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Half of domestic service workers in the United States are foreign born. Using data on time use and wages in the United States over the past 30 years, Patricia Corts of Boston University finds that the presence of migrant domestic workers has broad economic effects. First, the increase in the number of migrant domestic workers has reduced the price of babysitting, cleaning and other forms of household production by about 10%. Second, domestic workers are mainly employed by highly educated women, who then participate in the labor force at higher rates. Finally, the increase in labor force participation of highly skilled indigenous women has narrowed the gender pay gap in the top third of the wage distribution. The findings suggest that outsourcing domestic work may reduce gender gaps among native-born workers in the United States.
Using consumer credit data and comparing individuals just above and below the age at which they become eligible for Medicare, Paul Goldsmith-Pinkham and Jacob Wallace of Yale and Maxim Pinkovskiy of the Federal Reserve Bank of New York find that l Medicare eligibility improves the financial health of Americans. Specifically, the authors believe that health insurance eligibility at age 65 reduces collections by 30 percent and reduces differences in the amount of debt sent to collection agencies between states by two-thirds. Improvements in financial health are most pronounced in Southern states and commuting areas with higher shares of Black residents, people with disabilities, and for-profit hospitals. These areas also experience larger increases in health insurance rates as residents become eligible, suggesting that the reduction in debt collections comes from more people buying health insurance at age 65 than changing their type of coverage. The authors hypothesize that federally administered universal policies such as Medicare reduce geographic disparities by extending coverage to areas where financial health gains per newly insured are greatest, while policies such as the Affordable Care Act that delegate significant latitude to states in policymakers are unable to target such areas.
Using a large panel of credit and loan data, University of Chicago’s Michael Dinerstein, Constantine Yannelis and Ching-Tse Chen find that the pause in federal student debt payments reduced the loan default rate by 0.8 percentage points rates of affected borrowers, with default rates on other loans largely unaffected. PRepeatedly defaulting borrowers saw their credit scores rise by an average of 28 points as the pause boosted perceived creditworthiness, argue the authors. Never-defaulting borrowers took out loans during the lull, with the average household in this group increasing their non-student loan debt by $1,200, mostly due to rising mortgage balances. The authors highlight the complementarity of liquidity and credit. Let’s assume that the use of credit requires a certain level of liquidity to make advances or make the first months due. This interplay between liquidity and credit is important for policy design and underscores that policymakers should consider them jointly.
[M]My conclusion is that demand is cooling but not cold yet. We had this big spike in January on all demand metrics. But February, March, April, they’re coming in much flatter, adjusted for inflation. I think it’s just a sign that the combination of all these things rising rates, eroding consumer savings, waning fiscal stimulus are all affecting demand the way you would think[T]Here’s a plausible story that combines the things I was just talking about and adds a credit crunch to say they’re going to reduce demand and over time reduce inflation. I think it’s a plausible story. I’m still trying to be convinced. I still see core inflation or average inflation capped in the 0.4% monthly range, which implies we are trading at around 5% annual rate and I’m still trying to be convinced that demand will come down and then obviously the one that will reduce inflation at a rate that will not erode expectations, says Tom Barkin, chairman of the Richmond Fed.
I like the optionality implied in the statement we made after the last meeting. Of course, this month too we will have a full month of data arriving. Have questions about the debt ceiling and the impact it could have. Have questions about credit tightening and how significant it could be. I think it gives you the time and a chance to say there’s still more we need to do, so let’s do more, or is it still OK to wait and wait a bit.
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