Cleveland Fed ramps up efforts to address economic inequities

Dionissi Aliprantis, assistant VP and a senior research economist in the Research Department at the Federal Reserve Bank of Cleveland, joins Yahoo Finance Live's Time For Change to discuss initiatives to address income inequality in the U.S.

Video Transcript


ANJALEE KHEMLANI: Welcome to A Time for Change, presented by Citi. I'm Anjalee Khemlani along with Marquise Francis and joined today by Brian Cheung.

The holidays are often a time for overspending, but for many, they're just another harsh reminder of America's growing wealth gap, one that continues to widen during the pandemic. So how do we make sure everyone gets a piece of the pie?

The Federal Reserve Bank of Cleveland is on a mission to combat racial wealth inequity and raise awareness about economic inclusion. They're taking a page out of Lin-Manuel Miranda's-- Lin-Manuel Miranda's book and using spoken word. Let's listen.

- The Federal Reserve Bank of Cleveland studies our economy. They found it can't reach full potential without racial equity. They track systemic proof that these disparities affect us all, and their program on economic inclusion shows where it's gone. Gender and race disparities hurt the economy we live in. Estimates of the labor gap could cost the economy trillions.

BRIAN CHEUNG: And joining us now to discuss that video in addition to what else their program on economic inclusion is doing is Cleveland Federal Reserve director of the Program on Economic Inclusion Dionissi Aliprantis. Dionissi, it's great to have you on the program this afternoon. Thanks so much for joining us.

You know, pretty unusual to see the Federal Reserve using that type of format to convey any sort of communication. I don't see any sort of slam poetry coming from the Fed chairman. I'm wondering if you could just explain a little bit more about what the thinking was behind producing that video and kind of the larger goals of the program within the context of what you're trying to communicate here with the racial equity gap, a remaining issue in this year and age.

DIONISSI ALIPRANTIS: So thanks for having me on. So, you know, a lot of the thinking behind that video comes from some of our experience working with people in the field where when we're interacting with people, a lot of the time we'll hear comments like I wasn't aware that the Federal Reserve was interested in these issues. And so that video was an attempt to try to communicate to individuals and to the community that the Federal Reserve really sees its role as serving the public, and that means serving all citizens and trying to represent them and trying to work on their behalf.

ANJALEE KHEMLANI: Dionissi, Anjalee here. Brian and I have chatted about this, and to your point, there's definitely been interest not just at the Federal Reserve but at other agencies as well to try and bring in this wealth-- to try and bridge this wealth gap. I wonder in context of sort of the media market that you face today, do you see room for maybe more programs like this in order to reach places where traditional news doesn't?

DIONISSI ALIPRANTIS: Yes, I definitely do, and I think-- you know, I think there's a lot of potential for us to move the conversation in constructive direction. So that's one of our goals with the program on economic inclusion.

You know, so we're a research outfit. We're in the research department at the Cleveland Fed, but we're trying to also, you know, bring together researchers and practitioners to have conversations where we can learn from one another, where we can learn from community voices, and we think there's a lot of potential for kind of two-way conversations there and two-way learning. And so it's really one of the things we're going to be trying to do.

BRIAN CHEUNG: What are some of the statistics that the Cleveland Fed is looking at within the context of economic inclusion? Because that seems like that could cover a lot of different things when it comes to home ownership or job gains or unemployment. We know that there are those gaps. What specific areas of the economic disparity does this program and do these types of videos hope to address?

DIONISSI ALIPRANTIS: Yeah, so it's-- you know, we have a mandate to think about maximum employment when we're thinking about monetary policy. We have to think about stable prices but also maximum employment. We also have to think, because of the Community Reinvestment Act, about access to credit and access to capital.

But, you know, in terms of our research, a lot of it's going to be looking at, you know, also long-term factors in addition to kind of, for example, the latest kind of job-market report. We're also going to be looking at things like, you know, the racial wealth gap or the racial earnings gap. When you look at those data over the past six decades, both of those gaps have stayed perfectly flat over the past six decades. So those are the kinds of long-term issues we're going to be looking at.

