December 1999, Vol. 122, No. 12
Précis
Measuring
regional economies
Efficiency
and affirmative action
Women
college, and careers
Taken by itself, an individual data series rarely provides an unambiguous signal of the state and direction of the economy. This is the reason the Commerce Department developed the composite index of coincident indicators for the national economy. That index, now maintained by the Conference Board, has been a broad and timely indicator of economic activity in the United States, according to the Federal Reserve Bank of New York newsletter Current Issues in Economics and Finance.
The authors, James Orr, Robert Rich, and Rae Rosen, go on to tackle the more challenging problem of creating an index that would provide a similar service to analysts of State or even city economies in the Fed’s Second District. Orr, Rich, and Rosen use four series to construct their indexes: nonfarm payroll employment, average weekly hours in manufacturing, unemployment rate, and real earnings (wages and salaries).
The indexes clearly show the ways that the State and local economies of New York, New Jersey, and New York City diverged from the national business cycle. Perhaps the most notable difference in all three cases was in the most recent recession. Where the national downturn began in July 1990 and ended in March 1991, the corresponding cycle in New Jersey began more than a year earlier and lasted more than a year longer. Similarly, the downturn in New York State began in May 1989, according to these indexes, and only ended in November 1992.
The authors conclude that such indexes provide for a straightforward dating of regional business cycles, comparisons of regional and national cycles, and a broader view of the local cycles than could be provided by looking at any one indicator.
Efficiency and affirmative action
Affirmative action has been a subject of much debate in this country in the past few decades. However, as noted in a recent working paper from the National Bureau of Economic Research, neither side in the debate has had a well-established group of findings on which to base their arguments. In "Assessing Affirmative Action," Harry Holzer and David Neumark review research that economists have conducted on affirmative action and they especially consider the question of whether affirmative action enhances or reduces efficiency.
Holzer and Neumark acknowledge that it’s difficult to even come up with a suitable working definition of "affirmative action policies," in part because the policies have been more of a collection of pieces of other legislation and of court rulings, rather than being one coherent policy. The authors do state that, in principle, affirmative action is distinguished from other types of antidiscrimination measures because it requires pro-active steps to eliminate differences between women and men and between members of minority and nonminority groups—this is in contrast to laws that only prohibit actions that disadvantage women and members of minority groups, such as refusing to employ them.
Neumark and Holzer find "virtually no evidence" of poorer educational or job performance relative to men among women who benefit from affirmative action policies. They do observe that the "educational performance and labor market credentials of minority beneficiaries are weaker than those of their white counterparts," but they do not find strong evidence of weaker performance in the labor market. Overall, they conclude that at this time there is "very little compelling evidence of deleterious efficiency effects" of affirmative action policies.
In recent years, women have been more likely to attend and graduate from college than men have been. According to Bureau of Economic Analysis Chief Economist Barbara Fraumeni in a presentation to the National Economists Club, the majority of undergraduate degrees were earned by women and more women than men earn master’s degrees.
One explanation for the increase in college enrollment and graduation among women is that their expectations about working have changed dramatically. In 1968, 28 percent of women aged 14 to 24 expected to be working at age 35. In a similar survey in 1979, 72 percent of that age group reported that they expected to be in the workforce when they were 35. [In actuality, labor force participation rates for age groups approximating this cohort were 75 percent or above in 1998.—the editor]
Another explanation is the effect that education has on income or, more technically, the return to an extra year of education. Fraumeni finds that among women, the return to an extra year of college is significantly higher than the return to another year of high school. Furthermore, the largest return comes to the year in which a college degree is obtained. Young women want better jobs than their mothers might have had because they expect to remain in the labor force much longer. To get those better jobs, Fraumeni’s studies show clearly that they will need a college education.
(National Economist Club rapporteur Barbara Smith wrote the summary of Fraumeni’s remarks on which this précis is based.
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