A cost of living crisis is unfolding in America's major
cities.
We can't afford to live in this city if you're a
working class New Yorker.
The problems are acute in downtown Manhattan.
One bedroom units are renting for nearly $4,000 a
month on average.
There's a reason people are willing to pay.
It drives you and it motivates you.
And it keeps you hungry. It keeps you always thinking,
because no matter what, you know, there's somebody out
there hustling more. There's somebody thinking
something new. You can never become complacent.
That's what's so beautiful about this city.
People have returned to cities to see their friends
and have a good time.
That's pushing rents to new highs in places like Los
Angeles, Chicago and cities across the Sunbelt.
While renters have returned, many commuters
haven't, despite the return to office push from major
companies like Goldman Sachs and JPMorgan.
More days at home could help workers escape high
city prices and long commutes.
But there could be a cost to that decision.
I think it's really hard to form high quality new
relationships remotely.
I think it's easier to maintain existing
connections.
There's just something about meeting in person that you
can't replicate virtually.
During the pandemic, we saw some jobs where it could be
done remotely. However, new hires dropped dramatically,
about 40% for over a year and a half.
This is really compatible with a view that firms had
trouble onboarding new workers because it was
difficult for them to learn.
As prices keep rising across the country.
We ask our American major cities like New York still
worth it. The biggest benefit of cities are the
people being close to others in your field of work
can unleash powerful benefits.
Economists call this the theory of agglomeration.
When there's a concentration of an industry in the city
that can make those firms and people more productive.
You know, New York City is a good example.
You have like this variety of restaurants that you just
can't have in a population of 50,000 people.
There's long been a hypothesis of agglomeration
economies, which just means that we get more productive
when we are enmeshed in a maelstrom of economic
activity, both because we can buy and sell, we can
find workers to hire, we can find employers to hire
us, and we can learn from one another.
Within large cities, the benefit that you have is the
diversity. It's the diversity of people.
The diversity of culture is diversity of ways of life.
And I think that is not what is always present in
smaller cities, but I think that is an individual choice
on the person to decide if they want to stay in a
larger city or not.
Evan Robinson runs America on Tech, a nonprofit that
teaches young professionals how to code.
They have offices in Los Angeles, Miami and New York
City.
We're looking at it from a data perspective about where
our most underestimated communities are located, and
that happens to be within or in proximity of the
largest cities.
Opportunities like this are one of the big benefits of
cities, and it's what makes many consider them to be
worth it despite the costs.
But in the age of remote work, Sunbelt cities are
poaching talent from the old titans in Silicon
Valley, in New York.
People are fleeing governments and places that
they're not wanted or they feel that they're not
wanted, or where they're being taxed to death.
A lot of these tech companies, they're saying,
Oh, yeah, you can work remotely. But, you know, in
many cases they're also saying like, we're not going
to pay you quite the same amount.
Making it in any major city has never been easy.
I always wanted to come into Manhattan, be a businessman
in Manhattan. You can say anything negative you want
to say. There's a lot of negative things to say about
this place. It's a financial epicenter of the
world, and it drives you and it motivates you and it
keeps you hungry. It keeps you always thinking.
That's the exciting part, right?
And I'll be honest. Actually, that's what the
city has lost the most with COVID, is that it's lacking
that energy. You walk around, you don't feel that
energy. You don't feel that buzz.
Before the pandemic.
Manhattan could more than double in population during
working hours.
You're looking at a visualization of data that
was collected by NYU's Wagner School in 2012.
Although this hasn't been updated since the pandemic,
we can clearly see Manhattan's heartbeat has
changed since then.
Foot traffic plummeted during the darkest days of
the pandemic. At one point, consumer spending fell more
than 50% across Midtown.
The business community hopes that eventually those
vacant storefronts get new tenants.
Where I am most fearful is the retail space in the
business districts in the Grand Central area.
You have about a 30% vacancy of all retail
spaces. At best, we will have two thirds of
pre-pandemic level foot traffic in Midtown moving
forward.
Spending from high skilled workers has kept major
cities afloat through the years.
Tech workers in particular have clustered into about
eight major US cities, raising issues of
affordability in each.
Prospects for the software engineers and data
scientists in this cohort remain strong.
For example, the median worker at Google made over
$270,000 a year in 2020, according to SEC filings.
Other workers fare pretty well, too.
The purchasing power of these specialists can shoot
prices upward for housing and other goods.
Silicon Valley is kind of maybe the most famous
example where, you know, it's really costly to live
and there's a ton of regulation and yet software
companies seem to continue to locate there.
