More than two years into the pandemic, researchers are still learning about its impacts on families’ financial well-being. But as households begin to recover, what can be done to help low- and moderate-income families build more wealth than they had before COVID-19?

Federal Reserve leaders and economic experts tackled that question at the latest event in the 2022 Federal Reserve Community Development Research Seminar Series. The conference, called “Achieving an Equitable and Inclusive Wealth Recovery,” was hosted by the Federal Reserve Banks of St. Louis and Boston.

“Our goal shouldn’t be to simply restore the large and enduring wealth gaps that existed prior to the pandemic, but to narrow those gaps by reducing barriers and adding more incentives for disadvantaged groups to build wealth,” said Jim Bullard, president and CEO of the St. Louis Fed.

Boston Fed researcher Sara Chaganti said wealth provides a buffer against unexpected income loss, expenses, or the rising costs of basic needs.

“Among the many aspects of family economic inequality, disparities in wealth – particularly racial-ethnic wealth inequality – are some of the most persistent and enduring,” said Chaganti, deputy director of the Boston Fed’s community development research team.

“This trend has enormous consequences for families,” she said.

Experts: Lack of financial stability prohibits many Americans from building wealth

In the panels, experts discussed changes in household debt during the pandemic, as well as proven ways to help families build wealth, including: access to financial services, wage increases, homeownership, and opportunities for employees to own shares in their company.

New York Fed researcher Joelle Scally said there were “monumental shifts in how people spent their money and time in the last two-and-a-half years.”

“Household balance sheets, particularly debts, reflect this,” said Scally, a senior data strategist.

Scally said credit card balances dropped sharply at the start of the pandemic across high- and low-income borrowers as businesses and travel shut down. However, those balances have begun to increase again, though they are below 2019 levels, she said.

Still, nearly half of all U.S. households do not have incomes that exceed their basic expenses, making it difficult to build wealth, said Genevieve Melford, director of insights and evidence at the Financial Securities Program of the Aspen Institute, a global nonprofit with a stated mission to work toward “a free, just, and equitable society.”

“That’s largely driven by the decades-long and growing mismatch between wages – which have largely stayed flat for the majority of workers – and cost of living, particularly housing, health care, family care, and education, which have skyrocketed,” she said.

Chakrabarti: Proposal for law reform provides opportunity for innovation

Boston Fed Executive Vice President Prabal Chakrabarti said the Community Reinvestment Act is being reformed for the first time in 30 years, and it’s an opportunity for innovation. The CRA requires the Federal Reserve and other regulators to encourage banks to meet the needs of the low- and moderate-income neighborhoods where they do business.

“Are there ways … to provide an enhancement, something that mimics inheritance … that allows you to start a business, (buy) a home, or have education?” Chakrabarti asked in closing remarks. “This is where policy can be a bit creative.”

Learn more about the conference and register for future events in the seminar series here.