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Luis Armona, Samuel Kapon, Laura Pilossoph, Ayşegül Şahin, and Giorgio Topa
Since the peak of the recession, the unemployment rate has fallen by almost 5 percentage points, and observers continue to focus on whether and when this decline will lead to robust wage growth. Typically, in the wake of such a decline, real wages grow since there is more competition for workers among potential employers. While this relationship has historically been quite informative, real wage growth more recently has not been commensurate with observed declines in the unemployment rate.
Joseph Tracy, Robert Rich, Samuel Kapon, and Ellen Fu
Indicators of labor market slack enable economists to judge pressures on wages and prices. Direct measures of slack, however, are not available and must be constructed. Here, we build on our previous work using the employment-to-population (E/P) ratio and develop an updated measure of labor market slack based on the behavior of labor compensation. Our measure indicates that roughly 90 percent of the labor gap that opened up following the recession has been closed.
Stefania Albanesi, Claudia Olivetti, and Maria Prados
The persistence of a gender gap in wages is shaping the debate over women’s equality in the workplace and underscores the challenge facing policymakers as they consider their potential role in closing it. While the disparity affects females at all income levels, women in professional and managerial occupations tend to experience greater gender-pay differences than those in working-class jobs. The rise in the use of incentive pay, which has been linked to the growth of income inequality (Lemieux, MacLeod, and Parent), might have contributed to the gender gap in earnings (Albanesi and Olivetti). In this post, which is based on our related New York Fed staff report, we document three new facts about gender differences in the structure of executive compensation.
We often hear that women earn “77 cents on the dollar” compared with men. However, the gender pay gap among recent college graduates is actually much smaller than this figure suggests. We estimate that among recent college graduates, women earn roughly 97 cents on the dollar compared with men who have the same college major and perform the same jobs. Moreover, what may be surprising is that at the start of their careers, women actually out-earn men by a substantial margin for a number of college majors. However, our analysis shows that as workers approach mid-career, the wage premium that young women enjoy in these majors completely disappears, and males earn a more substantial premium in nearly every major. We discuss some of the possible reasons why the gender wage gap widens as workers progress through their careers.
Giorgio Topa, Olivier Armantier, Wilbert van der Klaauw, and Basit Zafar
The Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) turned two years old in June. In this post, we review some of the key findings from the first two years of the survey’s history, highlighting the most noteworthy trends revealed in the data.
Leaders of both developing and advanced economies believe that encouraging the development of small businesses will lead to job creation and economic growth. As such, many governments and nongovernmental organizations (NGO) promote the use of business training programs to help grow small businesses. For example, an international business literacy program called Start and Improve Your Business has been introduced in more than one hundred countries and reached more than 4.5 million potential and existing entrepreneurs between 2003 and 2010 according to the International Labour Organization. Similar programs have been undertaken also in the United States. The Small Business Administration, among many other programs, supports a network of Small Business Development Centers that provide free and low-cost business consulting and training. In this post, we show that the expected benefits of these interventions may vary widely between developed and developing economies.
With the college graduation season well under way, a new crop of freshly minted graduates is entering the job market and many bright young minds are hoping to land a good first job. It’s no wonder if they are approaching the job hunt with some trepidation. For a number of years now, recent college graduates have been struggling to find good jobs. However, the labor market for college graduates is improving. After declining for nearly two years, openings for jobs requiring a college degree have picked up since last summer. Not only has this increase in the demand for educated workers continued to push down the unemployment rate for recent graduates, but it has also finally started to help reduce underemployment, though the underemployment rate remains high. While successfully navigating the job market will likely remain a challenge, it appears that finding a good job has become just a little bit easier for the class of 2015.
The contribution of labor input to the potential GDP growth rate for the United States has changed over time. We decompose this contribution into two components: the size of the adult population and the average demographically adjusted employment rate. We find that these two components in the late 1960s and early 1970s contributed at least 2.5 percentage points to potential growth. Since the mid-1990s, the aging of the population has reduced the contribution of labor to growth. We estimate that the current contribution to potential economic growth from labor input has declined to around 0.6 percentage points. One implication going forward is that more labor productivity growth will be required to sustain U.S. growth.
Rob Dent, Samuel Kapon, Fatih Karahan, Benjamin W. Pugsley, and Ayşegül Sahin
Third in a three-part series
This is the third in a series of blog posts on the topic of measuring labor market slack. In this post, we assess the relationships between short- and long-term unemployment and wages by comparing the differences in states’ experiences over the business cycle. While all states felt the impact of the Great Recession, some fared better than others. Consequently, it is possible to use differences in the composition and shifts of short- and long-term unemployment to determine whether short-term unemployment exerts a greater influence on wage determination. The results suggest that there is little difference in how long-term and short-term unemployment affect wages, and as a consequence, the long-term unemployed shouldn’t be dismissed when evaluating labor market slack.
Rob Dent, Samuel Kapon, Fatih Karahan, Benjamin W. Pugsley, and Ayşegül Sahin
Second in a three-part series
In this second post in our series on measuring labor market slack, we analyze the labor market outcomes of long-term unemployed workers to assess their employability and labor force attachment. If long-term unemployed workers are essentially nonparticipants, their job-finding prospects and attachment to the labor force should resemble those of nonparticipants who are not looking for a job and should differ considerably from those of short-term unemployed workers. Using data that allow us to follow workers over longer time periods, we find that differences in labor market outcomes between short- and long-term unemployed workers exist, but these differences narrow at longer horizons. In contrast, labor market outcomes for the long-term unemployed are substantially different from those of nonparticipants who do not want a job.
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