Warren, Waters, Gillibrand Introduce Legislation Requiring the Fed to Close Racial Employment and Wage Gaps
Washington, DC - Today, United States Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Financial Institutions and Consumer Protection, Representative Maxine Waters (D-Calif.), Chairwoman of the House Financial Services Committee, and Senator Kirsten Gillibrand (D-NY) introduced legislation to require the Federal Reserve to use its existing authorities to close racial employment and wage gaps and report on how the gaps change over time.
"The Fed can use its existing authorities to reverse the serious racial gaps in our economy, including in our current recovery from the COVID-19 crisis - and our bill will require the Fed to do so," said Senator Warren. "Systemic racism and inequality is not something that happens on its own. It is a result of specific policy choices and the Fed must take deliberate action to fix it."
"Building on the great work of civil rights leader Coretta Scott King and others whoâ€¯led the way for the adoption of the Fed's full employment mandate, the Federal Reserve Racial and Economic Equity Act creates a new racial justice mission at the Fed to eliminate racial and economic disparities in all of its work. This bill also requires the Fed to report and testify on their efforts to fulfill this mandate and provide data on racial economic disparities," said Congresswoman Maxine Waters, Chairwoman of the House Committee on Financial Services. "As the COVID-19 pandemic crisis and its economic impacts disproportionately affect communities of color, and communities around the country march in the streets for justice, the Federal Reserve must do everything it can to ensure theâ€¯recovery is equitably shared."
"The pandemic has further revealed and deepened significant racial disparities in wages, economic opportunity and wealth," said Senator Gillibrand. "A hands off approach to addressing institutional racism is unacceptable . 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."
Gaps in economic outcomes for individuals of different races and ethnicities have persisted throughout different economic cycles*. In January 2020, for example, the white unemployment rate was 3.1 percent, while Black unemployment was nearly double at 6.0 percent and the Hispanic unemployment rate was 4.3 percent. These disturbing gaps have been heightened by the COVID-19 pandemic. The bill's introduction comes amid growing calls for the Federal Reserve to take a more active role in addressing racial inequality, including in recent op-eds from Janelle Jones and Jared Bernstein, and Raphael Bostic, President of the Federal Reserve Bank of Atlanta.
The Federal Reserve Racial and Economic Equity Act:
- Makes Reducing Inequality Part of the Fed's Mission: This bill adds a new section to the Federal Reserve Act that would require the Fed to carry out its functions in a way that "minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit."
- Ensures that Racial Economic Disparities are Not Ignored: This legislation requires the Federal Reserve Chair to identify in his or her semiannual testimony before Congress: (1) the existing disparities in employment, income and wealth across racial and ethnic groups and (2) how the Fed is using its authorities to reduce these disparities.
- Requires Robust Reporting on Disparities in Labor Force Trends: This bill requires the Fed's Semiannual Monetary Policy Report that the Fed releases in conjunction with the Chair's testimony to include recent labor force trends with "a comparison among different demographic groups, including race, gender, and educational attainment."
The legislation is co-sponsored by Senators Edward J. Markey (D-Mass.), Bernie Sanders (I-Vt.), Dianne Feinstein (D-Calif), Cory Booker (D-NJ), Chris Van Hollen (D-Md.), Richard Blumenthal (D-Conn.), Senate Banking Committee Ranking Member Sherrod Brown, and Jack Reed (D-R.I.), and Representatives Carolyn B. Maloney (D-NY), Nydia Velasquez (D-NY), Brad Sherman (D-CA), Al Green (D-TX), Emanuel Cleaver (D-MO), Al Lawson (D-Fla.), Michael San Nicolas (D-Guam), Ayanna Pressley (D-MA), Stephen Lynch (D-MA), Jesús G. "Chuy" García (D-IL), and Sylvia Garcia (D-TX).
“We strongly support Chairwoman Waters’ and Senator Warren’s
important and timely bill to expand the Federal Reserve’s focus and toolbox to
address the rampant and persistent economic inequality impacting Black workers
in America. The Black unemployment rate has consistently been double the
overall rate for as long as we’ve been tracking it, such that when the overall
economy hits “full employment,” Black workers face persistently recession-level
rates. That is why we proposed that the Federal Reserve elevate and report on
this historical reality born of systemic racism in the labor market and
aggressively use their economic tools to change it. We are elated to see this
bill do exactly that,” said Jared Berstein and Janelle Jones.
In June, Senator Warren questioned Fed Chair Powell at a Senate Banking hearing on racial disparities in the COVID-19 economic recovery, stating "The minute jobs start recovering for white Americans, we can't just say the problem is over." After Chair Powell confirmed to Senator Warren that the racial gaps in COVID-19 recovery are not a "not a healthy feature of our economy," she questioned him on the impact of the Fed's policy decisions on racial inequality, including if the Fed currently considers the impact of its monetary policy decisions on racial inequality and if it considers whether the actions it takes with respect to payments, bank regulation, and the use of its emergency authorities under section 13(3) of the Federal Reserve Act affect different racial groups in different ways.
* Much of the data available doesn't let us fully describe the experiences of people with different and overlapping identities in the workforce.
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