The interplay between gentrification, business failure and income inequality can be seen in places like Cortelyou Road in Flatbush.

Photo by: Pearl Gabel

The interplay between gentrification, business failure and income inequality can be seen in places like Cortelyou Road in Flatbush.

Income inequality in the developed world is at its highest level for the past half century, according to a report published last December by the Organization for Economic Cooperation and Development. In the United States, income polarization grew last year, with the Gini index—which measures household income inequality along a scale of zero to 1—jumping from .470 to .477.

According to Census figures, no state had higher income inequality than New York, with a Gini of .499. Manhattan—home to millionaires and billionaires—was the most polarized county in the Empire State. Westchester, long a bedroom community for wealthy commuters, was second.

Brooklyn, for all its blue-collar history and middle-class mystique, was third.

The causes of income polarization are both obvious (it’s what happens when the rich get richer, the poor stay poor and the middle-class moves out) and complex. Some may be playing out in places like Cortelyou Road, in the Flatbush section of Brooklyn.

Once an overwhelmingly Afro-Caribbean community and working-class neighborhood, there has been a 14 percent decline in the black population in Flatbush—a loss of more than 8,000 people—since 2000 according to the Center for Urban Research, a think tank at the Graduate Center of the City University of New York.

At Winston’s Dry Cleaners this seismic demographic shift has been devastating to business. “Most of my major customers have gone,” the owner, Winston Levy, says in a heavy Jamaican accent. Some dropped off their dry cleaning, but never returned to pick it up – even when the bill was $20. A staff of five several years ago is down to the owner and an occasional part-timer. Levy says he is close to shuttering his business after 25 years. The 65 year old says he does not expect enough in Social Security benefits to retire.

At another dry cleaners nearby, Ian Edwards says that after 15 years his business is struggling to keep afloat. His landlord bumped his monthly rent up to $4,500—a few years ago he was paying $2,500 a month—even as his customer base declines.

While at an optician’s blocks away a customer was angrily tapping his finger on the glass counter days later, furious that his landlord has raised his rent by $300 a month more than two years ago.

For nearly a decade some New Yorkers have worried that gentrification would force low-income people out of suddenly popular neighborhoods. In places like Flatbush, it’s a different segment—middle-class merchants—who are feeling the pressure. When businesses shutter, owners either move out or move down the economic ladder. Either way, the middle of the income spectrum shrinks, leaving more haves and have-nots behind.

The most polarized New York counties

Broader forces also at work

Though Kings County now has among the highest rates of income inequality in the country, the Census data suggests that there was no statistically significant change from 2006 to 2011. Indeed, a lot of the income inequality story in Brooklyn is part of a longer-term trend.

Wage stagnation has been the reality for most Americans since the 1970s, even as productivity grew. This concentrated income at the top of the distribution.

Meanwhile, a recent study by the Federal Reserve Bank of New York found that changes in the employment level of different industries in the metro area have contributed mightily to income inequality here.

“Over the past three decades,” the report says, employment opportunities in both the United States and the New York region have become “increasingly polarized into high- and low-skilled jobs.” Technological improvements and globalization “have created new jobs for workers at the high end of the skill spectrum and largely spared the service jobs of workers at the low end, but have displaced many middle-skill workers.”

These forces, “while increasing employment opportunities for higher skills and higher earners, have displaced many middle-skill workers over the past three decades,” the report says. At the same time technological advances and globalism have created many low-skill jobs, leading to a widening gap in wages, as they push up wages more rapidly for those with high skills.”

The report says that the rise in inequality has been especially sharp in downstate New York and New Jersey, where the wage gap is now markedly larger than the nation.

The Fiscal Policy Institute in a recent study found that from 1990 to 2007, as the New York State economy grew considerably, most wage gains went to the top. The real median hourly wage barely improved, while the average earnings for a full-time worker with a college degree declined. The income share, however, for the top 5 percent “increased rapidly,” the study found.

A 2011 study by the Drum Major Institute on recent job growth in the city finds that more than half of all new jobs created since 2009 are also the city’s two-lowest paid: retail and hospitality, repeating a trend that is spreading throughout the country.

It adds that 82 percent of all new jobs created since then were in the five lowest-paying industries, with the average wage lower than up to 60 percent of the city’s average wage.

The report concludes that retail and hospitality will be among New York City’s
“leading industries for job growth” and that in future years “an increasingly larger proportion of the city’s working families will be employed in the city’s lowest-paid industries.”

Recent data from the New York Economic Development Corporation’s quarterly census on employment and wages underscores those findings. From 2010 to 2011 the accommodation and food services sector posted the strongest growth of any local industry in terms of both the number of establishments and level of employment. Establishments in the industry increased by 6.8 percent over the period, while employment rose 7.7 percent. The surge is related to the record number of tourist coming to the city over the period.

Although average weekly wages increased 2.8 percent in Brooklyn for the first quarter of this year, they are still below the national average, according to the U.S Bureau of Labor. Kings was among the lowest paying counties, with average wages below $800 per week, the report says.
Incomes in Brooklyn, 1999 to 2010

Mapping economic extremes

Census numbers for Brooklyn show that the bottom fifth of households took home about 2.5 percent of the borough’s income in 2011. The top 5 percent claimed 24 percent. Almost 22 percent of the population of Brooklyn—some 545,000 people—live in poverty.

