Manhattan Has No Class

Just read an article on CNBC of what is it to be middle class in Manhattan. Manhattan is unlike most areas in the United States. It is a island where the poor, middle and upper classes lives together, ride the subway, purchase food in the same shops and may even eat at the same restaurants. This may seem great because all classes get along without any issues. However, appearances can be deceiving.  Manhattan over the last few decades has very real estate and cost of living relative to the rest of the country.  Due to these costs many of the middle class have fled to the suburbs were real estate and cost of living in much less.  The residents who aren’t rich living in Manhattan are on some form of subsidy.   This form of subsidy can be governmental rent control, university rents at below market for professors, parental subsidy to children to live in Manhattan or subsidized housing provided by New York.

There can be many factors that has contributed to this escalation of prices and the dying middle class breed in Manhattan.   I will not go into the detail or research every possible cause however a few come to mind that I will share.  First many people across the country and around globe want to live in Manhattan.  Manhattan is truly a 24 hour city that not sleeps.  Las Vegas got nothing on New York.   Since so many people want to live in Manhattan this causes rents and real estate prices to rise.  Secondly, government subsidies cause distortions in the market place which don’t reflect the natural price dynamics that the market place would impose.  Another factor is the money printing by the Federal Reserve causing the dollar to depreciate in value in terms of other currencies and domestic inflation. If you are a fireman earning $50,000 today your money has less purchasing power than your predecessors of 20-50 years ago even though he makes more money in absolute terms.   Additional factor was the federal government bailouts of the great recession.  Since the banking system was the largest beneficiaries of the bailouts those on top in the senior ranks benefitted the most because the compensation is tied to options and restricted equity.  If there were no bailouts I have no doubt Manhattan real estate market would have crashed because the banks will go bankrupt and the larger stock holders and senior bank executives would have lost the majority of their wealth.   I understand many people in the middle class benefit too from the bailouts, however relative to the upper class their benefits were pale in comparison. 

 

If you are interested in reading the article just click the link to learn more.

http://www.cnbc.com/id/100393079