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Discussion Paper
The Survey of Consumer Expectations Turns Two!
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.
Newsletter
What Does Labor Market Tightness Tell Us About the End of an Expansion?
We use a model based on the historical relationships between unemployment, inflation, and recessions, along with the Summary of Economic Projections (SEP) from the Federal Open Market Committee (FOMC),1 to examine the medium-term implications of current and projected unemployment rates for the U.S. economy. Our model predicts a low probability of a recession in the next two to three years based on SEP forecasts for additional labor market tightening over this horizon.
Report
Importing equality? The effects of increased competition on the gender wage gap
It is now well documented that the gender wage gap declined substantially in the 1980s, despite rising overall wage inequality. While Blau and Kahn (JoLE 1997) attribute much of this improvement to gains in women's relative labor market experience and other observable characteristics, a substantial part of the decline in the gender wage gap remains unexplained, and may be due to reduced discrimination against women in the labor market. This paper tests the hypothesis (based on Becker 1957) that increased globalization in the 1980s forced employers to reduce costly discrimination against women ...
Discussion Paper
Some Places are Much More Unequal than Others
Economic inequality in the United States is much more pronounced in some parts of the country than others. In this post, we examine the geography of wage inequality, drawing on our recent Economic Policy Review article. We find that the most unequal places tend to be large urban areas with strong economies where wage growth has been particularly strong for those at the top of the wage distribution. The least unequal places, on the other hand, tend to have relatively sluggish economies that deliver slower wage growth for high, middle, and lower wage earners alike. Many of the least unequal ...
Working Paper
The Passthrough of Labor Costs to Price Inflation
We use a time-varying parameter/stochastic volatility VAR framework to assess how the passthrough of labor costs to price inflation has evolved over time in U.S. data. We find little evidence that changes in labor costs have had a material effect on price inflation in recent years, even for compensation measures where some degree of passthrough to prices still appears to be present. Our results cast doubt on explanations of recent inflation behavior that appeal to such mechanisms as downward nominal wage rigidity or a differential contribution of long-term and short-term unemployed workers to ...
Working Paper
Monopsony in Spatial Equilibrium
An emerging labor economics literature studies the consequences of firms exercising market power in local labor markets. These monopsony models have implications for trends in earnings inequality. The extent of this market power is likely to vary across local labor markets. In choosing what market to live and work in, workers trade off wages, rents and local amenities. Building on the Rosen/Roback spatial equilibrium model, we investigate how the existence of local monopsony power affects the cross-sectional spatial distribution of wages and rents across cities. We find an employment-weighted ...
Working Paper
Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?
During the recovery from the Great Recession, inflation did not reach the central bank?s 2 percent objective as quickly as many models had predicted. This coincided with increases in online shopping, which arguably made retail markets more contestable and damped retail inflation. This hypothesis is tested using data on the online share of retail sales, which are incorporated into an econometric model. Results imply that the rise of online retail has flattened the Phillips Curve, reducing the sensitivity of inflation to unemployment rate changes. Improvement in fit from just including the ...
Discussion Paper
How Do Firms Respond to Hiring Difficulties? Evidence from the Federal Reserve Banks' Small Business Credit Survey
Using data from the Federal Reserve Banks' 2017 Small Business Credit Survey (SBCS), this paper investigates the various ways in which different types of firms with less than 500 employees experience and address hiring difficulties, including when they decide to increase compensation. {{p}} The authors find significant variation in hiring difficulties by type of firm, and a firm's response appears to depend on the nature of the problem. The most common response is to increase compensation, with firms that experience competition from other employers being the most likely to do so. Other common ...
Working Paper
Minimum wages and firm employment: evidence from China
This paper studies how minimum wage policies affect firm employment in China using a unique county level minimum wage data set matched to disaggregated firm survey data. We investigate both the effect of imposing a minimum wage, and the effect of the policies that tightened enforcement in 2004. We find that the average effect of minimum wage changes is modest and positive, and that there is a detectable effect after enforcement reform. Firms have heterogeneous responses to minimum wage changes which can be accounted for by differences in their wage levels and profit margins: firms with high ...
Newsletter
Explaining Variation in Real Wage Growth Over the Recent Expansion
In August 2019 the unemployment rate was roughly 1 percentage point below the Congressional Budget Office?s (CBO) estimate of its long-run or natural rate, nearly matching the unemployment rate gap that developed during the historically tight labor market of the late 1990s. Nevertheless, real wage growth remains well below its pace of the late 1990s and even that of the milder 2000s expansion.