Income Polarization Redux: NYC’s Wage Gains (Again) Flow to the Top
Mohamed Obaidy, associate director of CNYCA's economic policy team, breaks down how income inequality and labor market polarization deepened in 2025, even as workers became more productive overall.
Mayor Zohran Mamdani’s campaign spoke directly to New Yorkers’ concerns about the cost of living and the widening gap between those who benefit from the city’s growth and those who do not. These concerns are not abstract. The most recent wage and employment annual data suggest that income inequality and labor market polarization deepened again from 2024 to 2025.
CNYCA’s latest analysis finds that:
Except for the top 20 percent of wage earners, every wage group saw their hourly wage perform worse from 2024 to 2025 than in the 2019–2024 annualized period.
High-wage industries saw the strongest average wage and employment growth between 2024 and 2025.
Despite New York City workers becoming more productive over the last two decades, wages for the bottom 80 percent have lagged and inequality continues to rise.
Real wage growth in New York City is increasingly concentrated at the top. High-wage workers and high-wage industries are pulling further ahead, while most of the bottom and middle of the wage distribution are either stagnating or losing ground. The employment picture is more modest, but it points in the same direction: job growth is strongest in high-wage industries, while several lower- and middle-wage industry groups are shrinking or barely growing.
This matters not only because New York City is already facing an affordability crisis, but because these trends are happening while the city has become more productive. If the city is producing more per hour of work, but the majority of workers are not seeing that reflected in their wages, then the issue is not simply whether New York City is growing. The issue is who benefits from that growth.
The Wage Distribution Is Polarizing Again
As Figure 1 shows, real hourly wage growth from 2024 to 2025 was strongest by far at the top of the wage distribution. The average real hourly wage increased by 5.1 percent for the top 20 percent of wage earners, compared to only 0.6 percent for the bottom 20 percent. The bottom 20 percent of wage earners did experience positive real wage growth, but it was much weaker than at the top. In hourly wage levels, the gap is even starker: workers in the bottom 20 percent earned an average of $14.21 per hour, compared to $102.21 per hour for workers in the top 20 percent. See my previous report for an explanation of the methodology.
Figure 1
The middle of the distribution performed worse. Lower-middle-wage earners, with an average hourly wage of $20.24, saw their real hourly wage decline by 1.3 percent. Upper-middle-wage earners, earning $41.95 per hour on average, saw their real hourly wage decline by 1.2 percent. Workers in the middle of the distribution, earning $28.11 per hour, saw no real wage growth at all from 2024 to 2025.
Figure 1 also puts the change from 2024 to 2025 in historical perspective. Except for the top 20 percent, every wage group performed worse in 2024–2025 than its annualized real wage growth rate during 2019–2024. The contrast is striking. The top 20 percent saw real hourly wage growth of 5.1 percent in 2024–2025, compared to an annualized rate of 1.5 percent during 2019–2024. In other words, top earners are not only doing better than everyone else; they are doing much better than their own recent historical trend.
For the rest of the wage categories, the opposite is true. The year 2025 was not simply another year of slow wage growth. It was a year in which much of the wage distribution either lost purchasing power or failed to keep pace with recent performance.
High Wage Industries Are Capturing the Gains
Does the same polarization story appear when we look at industries? And is the wage polarization accompanied by job polarization?
To answer this, I use the annual Quarterly Census of Employment and Wages data (QCEW), which captures payroll data on jobs located in New York City, rather than the analysis above on workers who live in the city. That distinction matters in a commuter-intensive economy like New York City.
I then rank industries by their average annual wage and group them into five wage categories, from low- to high-wage industries. For each wage category, average wages are calculated as total wages divided by average employment.
The industry-level results confirm the broad pattern observed in the hourly wage data. As Figure 2 shows, high-wage industries experienced by far the strongest real average wage growth in 2024–2025. Real average wages in high-wage industries increased by 7.7 percent, compared to only 0.1 percent in low-wage industries and 0.5 percent in middle-wage industries. These increases for low- and middle-wage industries are better described as wage stagnation than meaningful wage growth. In contrast, lower-middle-wage and upper-middle-wage industries saw real average wages decline by 4.2 percent and 1.1 percent, respectively.
Figure 2
The job growth during this time period was less polarized, but still skewed. New York City’s labor market has experienced weak job creation over the last two years. As Figure 2 shows, high-wage industries recorded the strongest job growth, at 1.2 percent, equivalent to 5,501 added jobs. Low-wage industries experienced the largest decline, with employment falling by 1.8 percent, or 5,334 jobs. Middle-wage industries lost 3,333 jobs, while upper-middle-wage industries lost 1,604 jobs. Lower-middle-wage industries were the exception outside the top, adding 580 jobs, or 0.3 percent growth.
The employment pattern reinforces the same labor market inequality concern: job gains are concentrated at the upper end of the industry wage distribution, while low-, middle-, and upper-middle-wage industries are either losing jobs or barely growing.
The top industries that experienced both positive job growth and strong real average wage growth are concentrated in finance, management, and high-value sectors. These include: Funds, Trusts & Other Financial Vehicles; Financial Investment & Related Activity; Management of Companies and Enterprises; and Heavy and Civil Engineering Construction. This matters because these industries already sit near the top of the city’s wage structure. Their strong wage performance does not offset inequality; it deepens it.
