Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, Senator Elizabeth Warren (D-MA), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Financial Institutions and Consumer Protection, 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.
“Building on the great work of civil rights leader Coretta Scott King and others who 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 Chairwoman Waters. “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 the recovery is equitably shared.”
“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.”
“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.”
The legislation is cosponsored by 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), and Senators Edward J. Markey (D-Mass.), Bernie Sanders (I-Vt.), Dianne Feinstein (D-Calif), Cory Booker (D-NJ), Chris Van Hollen (D-Md.), and Richard Blumenthal (D-Conn.).
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.”
Read the bill text here.
* Much of the data available doesn’t let us fully describe the experiences of people with different and overlapping identities in the workforce.