I just finished Richard Rothstein’s masterful new book, “The Color of Law,” on the history of explicit racial residential segregation in America, the vestiges of which remain crystal clear today. Then there’s this quick, powerful interview with Heather Ann Thompson on racial inequity and violence in the criminal justice system.
Next, there’s this fact. In 1968, the Kerner Commission report on race and civil disorders observed the following:
Employment is a key problem. It not only controls the present for the Negro American but, in a most profound way, it is creating the future as well. Yet, despite continuing economic growth and declining national unemployment rates, the unemployment rate for Negroes in 1967 was more than double that for whites.
Last month, April 2017, the ratio of black to white unemployment was 2.1 to 1.
Finally, there’s this graph of inflation that came out last week. It shows the year-over-year growth in prices, both for the overall consumer price index and for the “core” index, which leaves out volatile energy and food costs. The core index, which better reveals the extent to which the tight labor market is creating price pressures, shows no evidence of such pressures. The overall index rose for a few months as energy prices normalized, but it, too, has decelerated in recent months.
How do these all relate?
The Rothstein book gathers meticulous research showing how governments at all levels long employed racially discriminatory policies to deny blacks the opportunity to live in neighborhoods with jobs, good schools and upward mobility. The creation of “racial ghettos,” to use the language of the Kerner Commission, was neither an accident nor, as the courts to this day wrongly assert, a function of “de facto” discrimination, meaning that for complicated reasons, it just turned out that way. Nor is it a former problem, one that has been solved by affirmative, corrective policy measures. Rothstein writes:
Today’s residential segregation…is not the unintended consequence of individual choices and of otherwise well-meaning law or regulation but of unhidden public policy that explicitly segregated every metropolitan area in the United States.
Thompson, who has studied the 1971 Attica prison uprising, argues that the justice system is no less racially biased today and that prison conditions are, if anything, worse. But the part of her interview I found most striking was her response to the question of what she learned from her research that she found surprising:
Sometimes I hear from people who have served time who say that prison was a place where they could finally get help. … I realized that one reason that’s the case with a lot of people is because it’s an institution and, for some people, they actually have health care for the first time, or housing for the first time.
For anybody who still resides in Factville, the idea that residential segregation isn’t an accident of fate, or that a class of disproportionately minority people must go to prison to get health care and housing in a country as wealthy as ours is probably not that surprising.
Nor should it surprise anyone that the black unemployment rate is twice that of whites; it has been that way for as long as the data exist. And, importantly, this isn’t just a matter of education. As I show here, African American unemployment rates, while clearly lower for those with more education, are still multiples of those for whites across each education category.
To cut to the chase, institutionalized residential segregation and our biased criminal justice system have created a lasting policy framework that actively blocks a class of Americans from realizing anything close to their potential.
But what’s inflation got to do with it?
The federal government cannot be counted upon to do anything to help this unjust situation. To the contrary, progressives are fighting tooth and nail to preserve what measures we have in place to support the well-being and opportunities of those hurt by institutionalized discrimination.
But perhaps the Federal Reserve can help. That unemployment multiplier of two works both ways, meaning African Americans often get an extra boost in very tight labor markets. In a forthcoming paper, Ben Spielberg, Keith Bentele and I show how the share of black households with no labor-market earnings fell by more than half in the full-employment 1990s while that of white households, already very low, hardly budged.
True, fighting racial injustice is not in the Fed’s job description. But that is what it would be doing were it to allow the already tight labor market to get even tighter.
Why should it do so? Two reasons.
First, the Fed’s reasonable objection to my request would be that its mandate is to pursue full employment — in the aggregate, not for a particular subset of the labor force — at stable prices. If it were to push the overall unemployment rate down further to help African Americans, it would be risking faster inflation that would violate its mandate and hurt everyone.
But look at that inflation chart (or at inflationary expectations)! This argument would be more persuasive if there were more evidence to support it. But such evidence looks to me to be surprisingly thin given the absence of accelerating price growth even at 4.4 percent unemployment. Clearly, the relationship between unemployment and inflation ain’t what it used to be, a fact I’d urge the Fed to weigh heavily in considering my request.
Second, a quick perusal of President Trump and Treasury Secretary Steven Mnuchin’s recent interview with the Economist will convince you that we are at a moment where the Fed is the only rational economic policy institution in operation. There’s simply no other agency pulling the economic levers right now that has a clue as to what it is doing.
I know I’m asking the Fed to go outside its comfort zone, and in the interest of a cause that, while I know for a fact is one deeply felt by many over there, is not part of its mandate. But based on the history and the evidence, I believe my request is both reasonable and justified.