Program on Economic Inclusion
Why do we have a program on economic inclusion?
Striving toward the ideal of equality of opportunity has been a source of strength for the American economy. In the United States, we aim for economic advancement to be based on performance and innovation, not on the circumstances of birth or political connections. Our economy is so productive precisely because it gives Americans from a wide range of backgrounds the chance to develop their potential and contribute to economic progress. We all benefit from this process: When someone finds a better way to produce a good, to deliver a service, or to save lives, we are all better off.
The Program on Economic Inclusion (PEI) is an effort to understand the factors that lead to economic opportunity for all, which we define as universal access to the elements that allow individuals to develop their potential. We are engaged in this effort in part because economic inclusion is central to our economy’s reaching maximum employment, which is one of the two monetary policy goals Congress has given the Fed (the other being price stability). We are also engaged in this effort because economic inclusion is part of the Fed’s responsibility mandated through the Community Reinvestment Act (CRA) of 1977: to ensure that low- and moderate-income communities have access to financial products and services.
Research has shown that factors like race and geography remain significant obstacles to economic inclusion. One consequence is that the gaps in earnings and wealth between Black and white households have remained constant over the past six decades, even after the passage of civil rights legislation that aims to promote racial equality. Similarly persistent gaps can also be found between Hispanic and white households. Likewise, mortality rates in urban and rural areas have diverged in recent years. While inequality of outcomes is not necessarily evidence of inequality of opportunity, these patterns – together with what we know about historical policies and current features of the economy – reinforce the need to seek insights into how we can make progress toward the American ideal of an inclusive economy.
The Federal Reserve bases its understanding of economic conditions on a foundation of rigorous research. Through the PEI’s work, we will be leveraging this research to try to answer the following questions: What obstacles to economic inclusion do we see in the Federal Reserve’s Fourth District? Where has progress been made on removing those obstacles? And how can we build upon that progress?