July 23, 1998

NOTE TO EDITORS

Attached is the latest edition of the New York Fed's Second District Highlights, entitled Earnings Inequality: New York-New Jersey Region.

Authors David Brauer, Beethika Khan, and Elizabeth Miranda examine the earnings gap between upper income workers and lower income workers in the New York-New Jersey region during the 1979-96 period.

The authors find that the region's inequality trends have largely followed the nation's. Among year-round, full-time workers--both men and women--earnings inequality has increased nearly 50 percent over the past two decades. This widening is due to divergent trends in earnings growth near the top and bottom of the earnings distribution: while workers near the top have consistently realized earnings gains, many workers near the bottom have incurred earnings losses, even during periods of economic growth.

The authors' research also shows that:

  • In the first half of the 1990s, the earnings gap grew at a faster rate in the region than in the nation, with the most rapid rise occurring in the New York City metropolitan area. This rise was partly due to the area's severe economic downturn of the early 1990s, which caused workers at the bottom end of the spectrum to experience disproportionately large earnings losses. At the same time, the earnings of workers at the top end increased steadily, mainly because of the strong performance of the high-paying financial services sector.

  • In the region, during the 1979-96 period, the real earnings of male workers at the 90th percentile climbed 26 percent (from $63,700 to $80,000), while those of female workers increased 37 percent (from $39,300 to $54,000). Earnings for male and female workers at the 10th percentile fell 21 percent (from $19,000 to $15,000) and 7 percent (from $13,200 to $12,300,) respectively.

  • The region's strong performance in recent years and its favorable job developments will likely boost earnings at both ends of the distribution. Continued strong growth near the top, however, could keep the gap from narrowing significantly.

Contact: Douglas Tillett