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For release on delivery
10:40 a.m. EST (9:40 a.m. CST)
November 17, 2022

Opportunity and Inclusive Economic Growth

Remarks by
Philip N. Jefferson
Board of Governors of the Federal Reserve System
at the
2022 Institute Research Conference, hosted by
the Opportunity and Inclusive Growth Institute
Federal Reserve Bank of Minneapolis
Minneapolis, Minnesota

November 17, 2022

Good morning, and thank you. It is a pleasure to be here. I would like to use my
time today to answer the question posed by the title of this session: What can the Fed
learn from research on opportunity and inclusive growth? But, first, let me remind you
that the views expressed are my own and do not necessarily reflect those of anyone else
on the Federal Open Market Committee or in the Federal Reserve System.
Some of the Fed’s purview—including consumer protection, community
development, and financial stability—can help to support inclusive growth. But
monetary policy cannot address these issues directly. I do, however, see a direct line
between research on opportunity and inclusive growth and our dual mandate of maximum
employment and price stability. Fulfillment of our mandate is likely easier if certain
other conditions are present. For example, if the channels of upward social mobility are
open and working for all, we are likely to see both higher labor market participation and
higher productivity—both of which make it easier to attain maximum employment amid
low and stable inflation. The better we understand the channels that affect the health and
function of the overall economy, the better we can calibrate our policy decisions to
deliver on our dual mandate.
Those channels consist of several areas that are, largely, not ours to make policy
about but are important for our policies to be effective in promoting the conditions for
prosperity. They include health, housing, transportation, childcare, disability services,
education, access to the financial system, and access to capital.
First, I would like to address monetary policy. In pursuing its dual mandate, the
Federal Reserve is essentially trying to foster and maintain the conditions in which the
economy and all its participants can thrive. Research has shown that the benefits of a

-2strong economy—with high employment and stable prices—are especially significant for
less advantaged groups. 1 These groups also tend to see the greatest gains later in an
expansion, meaning that they benefit the most from sustained periods of growth—like the
expansion we were experiencing before the pandemic, which was the longest on record.2
For example, during the pre-pandemic expansion, the long-standing disparity between
unemployment rates for prime-age African Americans and Hispanics and their white
counterparts began to close. In fact, disparities in labor market outcomes just prior to the
onset of the pandemic were the narrowest in at least 50 years. At the same time, inflation
remained low—lower, in fact, than our 2 percent target for most of that time—and
showed little sign of picking up despite the strong labor market.
Unfortunately, the pandemic brought about the most rapid and severe labor
market contraction of the past 80 years. It also had a noticeably larger effect on the
unemployment rates of women and of Black and Hispanic individuals than it did on most
other demographic groups. And while job losses were widespread across all sectors of
the economy, workers with less education were particularly hard hit. This was especially
true for those unable to work remotely or in jobs that required in-person interactions.
As the economy reopened and began to recover, unemployment rates for those
groups initially affected the most—Black and Hispanic workers—also fell more sharply.
Today, while material disparities in unemployment rates along racial lines persist, these
disparities have almost returned to the narrower ranges we saw just before the pandemic.
See Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos (2017), “Racial Gaps in Labor Market
Outcomes in the Last Four Decades and over the Business Cycle,” Finance and Economics Discussion
Series 2017-071 (Washington: Board of Governors of the Federal Reserve System, June),
See, for example, Stephanie R. Aaronson, Mary C. Daly, William L. Wascher, and David W. Wilcox
(2019), “Okun Revisited: Who Benefits Most from a Strong Economy?” Brookings Papers on Economic
Activity, Spring, pp. 333–75,

-3However, as the economy has recovered, strong demand and a variety of supply
constraints have contributed to the fastest increases in consumer prices since the early
1980s. Inflation, too, has disproportionate effects on, and is felt most acutely by, those
who can least afford it. Price increases have been particularly sharp for necessities like
food, transportation, and shelter, which make up a substantial portion of household
budgets for people on the lower end of the pay scale. Lower-income households also
have less in savings to buffer price increases, meaning that they not only feel the effects
more forcefully, but they also feel them immediately. The savings they do have are more
likely to be in cash or noninterest-bearing accounts, which means inflation directly erodes
the purchasing power of their savings.
Monetary policy cannot address the specific reasons that low-income households
suffer the most from high inflation. But these reasons help to illustrate the importance of
low inflation: Low inflation is key to achieving a long and sustained expansion—an
economy that works for all. Pursuing our dual mandate is the best way for the Federal
Reserve to promote widely shared prosperity. At the same time, it is critical for monetary
policymakers to understand the many and varied conditions that can make our policies
more effective in fostering prosperity.
Now let me turn to these concomitant conditions for prosperity outside of the
Fed’s mandate, which nevertheless should be carefully studied. Many of them are
straightforward, like housing, transportation, and childcare. Even as remote work has
increased, many jobs remain in person and on site. If people cannot live near work,
either because of the cost or because jobs are located in nonresidential areas, they must
commute. Commuting depends on public or personal transportation—which in turn

-4relies on infrastructure, such as roads and highways. And time spent commuting affects
childcare decisions. Caring responsibilities overall—for children or for other relatives—
can keep people out of the workforce, and the onus falls disproportionately on women.
This was particularly evident during the pandemic, and particularly true for Black and
Hispanic mothers. 3
Financial participation is also clearly connected to prosperity. Being unbanked
means less financial security. Less access to credit means a smaller, or even nonexistent,
safety net, but it also means less opportunity, be that buying a house to build capital,
funding education, or starting a business.
But there are other, less obvious—or even less quantifiable—issues. Beyond
location, a home provides both basic needs, such as shelter, and invaluable benefits, such
as a sense of personal safety and dignity. It is a refuge in which our minds and bodies
can recuperate and regenerate so we are prepared to participate in all aspects of life,
including the next day’s work. The costs of living in disadvantaged areas or of dealing
with financial hardship can be seen in all areas of life. Higher stress, the frequent
necessity of working more than one job, the absence of benefits, and the time and money
spent commuting—all these exact a financial and psychological toll. There is a
fundamental aspect of our humanity, which is to live a more fulfilling existence—to
enjoy the richness of life. In an economy that works for all, we should not live to work,
but work to live. These are the factors that will allow people to thrive.

See Joshua Montes, Christopher Smith, and Isabel Leigh (2021), “Caregiving for Children and Parental
Labor Force Participation during the Pandemic,” FEDS Notes (Washington: Board of Governors of the
Federal Reserve System, November 5),

-5Of course, policies that can address these important issues are not made by Fed
policymakers. But the research agenda we are discussing today helps us to understand
better those aspects of well-being that allow people to prosper and to enrich their lives
more broadly. Thank you.