which changes have been taking place after the attack is alarming.
After September 11, there has been a monthly decline in employment especially in the insurance and finance sectors. A greater percentage of employment loss in the finance sector was experienced in Manhattan relative to the suburban part of the region (Congress, 2001, p. 22246).
However, research shows that the New York City as a business location was not permanently damaged by the attack. Albeit, the city has some risks.
There is a rise in competition for jobs and earnings which is within the city and even with other cities. The leading industries in New York are supposed to intensify innovation so as to discover commodities that will justify the expensive cost of living in the city (Chernick, 2005, p. 9).
Private investments have been pursued by government agencies and the latter have been strongly opposed by both the preservationist forces and the neighborhood.
The city has also experienced changes in relations between men and women that have resulted in the transformation of the economy, renewed attitudes and new family structures. The use of space has been affected by this as women look for proper housing facilities, work and aid in their parental duties.
“The increased participation of women in the labor force and the strains they have felt as a consequence of the double burden of home and work have expanded their need for convenient job locations better transportation systems and day care (Kleniewski, 2004, p. 179).”
The economic significance of New York as a city has been heightened by the rising integration of the economy. This is due to the increase in global investment opportunities of the city’s dominant finance sector. Also, New York’s status has been threatened by globalization as other aspirants have created increased competition as they compete for the city’s economic niche (Kleniewski, 2004, p. 179).
Besides, the growth in the real estate market was driven by a number of factors such as the leasing activity from the new media, highly developing internet and advanced technology present in the sector of business service. The city had also grown in population compared to the way it was three decades earlier.
The population growth was mainly due to the immigrants (Sites, 2003, p. 63). The high population of employed people provided ready market for the city’s products and services causing its economic growth to continue climbing.
Role of Public authorities in facilitating the Structural Changes
For many years, the private market provision of housing was supplemented and regulated by the New York City and state governments. For quite some time, there were several tax exemptions and abatements available. The house developers with limited profit were eligible for lending from the city and the state.
After some time, the regulatory measures of the city started affecting the housing supply in a negative way. In the private housing market, the government intervened through rent control which was argued to discourage people from investing in low cost housing that’s under private ownership (Bellush & Netzer, 1990, p. 204).
The zoning resolution that was reached at several decades back had restricted accepted densities for the city’s new residential construction. In the mean time, there was a slowdown by the Housing Authority in building traditional houses for the low income earners.
This occurred because the city costs were more than the federal standards while the design and social criticism for projects increased. The Housing Finance Agency then intensified its banking services through mortgage buying and lending for housing.
Several years after its inception, it became one of the institutions that offered securities that were tax-exempted. Its credit rating exceeded that of the city government (Bellush & Netzer, 1990, p. 205).
The efforts of the public authorities saw the revival of New York City in 1990s. Both building of the city and reconstruction of projects was as a result of the partnership between public authorities and market investors.
One of the main aspects of this endeavor was that the government agencies extension of coercive and displacing measures towards the urban residents, specifically the low income earners.
The New York City through policy initiatives such as housing, welfare and policing was able to coordinate with the government in eliminating some social impediments so as to clear the way towards good economic growth (Sites, 2003, p. 62).
These innovations earned mayor Giuliani a lot of credit due to politics and government that had contributed towards changing of the city’s public image and not necessarily because of the prosperity of the local economy.
Problems faced by the New York City and Proposed Economic Strategies for solving them
The largest contributors to the economy in the city are a few sectors that include finance, real estate and insurance. Despite this being a great financial center, unemployment can at times be on the rise. For instance, in 1985, 50% of the city dwellers were not employed. Besides, residents with past criminal convictions are discriminated in employment (Deadwiley, 2009, p. 87).
Secondly, housing cannot be afforded by the low income earners especially in the central part of the city. Harlem and the Bronx are regions that have slums (E-Learning and Teacher Education, 2010, p. 1). Also, there are thousands that are homeless in Manhattan.
Thirdly, there’s an environmental problem as a result of waste production. The city generates a large amount of waste on daily basis with the main problem being the waste’s disposal. This is also accompanied by green house gas emissions.
In solving the problem of unemployment for the majority of the city residents, the city should diversify in other sectors apart from the existing few to enable residents who have diverse skills in other sectors to get jobs.
Also, the Civil Act Rights of 1964 should be amended to enable individuals with past criminal offenses to seek employment without being discriminated to enable them contribute towards the city’s economic growth.
Second, the problem of housing can be solved by city government’s intervention to ensure that there are different categories of houses according to the affordability of tenants. This will give the low income residents an opportunity to secure housing in the central city.
Third, the problem of waste disposal can be solved by the city authority under the mayor. This can be addressed by devising an effective environmental waste disposal policy. The city authority should help in contribution of funds to purchase equipment that is energy efficient and one that can be used in public houses and offices.
Moreover, the city authority should devise waste management plans to facilitate proper disposal and management of wastes in firms and households.
This will lead to employment of more residents as part of the waste management team. Pollution due to carbon and green house emission can be minimized by adopting a policy that encourages use of hybrid cars and ‘green’ buildings.
New York City has undergone growth in its economy along the past decades. The city’s most active sectors are finance, insurance and real estate.
The structural development of the city’s economy and growth of these sectors has been driven by national and local authority involvement, high population, high competition and ready market due to the high population.
However, despite this economic progress, the city experiences some problems such as housing, environmental pollution and unemployment. These can be dealt with through application of relevant economic strategies.
Bellush, J., & Netzer, D., 1990. Urban Politics, New York Style. NY: M.E. Sharpe.
Chernick, H., 2005. Resilient City: the Economic impact of 9/11. NY: Russell Sage Foundation.
Congress. 2001. Congressional Record, V. 147, Pt. 16, November 8, 2001 to November 28, 2001. Washington D.C: Government printing Office.
Deadwiley, E., 2009. Civil Death in New York State: How New York State Utilizes Criminal Conviction Records to Impede the Economic Growth of Formerly Convicted People. NY: iUniverse.
E-Learning and Teacher Education, 2010. Urban Development: Problems Facing New York. E-learning and Teacher Education. Web. Web.
Kleniewski, N., 2004. Cities and Society. Malden, USA: Blackwell Publishing.
Okuyama, Y., & Chang, S., 2004. Modelling Spatial and Economic Impacts of Disasters. Springer-Verlag: New York.
Sassen, S., 2001. The Global City: New York, London, Tokyo. Princeton University Press: Princeton, NJ.
Sites, W., 2003. Remaking New York: primitive globalization and the politics of urban community. Minneapolis: University of Minnesota Press.