And I should also add, you know, in the Fourth District of the Federal Reserve, in Cleveland's district, we also have some rural areas that, you know, are also facing very similar issues in terms of access to economic opportunity, so we're looking at some of those challenges as well. We're really just trying to be as thoughtful as we can and trying to really understand how people can access economic opportunity.

BRIAN CHEUNG: To kind of drill down into that a little bit further, we know that the pandemic has, in many cases, exacerbated some of these gaps, and you don't need to look farther than, for example, the Black or the Hispanic unemployment rate, as we were just showing in that chart, to show where that gap really is.

But what can the Cleveland Fed do? You're not a fiscal agent. It's not like you have the ability to kind of engineer direct policies that can change those things. But when you do this outreach, when you engage with the communities, is it more of a fact-gathering situation there or are you asking them also specifically what can the Fed specifically do to help narrow those gaps?

DIONISSI ALIPRANTIS: You know, I think a little bit of all of the above. So, you know, we do have some-- you know, some control when we're thinking about things like access to credit. We do actually have a role to play there.

But then in terms of the more fiscal issues, it's true that, you know, studying an issue and trying to actually implement a policy, those are very different things, and what we're involved in is studying these issues. But what we can do is we can bring to light what do we think? and what does the research indicate are the most effective approaches to addressing some of these issues?

So, you know, I can give an example from some of my own research. You know, when you're thinking about the racial wealth gap, you know, you might think that, say, for example, returns on capital are kind of one of the main drivers, inheritances, intergenerational transfers. And most of the time when people have looked at kind of the earnings gap, they've thought that the earnings gap was too small to sustain such a large racial wealth gap. And what we found is that actually the earnings gap is really the primary driver of the racial wealth gap when you think about things in a dynamic setting over time.

And that really just kind of turns our attention to thinking about all of the factors that drive the racial earnings gap, and that's kind of an everything problem. But, you know, being aware of that or having a sense of that hopefully will direct attention and energy toward long-term solutions.

ANJALEE KHEMLANI: I wonder about that point, especially on the long-term solutions part, and even tracking that because this is not a new issue to the point of this is a systemic problem. It's been around for a while. Agencies have noted it, whether it be private banks or the Small Business Administration. We've seen this topic come up over and over again and programs or strategies laid out to help assess it, but it clearly seems to not have an impact. What can you do to really change that?

DIONISSI ALIPRANTIS: You know, again, I think, you know, getting to the research, I can again give an example from my own work. You know, looking at how Black and white households end up in such different neighborhoods, it's a known fact that even with the same incomes, Black and white households live in very different neighborhoods in terms of their socioeconomic status-- things like poverty rates, educational attainment. And some of our research is actually indicating that that's also true for Black and white households with the same income and wealth. And so that points us to these broader, deeper issues about how some households might be trying to move to certain neighborhoods to avoid racial hostility and then, you know, passing up some economic opportunities.

So this is really pointing to kind of longer-term solutions. And I think, you know, in light of what you just said, I have to just agree that, you know, these are very longstanding issues, and I don't think they're going to be solved overnight. But I do think that between, you know, the Federal Reserve Bank of Cleveland and the Federal Reserve System with our Racism and the Economy series and some of these initiatives, I think we're trying to make it clear that we see ourselves as being in it for the long haul and that we are committed to trying to understand and improve the situation.

BRIAN CHEUNG: Dionissi, really quickly, 30 seconds here. Is this in the Fed's mandate? Because a lot of people wondering, you know, if the Fed isn't normally doing this type of thing, it's not necessarily directly tied to the dual mandate. What is the role there?

DIONISSI ALIPRANTIS: Yeah, so I'll say first and foremost that I think it's very important that the Fed maintain its independence, but I think it's also clearly-- for me, it's very much within our wheelhouse because, you know, as we're mandated to think about maximum employment when we're thinking-- conducting our monetary policy, all of these factors are connected to employment, access to opportunity. You know, these issues are really centrally connected. So I would say I think it's very clearly, you know, tied in to our mandate from Congress.

ANJALEE KHEMLANI: Well, Dionissi Aliprantis, director of the Program on Economic Inclusion for the Cleveland Fed, thanks so much for being here.