Markets Wired

As prepared for delivery 

Thank you so much for joining us. I’m so glad to chair this meeting of the Financial Literacy and Education Commission, and I am very enthusiastic about the chosen topic: addressing some of the longstanding inequalities in our country; the fact that our economy worked has never worked fairly for people of color. 

I’ve been an economist for a long time, and this is one of the areas where I’ve focused my attention. 

It was probably because I started studying economics during the Civil Rights Movement. I took my first course around 1963. I was a freshman in college, and if you looked at the economic data back then, the average Black family possessed roughly 15% the wealth of the average white family. That is more than a 6-to-1 difference, and it is stark. But perhaps it isn’t surprising: Jim Crow laws were still in effect in many places. What is surprising, however, is that it’s now more than half a century later, and that 6-to-1 number has barely budged.

Today, African Americans remain unemployed at roughly twice the rate of white Americans, and that number hasn’t much changed in fifty years either. It’s as close to a constant as you come in economic data. In fact, if you somehow transported my freshman economics professor to 2021 — and you only showed him the employment and the wealth numbers — he would have a hard time guessing that the country has passed the Civil Rights Act; or that we’d elected our first Black president; or our first Black Vice President.
Instead, he might actually notice signs that the country had headed in the opposite direction — especially after 2008. During the last recession, the highest white unemployment ever reached was 9.2%. But black unemployment was trapped above 10% for five years. It reached 17%, and it hit its peak earlier and recovered slower than unemployment for almost any other group.

This is what economic crises do. They hit people of color harder and longer, and we are seeing it happen again: During the early days of the pandemic, African Americans were the first to lose their small businesses and their jobs, and we’ve seen early data that suggest Black workers will be the last re-hired when the economy opens back up.

Of course, it would be very inaccurate to say that financial education alone can address the inequalities of the past 15 months – or the past 50 years. It isn’t cure-all. There is a lot more we must do. Big fiscal policy is required to address the inequalities in this country and to build an economy that works for everyone. (That’s why the President signed the American Rescue Plan into law – and has proposed the American Families and Jobs Plans: create a bigger, fairer, more competitive country). 

But research does show that education – especially early education – about how navigate personal finances can have a lasting, positive impact on people’s lives. It can be part of our strategy for building a more equitable economy. 

We know that young people who finish high school in states with robust financial education requirements tend to have better credit scores, fewer delinquencies, and make more informed decisions about college financing. Similar research has found that young adults from states where financial education was mandated in high school were less likely to use payday loans, auto loans, pawnshop and rent to own financing compared to similar adults from other states.

We have solid evidence about what makes financial education work.  We know one-on-one financial coaching and counseling helps adults get out of debt, build savings, and successfully buy a home.  We also know that the education is much more effective when instructors take the time to understand people’s individual hopes and dreams: Is someone trying to get out of debt? Or pay for college? Or buy a home?  Or help extended family members? 

The best financial educators use not just knowledge, but also empathy to help people set and achieve their own goals. 

And yet, where we can improve is making sure that everyone can access this type of education. We know that isn’t the case right now: Compared to the national average, students in majority- minority schools receive financial education at half the national rate. If your child goes to an urban school, rather than a rural one, she’s half as likely to take a required financial education class. 

When we talk about financial inclusion, people tend to think about connecting people with bank accounts, for instance. And that’s important. But many people also need more than the door to financial services.  They need guidance in using them, help to overcome financial setbacks, tools to manage their daily needs, and support to take steps toward a brighter future.  Any push for financial inclusion must include quality financial education, too. 

That’s where I will end my remarks – except to say that yesterday marked a terrible anniversary: one year since George Floyd’s death at knee of a police officer. 

Over the past year, the country has grappled with a long overdue reckoning on race and racism. There have been moments of progress, but we have so much further to go. 

As I said, it would be a gross overstatement to say that this Commission can make meaningful change alone. We can’t. But then again, that’s not how big, entrenched problems are usually solved. Progress is made by a constellation of organizations and advocates, each trying to make their own corner of the world a little bit better. 

I am heartened to be part of such an organization today. 

Thank you for being here, and I look forward to the discussion.

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