wage inequality in the region - federal reserve bank of new york · 2017. 11. 28. · wage...
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Wage Inequality in the Region
Jaison R. Abel, Research Officer
Community Advisory Group Meeting – November 15, 2017
The views expressed here are those of the presenter and do not necessarily represent
those of the Federal Reserve Bank of New York or the Federal Reserve System.
Overview
• Since the early 1980s, wage inequality has increased
among all workers in the United States, not just
between those at the top and bottom.
• Some places are much more unequal than others. In
fact, the NY-NNJ region is home to some of the most
unequal and least unequal areas in the country.
• The most unequal places tend to be large metros
with strong wage growth for those at the top of the
wage distribution.
FEDERAL RESERVE BANK OF NEW YORK 1
Annual Wages in the United States Full-Time Workers, Constant 2015 Dollars
2
$0
$20
$40
$60
$80
$100
$120
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
90th Percentile
10th Percentile
Thousands
90/10 Ratio = 3.9
90/10 Ratio = 5.3
90/10 Ratio = 4.1
Source: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Bureau of Economic Analysis, PCE Price Index.
Note: Full-time workers are those aged 16 to 64 working at least 35 hours per week and 40 weeks per year.
5th 15th 20th 25th 30th 35th 40th 45th 50th 55th 60th 65th 70th 75th 80th 85th 95th Median
Real Wage Growth in the United States 1980-2015 Percent Change by Percentile
3 Source: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Bureau of Economic Analysis, PCE Price Index.
0%
20%
40%
60%
80% Percent Change
10th 90th
+57%
+24%
What’s Driving Wage Inequality?
• Technological change and globalization have changed the
pattern of demand for workers.
Strong demand for skilled workers has resulted in larger wage
gains for workers toward the top of the wage distribution.
Demand for lesser skilled workers has been weaker, stifling
wage growth for workers at the middle and bottom of the
wage distribution.
• Other contributing factors include the decline in unions and
the falling real value of the minimum wage.
FEDERAL RESERVE BANK OF NEW YORK 4
The Geography of Wage Inequality 2015 90-10 Ratio for U.S. Metropolitan Areas
5 Sources: U.S. Census Bureau, Decennial Census (1980) and American Community Survey (2015).
Most Unequal
Least Unequal
>7
6-7
5-6
<5
Wage Inequality in the Region 2015 90-10 Ratios for 2nd District Metro Areas
6 Sources: U.S. Census Bureau, Decennial Census (1980) and American Community Survey (2015).
8.7
7.0
6.5
4.8 4.8 4.8 4.7 4.7 4.5
4.2
0
2
4
6
8
10
Fairfield NYC-NNJ Ithaca Rochester Binghamton Syracuse Albany Glens Falls Buffalo Utica
Note: The NYC-NNJ metro includes New York City, Long Island, parts of the Northern
Suburbs, and much of Northern NJ.
U.S. = 5.3
• Agglomeration Economies
Productivity benefits from clustering together in cities have been
particularly strong for skilled workers located in large metros.
• Migration
Skilled workers are increasingly moving to large metros that offer
urban amenities and higher wages.
Why Are Some Places More Unequal?
7
Demand for skilled workers has been particularly strong in some
metros leading to outsized wage gains for those at the top.
Decline in demand for lesser skilled workers has been
geographically concentrated, stifling wage growth for workers
toward the middle and bottom of the wage distribution.
FEDERAL RESERVE BANK OF NEW YORK
• Differences in Local Demand for Workers
Larger Metros Now Tend to Be More Unequal
than Smaller Metros
8 Sources: U.S. Census Bureau, Decennial Census (1980) and American Community Survey (2015).
2
3
4
5
6
7
8
9
100,000 500,000 1,000,000 5,000,000 10,000,000
Population
90
-10
Ra
tio
2015
1980
Real Wage Growth in U.S. Metros 1980-2015 Percent Change by Percentile
Sources: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Census Bureau, Decennial Census (1980); American Community Survey (2015); U.S. Bureau of Economic Analysis, PCE Price Index. 9
5th 10th 15th 20th 25th 30th 35th 40th 45th 50th 55th 60th 65th 70th 75th 80th 85th 90th 95th -25%
0%
25%
50%
75%
100%
125%
150%
United States
San Francisco
Youngstown
Detroit
NYC-NNJ
Percent Change
Real Wage Growth in the Region 1980-2015 Percent Change by Percentile
Sources: U.S. Census Bureau and Bureau of Labor Statistics, Current Population Survey; U.S. Census Bureau, Decennial Census (1980); American Community Survey (2015); U.S. Bureau of Economic Analysis, PCE Price Index.
5th 10th 15th 20th 25th 30th 35th 40th 45th 50th 55th 60th 65th 70th 75th 80th 85th 90th 95th -25%
0%
25%
50%
75%
100%
125%
150%
United States
Rochester
Albany
Percent Change
10
Fairfield 97th = 276%
Summary
• Wage inequality has increased in nearly every metro
since the early 1980s, though it has increased much
more in some places than others.
• The most unequal places tend to be large metros with
strong demand for skill, agglomeration economies, and
appeal for skilled workers (e.g., NYC-NNJ Metro).
• The least unequal places tend to have lackluster wage
growth across the board, due in large part to weak
demand (e.g., most metros in upstate New York).
FEDERAL RESERVE BANK OF NEW YORK 11
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