Press Release
Poverty in New York City, 1969-99: The Influence of Demographic Change, Income Growth and Income Inequality
July 29, 2008
Note To Editors

The Federal Reserve Bank of New York today released the latest edition of the Economic Policy Review series, Volume 14, Number 1. This edition includes two articles previously released by the Bank and introduces a new study, Poverty in New York City, 1969-99: The Influence of Demographic Change, Income Growth and Income Inequality.

Poverty in New York City, 1969-99: The Influence of Demographic Change, Income Growth and Income Inequality, the latest article in the Bank’s Economic Policy Review series, evaluates the impact of the major causes of poverty in New York City from 1969 to 1999 and their policy consequences. Authors Mark K. Levitan and Susan S. Wieler find that demographic factors, coupled with a sharp drop in mean family income, played a leading role in the dramatic rise in the New York City poverty rate from 1969 to 1979. Furthermore, an increase in income inequality linked to the stagnation of wages at the low end of the earnings distribution and a rising share of the city’s population in poverty-prone groups largely explains the stable but stubbornly high poverty rate between 1979 and 1999.

Findings by Levitan and Wieler support the need for policy efforts in New York City to address wages for workers at the lower end of the pay scale, including the consideration of indexing the minimum wage to the annual rise in the cost of living. Local policymakers could also consider a continued expansion of the earned income tax credit and other tax credits that supplement earnings, according to the authors.

In Signal or Noise? Implications of the Term Premium for Recession Forecasting, first released by the Bank in January 2008, authors Joshua V. Rosenberg and Samuel Maurer examine the sources of the yield curve’s success in predicting U.S. recessions. While the yield curve reflects a term premium in addition to interest rate expectations, term spread models used to forecast recessions typically combine the effects of these two distinct components. To understand how these two components affect recession predictions, Rosenberg and Maurer construct a forecasting model that excludes the term premium and compare the performance of their model with that of the standard term spread model in predicting past recessions. The authors find that a model using only the expectations component performs better than the standard model in predicting recessions, but caution that the historical data are insufficient to produce a definitive conclusion.

In Why the U.S. Treasury Began Auctioning Treasury Bills in 1929, previously released in June 2008, author Kenneth D. Garbade identifies the three most substantial flaws in the U.S. Treasury’s financing structure that led to legislation allowing the Treasury to begin auctioning bills. The introduction of bill auctions as a new financing tool kept the securities at a price more consistent with market rates and allowed for more effective Treasury cash management. Garbade also notes that introducing a new class of securities while maintaining the existing primary market structure allowed Treasury an exit strategy should an unanticipated flaw arise in the new procedure.

Economic Policy Review - Volume 14, Number 1 ››

Poverty in New York City, 1969-99: The Influence of Demographic Change, Income Growth and Income Inequality ››

Contact: Andrew Williams
(212) 720-6143
(646) 720-6143
andrew.williams@ny.frb.org