Mark L. Mullinix

Good afternoon. I’m pleased to be here with so many leaders and thinkers from throughout our community. It’s not often that Federal Reserve officials get to share a stage with artists and religious leaders and historians and public health experts, to name just a few of the many disciplines represented here.

In fact, I’d posit that it’s not often a crowd this intellectually diverse gets together, period — which is a testament to both the importance and the complexity of the challenges and opportunities we’re discussing.

Before I say any more, I have to note that my remarks represent my own views and not necessarily the views of the Richmond Fed or the Federal Reserve System.

In a few minutes, you’ll be hearing from some of the Fed’s community development team about our efforts in workforce development. This might prompt you to ask two questions: Why does the central bank have a community development function? And why is the central bank interested in workforce development?

Role of Community Development

The answer to the first question can be traced back to 1977 and the passage of the Community Reinvestment Act. This law was intended to discourage “redlining,” or the reluctance of many banks to market their products in certain (often minority) neighborhoods. More precisely, it encouraged banks “to help meet the credit needs of local communities in which they are chartered.” (Most people attribute the term “redlining” to color-coded maps produced by the Home Owners Loan Corporation in the 1930s, which deemed certain neighborhoods “hazardous” for mortgage lenders.)

The CRA set up a process to enable citizens and community groups to protest if they believed a bank was discriminating against a particular neighborhood. Some Reserve Banks created departments to help those groups navigate the administrative process of filing a protest. The Board of Governors asked every regional Reserve Bank to establish a similar function, and by 1981, community development had a presence throughout the System.

Over time, community groups needed less assistance with the protest process. Concurrently, banks and community groups were increasingly seeking each other out: banks were looking for community investment opportunities, and community groups were looking for funding. So the Fed’s community development function evolved, and we shifted into more of a facilitator role — bringing together community groups, financial institutions and other stakeholders to provide people and businesses in low- and moderate-income neighborhoods with tools and resources to address credit and development issues.

For nearly three decades, then, understanding the constraints and the opportunities in communities throughout our District has been part of our mandate.

Why the Fed Cares About Workforce Development

Another major component of our mandate, of course, is the charge to promote “maximum sustainable employment.” Employment is influenced by a variety of factors outside the purview of monetary policy, including the education and training of the workforce.¹

For example, during economic downturns and expansions alike, college graduates on average have much lower unemployment rates than workers with less formal education. And during recessions, the unemployment rate for college graduates tends to rise less than the rate for less-educated workers. Thus, a well-educated workforce may offer the promise of an economy with a low and stable unemployment rate.

Now, it’s not news to this audience that many communities don’t have equal access to educational and work opportunities. And that matters not only for the well-being of the individuals who live in those communities, but also for the well-being of our society as a whole.

I’ll refrain from going into too much detail, but in short, economists generally believe that productivity growth is the key contributor to long-run economic growth. And the key to productivity growth, in turn, is our society’s “human capital” — the skills and knowledge we collectively possess.

So to the extent that some people are not able to reach their full potential simply because they don’t have the same opportunities as others, we are in essence throwing away human capital that could be contributing to more economic growth and higher living standards for all of us. And as a policymaker, that is what I am ultimately concerned with.

Day-to-day, the Fed’s mission is to foster the stability, integrity and efficiency of our nation’s monetary, financial and payments systems. But the reason that’s our mission is because we want to help create a society in which people have the freedom and the opportunity to prosper.

I am grateful to Jessie Romero for assistance in preparing these remarks.