This also raises a forward-looking question about the impact of Artificial Intelligence (AI) on the city’s economy. Much of the debate around AI focuses on whether it will replace workers or rather raise the productivity of workers. But the distributional question is just as important. Even if AI increases productivity, who will capture those gains? If the benefits flow mainly to high-wage workers and high-wage industries, AI may increase output while further widening wage inequality.
NYC Is More Productive. So Why Are Most Workers Falling Behind?
One might assume that slow wage growth reflects the city’s slow and uneven recovery from Covid, and the impact of Trump’s policies over the past year and half. If the pie gets smaller, the slices get thinner. But that explanation is inaccurate for New York City, where growth in real Gross Domestic Product (GDP), the monetary value of all goods and services produced in the city, has been steady around 2 percent annually since 2021 (compared to 3 percent in 2013-2019), and the city’s economy has become more productive.
Labor productivity is a concept that measures how much output an economy produces for each unit of labor input, typically measured in hours. If workers can produce more goods and services in the same amount of time, then the economy has become more productive.
In theory, higher labor productivity should create room for higher wages. If workers are producing more per hour, there is more income available to be distributed.
Mainstream economic theory suggests that, in general, wages should rise with workers’ productivity. But the evidence in the U.S. and in New York City points to a different reality: productivity gains are not automatically shared with workers. Put in Marx’s terms, the gap between what workers produce and what they are paid is not incidental to capitalism; it is one of its central distributional conflicts.
But if productivity rises while wages stagnate or decline for most workers, then the problem is not that the city is failing to create wealth. The problem is that the wealth being created is not being distributed evenly. The difference between productivity growth and wage growth is called the wage-productivity gap.
To examine this, I estimate the average hourly labor productivity in New York City by dividing real Gross Domestic Product (GDP) by total annual hours worked across all jobs. This tells us how much economic output the city produces, on average, for each hour of work, abstracting from changes in prices.
Figure 3 shows how average hourly productivity for all workers and average real hourly wages by wage quintile have changed for the period 2001-2024. Each series is indexed to 2001 level, so the figure shows cumulative growth over time rather than year-to-year changes.
Hourly productivity in New York City increased by 36.3 percent between 2001 and 2024. However, real hourly wages for most workers (except high-wage workers) grew much more slowly, resulting in a widening of the wage-productivity gap. The real hourly wage of the bottom 20 percent increased by 25.1 percent, while upper-middle-wage earners saw a 23.7 percent increase, lower-middle-wage earners a 19.1 percent increase, and middle-wage earners only 16.5 percent. Since the pandemic, the wage-productivity gap for the bottom 80 percent has widened further. Meanwhile, high-wage workers’ hourly wages increased by 41.6 percent and have generally grown faster than aggregate hourly productivity (except from 2011 and 2014).
Figure 3
The widening of the gap between wage and productivity growth for the bottom 80 percent of workers demonstrates that most workers have not shared proportionally in productivity gains. High-wage workers are the exception. Their wage growth has tracked productivity closely since 2001 and, over the full period, exceeded it.
Economists often point to globalization and technological change as explanations for the wage-productivity gap. Both forces tend to benefit workers with high skills, workers in tradable sectors, and workers whose tasks are harder to replace or relocate abroad. But these forces are not the whole story. As the economist Arindrajit Dube argues in his recent book, The Wage Standard, inequality is also shaped by “the choices we have made as a society”: loose labor laws, wage-setting practices by corporations, and the decline in bargaining power of workers through the weakening of unions.
That point is especially relevant for New York City. A stagnant minimum wage during the 2019-2024 period has certainly played a central role in the slow wage growth of the bottom but also of the middle of the distribution, since a minimum wage acts as a floor upon which workers, particularly those earning above it, can bargain to increase their wages. When wage floors fail to keep pace with inflation and productivity, the benefits of growth are less likely to reach workers with the least bargaining power.
The Challenge Is Not Growth Alone, But Shared Growth
New York City has become more productive over the last two decades, but inequality has continued to rise.
The inequality of wages and employment opportunities have social and psychological consequences. They also have macroeconomic consequences. When real wages stagnate or decline for most workers, households have less income to spend. That weakens consumption, one of the most important components of aggregate demand and one of the main drivers of economic growth. It also creates fiscal pressure: slower wage growth for the majority of workers can weaken the tax base while increasing the need for public support.
New York is not simply failing to grow. The city is producing more, but the income gains from that growth are increasingly concentrated at the top. The 2024–2025 data confirm this pattern: high-wage workers and high-wage industries pulled further ahead, while much of the bottom and middle of the wage distribution stagnated or lost ground.
This matters especially in the context of AI. The NYC Comptroller’s Office and Moody’s Analytics both assign the highest probability - 35 percent and 40 percent, respectively - to a scenario in which AI strengthens the economy through productivity growth with limited labor-market disruption. But productivity growth alone will not solve New York City’s inequality problem. The city’s recent history shows that higher productivity can coexist with stagnant wages for most workers and rising income concentration at the top.
For the Mayoral administration, the challenge is therefore not only to make New York grow, or even to make it more productive. The challenge is to ensure that growth is broadly and equitably shared. That means focusing on wage standards, job quality, labor protections, and the bargaining power of workers. Without those interventions, the promise of AI-driven productivity may simply reproduce the city’s existing pattern: more wealth created, but a larger share captured by those already at the top.
