The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes sound financial and economic decisions through community development and education programs.
At today’s economic press briefing, we provided an update on regional economic conditions, with a particular focus on job growth in the region, and highlighted an important emerging labor market trend: the return of middle-wage jobs.
A key concern about Puerto Rico’s prospects is that its labor force participation rate, which is the percentage of the adult population either working or looking for work, has fallen sharply. Looking at the data shows that this decline cannot be attributed to any particular demographic segment. Instead, it is the consequence of an aging population, accelerated by a falling birth rate and outmigration of a relatively young cohort. Expected demographic trends will continue to put downward pressure on the participation rate over the medium term, creating a challenging headwind for the economy to overcome.
Jaison R. Abel, Giacomo De Giorgi, Richard Deitz, and Harry Wheeler
Given Puerto Rico’s long-term economic malaise and ongoing fiscal crisis, it is no wonder that out-migration of the Island’s residents has picked up. Over the past five years alone, migration has resulted in a net outflow of almost 300,000 people, a staggering loss. It would make matters worse, however, if Puerto Rico were losing an outsized share of its highest-paid workers. But we find that, if anything, Puerto Rico’s migrants are actually tilted somewhat toward the lower end of the skills and earnings spectrum. Still, such a large outflow of potentially productive workers and taxpayers is an alarming trend that is likely to have profound consequences for the Island for years to come.
Estimates from the Current Population Survey show that the probability of finding a job declines the longer one is unemployed. Is this due to a loss of skills from being unemployed, employer discrimination against the long-term unemployed, or are there characteristics of workers in this segment of the workforce that lower their probability of finding a job? Studies that send out fictitious resumes find that employers do consider the length of unemployment in deciding whom to interview. Our recent work examines how such employer screening based on unemployment duration ultimately affects job-finding rates and long-term unemployment.
Since the 1940s, employers that provide health insurance for their employees can deduct the cost as a business expense, but the government does not treat the value of that coverage as taxable income. This exclusion of employer-provided health insurance from taxable income—$248 billion in 2013, according to the Congressional Budget Office—is a huge subsidy for health spending. Many economists cite the distortionary effects of this tax subsidy as an important reason for why U.S. health care spending accounts for such a large share of the economy and why spending historically has grown so rapidly. In this blog post, we focus on a provision of the Affordable Care Act (ACA) that is intended to chip away at this tax subsidy, the colloquially labelled “Cadillac Tax” on the priciest employer-provided health insurance plans.
Many newly minted college graduates entering the labor market in the wake of the Great Recession have had a tough time finding good jobs. But just how difficult has it been, and are things getting better? And for which graduates? These questions can be difficult to answer because timely information on the employment prospects of college graduates has been hard to come by. To address this gap, today we are launching a new interactive web feature to provide data on a wide range of job market metrics for recent college graduates, including trends in unemployment rates, underemployment rates, and wages. We also provide data on the demand for college-educated workers, as well as differences in labor market outcomes across college majors. These data will be updated regularly and are available for download.
The image of a newly minted college graduate working behind the counter of a hip coffee shop has become a hallmark of the plight of recent college graduates following the Great Recession. Recurring news stories about young college graduates stuck in low-skilled jobs make it easy to see why many college students may be worried about their futures. However, while there is some truth behind the popular image of the college-educated barista, this portrayal is really more myth than reality. Although many recent college graduates are “underemployed”—working in jobs that typically don’t require a degree—our research indicates that only a small fraction worked in a low-skilled service job in the years following the Great Recession. We find that underemployed recent college graduates held a wide range of jobs and, while most of these positions were clearly not equivalent to jobs that require a college education, some were actually fairly skilled and well paid. Further, our analysis suggests that many of those who started their careers in a low-skilled service job transitioned to a better job after gaining some experience in the labor market.
However important income inequality is, it is only a partial representation of the inequality in well-being among individuals, households, counties, and other communities. At a minimum, we need to consider other crucial measures such as consumption, leisure, and health. The reason for looking at other measures is that the inequality in income per se might not translate directly into a deeper and more important concept of inequality in welfare terms. For example, Jones and Klenow state that if we were to look at GDP only, France’s living standards would be only about 60 percent those of the United States. However, once we factor in leisure and life expectancy, that figure gets closer to 85 percent, a substantial change. In essence, monetary income, and therefore income inequality, is only a part of what individuals and countries value. We apply exactly this concept to highlight the substantial amount of health inequality across counties in the United States.
The risk of becoming unemployed varies substantially across different groups within the labor market. Although the “headline” unemployment rate draws the most attention from the news media and policymakers, there is rich heterogeneity underlying this overall measure. We delve into the data to describe how unemployment and job loss risk vary with demographics (gender, age, and race), skill (educational attainment), and job characteristics (occupation and earnings).
How much someone earns is an important determinant of many significant decisions over the course of a lifetime. Therefore, understanding how and why earnings are dispersed across individuals is central to understanding dispersion in a wide range of areas such as durable and non-durable consumption expenditures, debt, hours worked, and even health. Drawing on a recent New York Fed staff report "What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risks?", this blog post investigates the nature of earnings inequality over a lifetime. It finds that earnings are subject to significant downside risk and that such risk contributes substantially to overall earnings dispersion.
Liberty Street Economics features insight and analysis from economists working at the intersection of research and policy. The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Donald Morgan.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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