Overlaying Census data onto a map of Brooklyn shows many neighborhoods with stark contrasts in income distribution.

Just north of Fort Greene Park in Census tract 29, there is deep poverty: the median household income in an area that includes public housing is just over $9,000. Only around 10 percent hold a college degree. Meanwhile close by in tract 31 the median household income was much higher, at $61,050. More than 35 percent had gone on to graduate school and earned an advanced degree. South of Fort Greene Park, in tract 33, the median household income was $80,662. More than 25 percent had received a graduate degree, above the borough average. One in three households reported earnings in excess of $150,000 in 2010.

In Greenpoint, which like Fort Greene has undergone significant gentrification since the start of the century, tract 487 was reported to have a median household income close to $23,000, near the federal poverty line for a family of four, while a few blocks north in tract 589 the median household income was almost $90,000.

In census tract 21, which includes DUMBO, the median household income was $149,000, although for whites, who represent 80 percent of the population, the median household income was significantly higher at $163,000. For blacks the median household income in that area was $23,000.

But blocks away census tract 23, the median household income across races was $18,702.

Race and the corner laundry

If Flatbush’s newcomers shopped around more in the Afro-Caribbean end of Cortelyou Road, Levy’s future may not be so bleak. But, he says, “White people don’t come in here.”

On the predominantly black side of Cortelyou Road, many retailers report that business is significantly down—”terrible” one merchant says—along the main commercial strip at Flatbush Avenue. On one block between Flatbush Avenue and Beverley Road, nine retail stores are shuttered.

But on the other side of Cortelyou Road, in Ditmas Park, what was a bodega two years back is now a wine bar. A launderette three years ago is now a café.

One lawyer moved nearby from Manhattan six months ago earns more than $100,000 annually. A vice-president of technology, another recent mover, also earns more than $100,000. They said more space and their plans to start a family led them to Flatbush.

The husband of an employee at the Finnish embassy in New York says that abundant space and a garden brought his family from Manhattan, where they had been paying $8,000 for a three-bedroom apartment. They are now renting a six-bedroom house for the same price.

A few blocks away on Flatbush Avenue, Leroy Johnson, an activist with New York Community for Change, says that many landlords are ridding themselves of low-income minority tenants, and are no longer accepting Section-8 housing applicants.

Johnson, also a Jamaican immigrant, says that the retail store he runs is also in jeopardy. “I have lost all my good customers,” he says. His rent was recently raised by $1,100, to $3,000 per month.

Mind the gap

That New York has always been a city of extreme wealth and poverty is no secret. But, according to the FPI, it is also a city which has never had so many “super rich” people and where more than ten percent live in deep poverty or $10,500 for a household of four.

A recent study issued by The Graduate Center at CUNY reported that class in the city “had a clear color.” Although native-born whites make up 25 per cent of the population of New York, they represent more than 60 percent of upper-income earners, while low-wage jobs tend to be disproportionately minority. Meanwhile only one out of thirteen native-born blacks and one out twenty native-born Hispanic households were in the top category.

There are those who see who see no reason for alarm in the inequality statistics. Douglas J. Besharov, a professor of public policy at the University of Maryland, warned recently in an interview with the New York Times that “Too much redistribution will kill the goose that laid the golden egg.”

And for Brooklyn, “not very much” can be done to lessen income inequality, according to Nicole Gelinas of the Manhattan Institute. She says that as long as people migrate to New York for better jobs, and as long as some people continue to have families they can’t support, poverty will continue. And as long as people with more money desire to live in the New York rents will continue to rise.

Others believe there are ways to fill in the income gap. Outside Cortelyou Road train station, a teacher who recently moved into the neighborhood says that education is key for minorities to find the employment opportunities that will allow them to remain in the area. But the FPI study also found that since 1990, full-time workers with a college degree have seen their annual earnings decline.

Job training for higher-paying jobs in the tech sector may also help, say some. Raising the minimum wage could have an impact. Others push for a return to the days of stronger unions. It is no coincidence, says Richard Wolff, a visiting professor of economics at the Graduate Program in International Affairs of the New School University, that the glory days of the American middle class from 1947 to 1974 came during a time of powerful unions and high corporate tax rates.

“What makes a job middle class is not the work; it’s the salary. If we pursued policies that promoted better pay – unionization, living wage legislation, a social safety net that stops wages in their race to the bottom – we could turn jobs into ‘middle-class jobs,’ ” says Greg Smithsimon, a professor of sociology at Brooklyn College. “If we don’t do that, we won’t.”

The 2013 mayoral campaign could spur a vigorous debate about income inequality and possible ways to address it. Arguing that Mayor Bloomberg’s vision of the city has been one “that is most comfortable for economic elites and strivers,” David Jones, the president of the Community Service Society (which is City Limits’ parent), says that candidates in the Democratic primary will have to clearly lay out their plan on this issue. Emails to Democratic candidates in the primary weren’t answered.