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Banking

Fed Gov. Raskin: Policymakers Must Address Financial Insecurity

Fed Gov. RaskinEconomic challenges facing low- and moderate-income Americans have grown in number and complexity and demand the attention of policymakers, Federal Reserve Governor Sarah Bloom Raskin said during a March 22 speech at the National Community Reinvestment Coalition Annual Conference in Washington, D.C.

These challenges will not be surmounted by one group or sector. Rather, they require the attention of community groups, government policymakers, financial regulators, and businesses, Raskin said. She noted that the recent recession had hit low- and moderate-income Americans hardest, through job losses, wage stagnation, more complex requirements for new jobs, and restricted access to credit.

"There is no simple cure to these conditions," Raskin said, "but government policymakers need to focus seriously on the problems, not simply because of notions of fairness and justice, but because the economy's ability to produce a stable quality of living for millions of people is at stake. Our country cannot achieve prosperity without addressing the powerful undertow created by flat wages and tenuous financial security for so many millions of Americans."

Poverty rate climbed after stable decade
Raskin cited various statistics to describe this undertow. The nation's poverty rate has risen sharply, to 15 percent since the start of the recession, after a decade of relative stability. Roughly two of three jobs lost because of the recession were in "moderate-wage" occupations, she noted, such as manufacturing, construction, and office administration. It has been difficult for people who lost those jobs to find work that pays as well. Recent job gains have been concentrated in lower-wage areas, including retail sales, food preparation, and home health care, Raskin said.

Moreover, part-time work has become much more common since the recession. Temporary work accounted for 10 percent of job losses during the recession, while these jobs made up more than 25 percent of net employment gains since the reces­sion ended, Raskin pointed out. Part-time jobs generally pay less and offer fewer benefits than full-time positions.

Access to financial services a concern
Amid challenging labor market conditions, access to financial services has also become a greater concern, in Raskin's view. People with low and moderate incomes may have trouble establishing a credit history or may have problems in their credit history that inhibit their ability to borrow on competitive terms. Finally, a growing concentration of assets at fewer banks "raises doubts about whether banking services will continue to be provided at competitive rates to all income levels of customers wherever they may live," Raskin said.

How can the Federal Reserve help? The governor noted that the central bank's accommodative monetary policy has helped to improve the labor market and economy broadly. But monetary policy can only do so much, she cautioned.

"While monetary policy can help, it does not address all of the challenges that low- and moderate-income workers are confronting," Raskin remarked. "That said, the existing mandate regarding maximum employment requires policymakers on the Federal Open Market Committee to understand labor market dynamics, which obviously must include an understanding of low- and moderate-income workers."

April 3, 2013

 

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