> If the NYC underground economy is indeed the only thing keeping minorities afloat, that means the economy is dependent on exploiting minority communities (keeping them working in illegal ventures, preventing upward mobility).
The flip side of the coin is that there's a reason people work in illegal ventures: making them fully legal would make them uneconomic, because of a combination of taxes and regulations, and also hurt upward mobility. You see that in places like France, where the youth unemployment rate tends to fall in the 20-25% range. (Though that too gives an overly negative representation of the state of things: France also has a significant shadow economy, so things aren't actually as bad as they might look there.)
It's a game of tradeoffs. What's probably ideal is to move as much as possible into the formal economy, regulate only those things which you can actually afford to regulate and enforce, and tax to the extent you don't drive things underground or out of jurisdiction.
I'm not sure the argument that regulations are the cause of decreased social mobility is valid. Germany who have regulatory framework much closer to France than to the US, has lower youth unemployment than the US. The US in general has quite low social mobility compared to many more regulated economies (e.g. the Scandinavian countries typically rank amongst the highest on social mobility despite strong regulations).
Rankings (particularly by ideological organizations) need to be taken with a large grain of salt, but Heritage has a ranking of regulatory/economic freedom of different countries:
In it, Denmark > Sweden > Norway > Germany > USA >>> France. The low ranking of the US in particular might be for partisan reasons (i.e. intentionally overstating regulatory burden), but Scandinavian countries, although having large governments, typically have relatively low and transparent levels of regulation and efficient tax systems.
Social mobility is a term of art that doesn't mean what people intuit it does.
I think the question being asked here is "how easy is it to significantly increase your income", which has an inverse correlation with social mobility. The reason for this is that high social mobility is most commonly an artifact of wage compression. Scandinavia has high wage compression, and the US very low wage compression, hence why it is much easier to significantly increase your income in the US than Scandinavia despite lower social mobility.
The flip side of the coin is that there's a reason people work in illegal ventures: making them fully legal would make them uneconomic, because of a combination of taxes and regulations, and also hurt upward mobility. You see that in places like France, where the youth unemployment rate tends to fall in the 20-25% range. (Though that too gives an overly negative representation of the state of things: France also has a significant shadow economy, so things aren't actually as bad as they might look there.)
It's a game of tradeoffs. What's probably ideal is to move as much as possible into the formal economy, regulate only those things which you can actually afford to regulate and enforce, and tax to the extent you don't drive things underground or out of jurisdiction.