And a lot of that is because of agglomeration
economies.
If these workers leave the usual major cities, it could
fundamentally change the economy.
The ability to serve a latte with a smile was a path
towards a steady paycheck.
Now, when people stop going to to work downtown, those
jobs disappear.
If we have a shift to hybrid work, maybe that will
mean fewer people in the offices. But you'll also see
commercial rents going down, and you'll see
younger, scrappier firms replace older and more staid
firms that have sent their office workers home.
Hopefully, those younger, scrappier firms will
continue to demand things from the urban service
workers and provide opportunity for Americans
who start with less.
I am more worried about cities like Cleveland and
Detroit that started on the edge of of survival, where a
decline in demand for offices can really mean just
increased vacancies, which then spill through the urban
service economy.
The surge of people into major rental markets masks
the sluggish return to normal in downtowns.
Demand is still strong for city life because, well,
it's fun. In 2018, the most recent year with data
available, New York City had nearly 20,000
restaurants and over 2000 bars.
I mentioned kind of the diversity of restaurants,
but there's also the mating market, right?
Like young people want to be in a market where they
have other young people to meet and friends, right?
Like we're kind of inherently social creatures
and a density of social connections which cities
provide is going to continue doing that going
forward.
But those connections will cost you.
Quite honestly, the cost of living here is only gone up.
It has not gone down.
Quality of life is gone down in many ways.
Rent hikes are hitting some previously affordable
neighborhoods. Grocery prices are rising, too,
squeezing even the most frugal people.
Economists believe that returns for living in a big
city have flattened for less skilled workers since
the 1970s.
Cities should become fairer places that, while cities
are relatively good places for adults, even for adults
who don't have fancy degrees because there are
these urban service sectors, they're really not
great places for poor kids.
As the likelihood of recession increases, leaders
are trying to manage rising inequality.
What we are announcing today is the largest investment in
the city's history in support of vulnerable New
Yorkers experiencing homelessness on our streets
and subway.
I think that that is the most important thing to
getting people back here.
You know, there's a significant decline in
ridership on the subway.
And a large part of that is if people can avoid taking
it, they will.
Transit ridership in New York remains well below
pre-pandemic levels.
If this trend continues, it could impact the quality of
service down the line.
It is absolutely true that public transit becomes safer
when there are more people who are taking it.
This was Jane Jacobs fundamental insight that in
fact, having more people around makes places safe.
The available data suggests New York is still much, much
safer than it was during the 1970s.
They may become slightly less safe, but there's still
the best means to get around New York most of the
time.
Urban living today looks like a long commute to the
office that may feel unnecessary.
Or working remotely from a cramped and expensive
apartment. This makes a return to the city seem like
a raw deal for many people, especially if they can do
their jobs from home.
What is permanent about the pandemic?
And what we thought was probably permanent was this
change in the productivity of remote work.
There is always a sort of curve for the adoption of
new technologies.
We would have gotten all these technologies fully
adopted eventually, but the pandemic accelerated it.
The theory of agglomeration shined in the late 20th
century when fax machines and paper dominated offices.
It'll be tested in an era of hybrid work.
Our staff is coming into the office 1 to 2 days a week.
What we have seen is that this creates more
flexibility. This creates a more morale within our team
and more work life balance.
I really think going forward, hybrid work is here
to stay, but so is very much face to face contact.
It was exactly in the industries that were most
capable of enabling remote work prior to the pandemic.
Like information technology.
Like Google. They bought a million and a half square
feet in downtown Manhattan, even though if they really
wanted to enable remote work, they could have
enabled remote work.
So our city's still worth it.
If you're 23, 24, 21, especially, this is the time
to invest in your career and you can always come back
to where you want to live. You're just going to have
more options about where you want to live if you
invest in your career now and make yourself a more
productive employee.
Cities, especially city like Manhattan, is 100% still
worth moving to. And you see a lot of people come
here and they they go buy every penny they have just
to enjoy, experience living here for a couple of years.
And the major banks are going to pound their chests.
They say, get back to work, be here five days a week.
You will lose talent if you force people to come in five
days a week.
While you've seen kind of this migration of a lot of
individuals leaving major cities into smaller cities.
Majority of the population doesn't have the opportunity
to kind of move.
And I think during a time of uncertainty is important
that we're making not only strategic investments but
meaningful investments into communities that need it
most.
Just remember that life is better spent live.
Just think about how much better it was when you were
around other people.
That's what cities are delivering, where people are
moving up and down all over the place.
And you have the opportunity to learn from
them, from their mistakes and from their successes.
And good luck to you.