Attacks on welfare largely to blame
for New York City’s hidden poverty
By Moshe Adler*

19 October 2005: One of the poignant questions that Hurricane Katrina raised was this: How could so many people be so poor for so long without anybody noticing? But poverty is just as invisible in New York City as it was in New Orleans. The last five years of the 1990s were widely touted as years of a spectacular boom. Yet when Census 2000 was released, it revealed that poverty in New York City had increased by 10 per cent during the course of the 1990s. How could the euphoria of the boom be reconciled with the alarming census figures?

A New York Times front-page article claimed that the census figures drew a distorted picture. The conditions of New Yorkers who were long-term residents of the U.S. must have improved, the experts the article quoted argued, but as a result they moved "up and out." These affluent long-term residents were then replaced by poor new immigrants, and hence the higher poverty figures. "Immigration Cut Into Income in New York, Census Finds," was the article's headline. The truth is, the census found no such thing. In fact, the census figures that were released at the time did not distinguish between the incomes of new immigrants and the rest of New Yorkers.

The data that does permit distinguishing between the incomes the two groups has now been released. What do the figures show? Poverty increased for both groups over the 1990s, but among New Yorkers who have been in the country at least ten years the increase in the poverty rate was 14 per cent whereas among new immigrants the increase was only three per cent. The actual rates for either group are thus catastrophically high. More than a fifth of New Yorkers who were long term U.S. residents of the U.S. in 1999 (the figures of the 2000 census were collected during the preceding year) and more than a quarter of recent immigrants were living below the poverty threshold.

Why did New Yorkers lose ground in the 1990s? Because at the time that all levels of government were enjoying unprecedented budget surpluses these governments engaged in a frontal attack against the wages of the lowest paid workers. The most damaging was probably the attack on welfare, which provides workers their last defence against job offers that are too low. Welfare reform was implemented by the Clinton administration, but the Giuliani administration implemented its own version of it with particular vengeance. It pushed 250,000 destitute New York workers off welfare and into the low-wage job market between 1995 and 2000.

During the 1990s the pace of privatization also increased significantly, and this meant that jobs that could have been filled by relatively well paid public employees went to the low paid workers of private contractors. Between 1989 and 2000 the number of private social service jobs increased to 110,000, a 61 per cent increase. While not all these private workers produce governmental services, a large part of the funding of social service agencies comes from government. Another sector that saw increased privatization was sanitation. The number of Business Improvement Districts, or BIDs, organizations that provide sanitation services in select neighborhoods, more than doubled. Whereas the starting hourly for a city sanitation worker is $13 with full benefits, the BIDs often pay the minimum wage or near the minimum wage, and often with no benefits.

The 1990s saw also a new phenomenon that came with welfare reform. This was the replacement of government employees with individuals who are forced to work, and not for a wage but for a welfare check. By law, these forced workers are not permitted to unionize and are not eligible to receive the earned income tax credit. In 1999 the city employed directly 33,000 workfare workers in jobs previously or in some cases currently done by city employees who work alongside them. Finally, despite its image as a high-wage state, the New York’s minimum wage in 1999 was stuck at $5.15.

Unfortunately, while the 1990s are over, the rate of poverty in New York is virtually unchanged. The latest figures released by the Census Bureau show that in 2004 a fifth of all New Yorkers were still living in poverty. And it couldn’t be otherwise, since none of the policies that contributed to poverty have been reversed.

Welfare is still seen as a ‘giveaway’ instead of an integral part of a wage policy, privatization continues, and while the minimum wage was raised, it is now $6/hour, far from sufficient to pull anybody out of poverty. To fight poverty the government will have to switch from attacking workers to siding with them.

*Moshe Adler teaches economics in the department of urban planning at Columbia and is the director of Public Interest Economics, a consulting firm. He can be reached at: ma820@columbia.edu and via his website www.columbia.edu/~ma820.