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 Outreach & Education function engages, empowers and educates the public in the Second District. Our outreach mission furthers the Bank’s commitment to the region by listening to the communities we serve and developing programs, analysis and sponsored conferences and clinics to help meet their needs. Our education mission aims to advance public knowledge about the Federal Reserve System and its role in the economy.
We analyze the effects of various labor market policies on job creation, job destruction, and employment. The framework of Mortensen and Pissarides (2003) is used to model the dynamic interaction between firms and workers and to simulate their responses to alternative policies. The equilibrium model is calibrated to capture labor market conditions at the end of 2009, including the unemployment, inflow, and outflow rates by workers of different educational attainment. We consider the equilibrium effects of a hiring subsidy, a payroll tax reduction, and an employment subsidy. While calibrating parameters that characterize these policies, we try to mimic the policies in the Hiring Incentives to Restore Employment (HIRE) Act of 2010. We find that a hiring subsidy and a payroll tax deduction, as in the HIRE Act, can stimulate job creation in the short term, but can cause a higher equilibrium unemployment rate in the long term. Employment subsidies succeed in lowering the unemployment rate permanently, but the policy entails high fiscal costs.