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Ask the Expert

What impact do you aim to make on Americans with your research on the racial wealth gap and through the Bank’s broader Program on Economic Inclusion?

As appeared in the Cleveland Fed Digest's Ask the Expert

I’ve studied racial inequality for more than a decade. But some combination of COVID-19, George Floyd’s murder, and other events that have transpired during the last year and a half have caused people to be more reflective and introspective. They’re trying to understand the world that we’ve inherited and how we expand economic opportunity.

Part of the Federal Reserve’s role is maximum employment. Everyone who would like to should be able to participate in the economy. That’s beneficial to everyone. When somebody figures out a better way to produce a good, for instance, we’re all better off for it. Traditionally it’s been a strength of the US economy that so many people can participate, and now we’re in this moment when more people are trying to welcome those who’ve been left out. The Cleveland Fed’s Program on Economic Inclusion is trying to think through what the obstacles are to inclusion and some of the possible solutions.

Our latest research on the racial wealth gap finds that even with the same income levels, Black and white households live in very different neighborhoods. High-income Black households live in neighborhoods with unemployment rates comparable to neighborhoods of lower-income white households. When we started this research, I anticipated this had to do with the barrier of people’s ability to finance homes. But that doesn’t seem to be the main barrier. Instead, one explanation that emerged is that people could be choosing the gaps in neighborhood characteristics such as educational attainment, unemployment, homicide, and poverty. For example, we found that high-income Black households often have to make a choice: They can live with other high-income households or with other Black households. If people are making these neighborhood choices to avoid racial hostility, then the economic cost of that hostility is very high. If you think that neighborhoods matter for economic mobility (and my coauthors and I do), feelings of psychological safety, feelings of belonging are actually also about economic mobility.

As in the above example, we sometimes think that one thing is really what’s driving what we see, but then we find that it could be a different factor. Part of the reason why research on economic inclusion is important is that it can direct time, energy, and resources to approaches that will be fruitful and result in the greatest change. We want to add ideas or approaches or ways of thinking to the public discourse, ideas that could help further economic inclusion.

What’s unique about our approach at the Program on Economic Inclusion is that we’re going to listen a lot to practitioners in addition to doing research. There’s a lot that economic research and economists have to contribute, but we’re not the only ones with insights into these problems. With conversations between researchers and people working in the community, the hope is that we can push toward solving some of these problems.

We’re going to be hosting discussions about how economic inclusion is affected by issues like residential segregation, urban planning, and evictions. We’ll focus on what we can do to make sure more children are on positive trajectories, because the finding that keeps coming through many different studies is that a majority of people’s labor market outcomes—like whether they are employed and how much they earn—can be explained by what happens to people by their late teens, before they enter the labor market.

You think about what’s so good about the United States, and I think it’s the belief that there is a widespread opportunity for people to develop themselves, to contribute to our society. We want to expand that so more people can see what they can be. Who knows what innovations and technologies will come for all Americans from having a broader part of the population contributing.

You’re here today.

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