Lawmakers recently introduced a bill that would require the Federal Reserve System to take steps to eliminate racial disparities in employment, wages, wealth and access to credit.
The Federal Reserve is the central banking system in the U.S., and its current directive from Congress is to “promote maximum employment, stable prices and moderate long-term interest rates in the U.S. economy,” according to its website.
Rep. Maxine Waters, D-Calif., and Sens. Elizabeth Warren, D-Mass., and Kirsten Gillibrand, D-N.Y., announced the Federal Reserve Racial and Economic Equity Act on Aug 5, which would add to the agency’s responsibilities. If enacted, the bill would:
- Add a section to the Federal Reserve Act requiring the Federal Reserve to operate in a way that “minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit.”
- Require the Federal Reserve chair, when testifying semiannually before Congress, to identify existing racial and ethnic disparities in employment, income and wealth, and ways to reduce such disparities.
- Report on labor force trends with “a comparison among different demographic groups, including race, gender, and educational attainment.”
“The pandemic has further revealed and deepened significant racial disparities in wages, economic opportunity and wealth,” Gillibrand said. “This legislation will take the long overdue step of requiring the Federal Reserve to use its power to directly combat systemic racism in our economy.”
We’ve rounded up articles and resources from SHRM Online and other trusted media outlets on the news.
If enacted, the bill would initiate the first changes to the Federal Reserve’s mandate from Congress since 1977 and significantly shift the central bank’s focus. The Democrat-backed legislation, however, is not expected to pass the Republican-controlled Senate. Opponents of the bill have said that the Federal Reserve already aims to help all U.S. workers and that it isn’t equipped to focus on long-standing societal inequities. ”Isn’t this the job of Congress and, quite frankly, all of us?” tweeted Constance Hunter, chief economist at advisory firm KPMG. “To put this on the Fed seems to set them up for failure unless the entire rest of the system is organized to help achieve this goal.”
Biden Campaign Has Similar Goal
The presidential campaign for Democratic candidate Joe Biden called for a similar measure, and some economists have said the Federal Reserve should focus on the unemployment rate for Black workers when it makes policy decisions, since the gap between the unemployment rates for Black and white workers has been consistently wide.
Focused on Overall Unemployment Rate
Federal Reserve Chairman Jerome Powell has said that the agency’s job is to help keep unemployment rates low for all. “A tight job market is probably the best single thing that the Fed can do to support gains by all low- and moderate-income communities, and particularly for minority communities that are heavily representative in those groups,” Powell said during a Senate Banking Committee hearing in June. “Everything we’re doing is to try to get the labor market back to where it was in February.”
Unemployment Claims Tick Down
States reported that 1.2 million U.S. workers filed for new unemployment benefits during the week ending Aug. 1, a decrease of 249,000 from the previous week. The total number of workers continuing to claim unemployment benefits fell to 16 million last week after peaking at nearly 25 million in early May. Another 13 million people continue to claim unemployment under the newly created Pandemic Unemployment Assistance program providing jobless benefits to workers previously not eligible for unemployment.
SHRM Research Finds Need for More Awareness of Racial Inequality
U.S. workers and HR professionals say racial discrimination exists in the workplace, but there is a vast difference in perception of how widespread it is, depending on the race of the person you talk to, according to a new report the Society for Human Resource Management (SHRM) released on Aug. 3.