Felix Salmon graciously replied to yesterday’s post on Ontario and New York state:

Picking up on my chart of median household income in Ontario and New York, Reihan responds by saying that, essentially, that particular game is rigged: Ontario has more married-couple households, even if it doesn’t have bigger households, and that will help explain at least some of the difference.
I think that Reihan’s right here, although I suspect that even if you adjust for household size, median incomes in Ontario are still going to be higher than in New York. But Reihan’s argument is essentially a subset of a bigger fact, which is that it’s never possible to make true apples-to-apples comparisons between two different states or countries — especially if you take into account things like “the particular historical challenges facing a post-slavery society”.

Felix goes on to make a number of other observations that are worth a read, e.g.,

The fact is that when you’re comparing GDP per capita between two different states, there are just as many weird idiosyncrasies as there are when you’re comparing median household incomes. Ontario, for instance, has significantly lower GDP per capita than resource-rich states like Alberta, but that doesn’t mean that people in Alberta are better off than people in Ontario. And if Albertan GDP Is artificially raised by the energy industry, then New York’s GDP is artificially raised by Wall Street — something which does little good for poor families upstate or even people in New York City struggling with a cost of living which has been inflated by bankers’ bonuses.

Here is where we might disagree. While the unequal economy of New York city and its immediate surroundings might not directly benefit poor families living upstate, those regions certainly benefit from various direct and indirect transfers, e.g., tax revenues raised in the New York city region contribute to state-supported prisons and college campuses that constitute a non-trivial share of the employment base in some cities and towns. On the other hand, the fact that residents of the New York city region have a taste for high levels of government expenditures and for extensive regulation may well have burdened the upstate economy as the global manufacturing landscape grew more competitive. Looking at the issue broadly, I tend to think that upstate would be better served as a separate state of “West New York”: less money would flow from affluent New Yorkers, but the new state’s electorate might be more congenial to the kind of economic strategies that are more conducive to growth in a Rust Belt region.

But the question of poor families in New York city proper is another matter entirely. I take a very different view from Felix, which probably reflects our different ideological starting points. There is a reason poor families choose to cluster in a place like New York city. Perhaps the most salient one is that New York city offers economic opportunity to large numbers of less-skilled workers, precisely because it has so many skilled, high-wage workers. A high-wage worker has a strong incentive, for obvious reasons, to outsource household production. This, in turn, creates an opportunity for workers who can specialize in child care, meal preparation, and other services.

While it is certainly true that the cost of housing and various amenities is higher than it might otherwise be as wealthy families bid up the price of urban positional goods, the legacy of density and a dense transit network mean that less-affluent families can access employment opportunities without owning an automobile. So this makes New York city much more attractive than, say, a low-cost rural area where housing, etc., might be markedly cheaper, but access to the same kind of employment opportunities would be far more expensive.

So the real problem is not so much the presence of ultra-rich workers in the same city as poor workers — the complementarity is actually valuable for both parties. Rather, the big problem is that inelasticity of housing supply, which has a number of culprits — aggressive zoning restrictions foremost among them, as Ryan Avent argued in his excellent single The Gated City.

What is true, however, is that it is affluent New Yorkers who tend to defend aggressive zoning restrictions most zealously. In this regard, Felix and I might see eye to eye: poor New Yorkers are definitely harmed by the taste for historical preservation and limits on density that are widespread among the urban rich.