Like most Americans, I raised my eyebrows more than a few times over the last
year while shopping for groceries, ordering from restaurants, or restocking my family’s
medicine chest. Price inflation was last a topic of household conversation when I was a
child, but it has returned as an important issue in the pandemic recovery.
The Institute’s mission is to support the Fed in its pursuit of full employment through
our research into ways to enhance opportunity and inclusion in the U.S. economy. To
do this, we constantly seek new detail on how the full range of U.S. households are
faring. This spring, that search has led us to explore the ways inflation puts
different pressures on workers and families depending on where they live,
what they earn, and how they spend. We devoted a virtual Institute event to understanding the varied impacts of inflation and discussing how policymakers
The Institute is built on the idea that we need to know more and share
more—through efforts like our spring event—to expand participation in our
economy and access to its benefits. This premise has caused some to ask
whether efforts like ours “distract” the Fed from fighting inflation.
I frankly think that’s the wrong question. It supposes that having a narrower
sense of context and trade-offs could somehow lead to better decisions.
The U.S. economy is always evolving, sometimes slowly and sometimes
very quickly. The result is that our economy now looks very different from earlier,
formative periods like the late 1970s. For example, in 1980, the ratio of household income for those just inside the top 20 percent to those just inside the bottom 20 percent
was about 4 to 1. On the eve of the pandemic, this was about 5 to 1. The risk of a
lasting earnings cut at some point in one’s career has risen, and it has become harder
to move from one employer to another. Despite these challenging trends, opportunity
has in other ways expanded. The likelihood of staying with an employer for a long
time (20 years or more) has steadily increased for women. Meanwhile, Black well-being
broadly measured has advanced relative to that for Whites, despite a tide of rising
income inequality more generally and persistent wealth and earnings gaps. Furthermore,
efforts to address inequalities via social programs have provided opportunity
that lasts a lifetime for some.
Rather than asking whether the Fed has the bandwidth to focus on inflation and
broader opportunity, a better question is: What information do we want our decision-makers to have when they make choices that affect so many? Since its founding five years ago, the Institute has become a focal point for connecting with frontier
research into how our economy does, or doesn’t, work for all Americans. As such, it
is one effort—among others at the Fed—to provide as much context as possible. As
our spring event on the different ways that American households experience inflation
shows, this approach can complement a traditional concern like inflation and can
even provide new motivation for combatting it.
Research does little good if it is not shared—with policymakers, with other researchers,
and with business leaders, community activists, technical innovators—everyone
who participates in the economy. We hope that For All provides a way for you, our
readers, to connect with our research in an engaging way.