Re-examining Wealth Gaps with Prabal Chakrabarti Re-examining Wealth Gaps with Prabal Chakrabarti

Runtime: 12:40 — The Boston Fed’s Prabal Chakrabarti discusses a new research effort aimed at better understanding wealth disparities in Massachusetts. The work expands on the Bank’s impactful 2015 “Color of Wealth” report.

Overview Overview

Gaining a better understanding of regional wealth disparities is critical to the Boston Fed’s work to promote economic growth. It’s why the Bank recently announced it would partner with several organizations on a new research effort that takes a closer look at gaps in financial stability, wealth accumulation, and economic mobility that span race and geography in Massachusetts.

The research is a follow-on to the Bank’s 2015 “Color of Wealth” report, which is often cited because of the stark wealth disparities it found between minority and white households in the Boston area.

Boston Fed Community Affairs Officer Prabal Chakrabarti joined the Six Hundred Atlantic podcast to discuss the aims of the new study, how it differs from previous work in the space, and why this kind of work, in partnership with local groups, is so essential.

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Transcript Transcript

JESSICA GAGNE:

Hello, and thank you for joining us for this episode of Six Hundred Atlantic. I'm your host, Jessica Gagne, here with another interview aimed at highlighting the work done at the Boston Fed in service of the New England region.

The topic of today's interview is supporting the economic well-being of our communities. Now, community development work is key to helping the Bank achieve its mission of promoting sound growth and financial stability. If you take a look at the Bank's website, bostonfed.org, you can scroll through the long list of programs the Bank has set up that support community progress. And you'll quickly notice what's driving many of those programs is impactful research. For decades, the Boston Fed has conducted research aimed at promoting better economic outcomes for people who live in the New England area.

And today, we're going to discuss the latest research initiative being launched by the Bank, in partnership with several other organizations, that furthers that goal. So, joining me now is Prabal Chakrabarti. He's executive vice president of Regional and Community Outreach. And he's here to talk about exploring wealth disparities in Greater Boston and across Massachusetts. Good morning, Prabal.

PRABAL CHAKRABARTI:

Good morning. So great to be here with you, Jess.

JESSICA GAGNE:

Happy to have you, too. So, before we dive into the new research, I want to talk for a little bit about the past. So, can you cite some examples of past Boston Fed research and community development work that really had an impact?

PRABAL CHAKRABARTI:

The Boston Fed has had so much research that we're known for, in areas like monetary policy and financial stability. But what I really want to focus on are a couple examples that, really, I think have affected our region and our nation in what I, what's near and dear to my heart, which is community development, the focus on lower-income communities.

The first, back in the 1990s, the Boston Fed did a study of lending and home lending and found evidence of discrimination racially through an exhaustive and comprehensive sort of analysis of bank lending data. This was really an earthquake for how different groups of people were provided access to credit.

And what it did is it resulted in an effort by the banking industry to change how it lent to minorities. And so, the Bank is enormously proud of that work. So, that's one example. A second comes from our Bank's Research Department, which was looking at small- and medium-sized cities around the region. Now, our region around New England, we have a lot of cities that have fallen on hard times over decades from de-industrialization. And the question was, "Are any of these cities sort of doing well?" And to make a long research paper short, the answer was, "Yes, there are some across the country that are doing well."

And that research set out to find what those drivers were and ended up motivating the Bank's Working Cities Challenge and Working Communities Challenge. So, those are two examples of research that really made a difference, both in terms of what the findings were, but especially having impact in the community.

JESSICA GAGNE:

That's great. And I know there's another example that we definitely want to touch on today. And I believe it was back in 2015, there was a study that was put out called, "The Color of Wealth." Can you talk about that study and some of its impacts and some of the ripple effects that happened after it was put out?

PRABAL CHAKRABARTI:

Yes. One of the things that the earlier study on home mortgage lending demonstrated was really the history of exclusion from many important ladders up economically, and the exclusion of racial and ethnic groups from full access to those ladders.

So, when you think about that context, the Color of Wealth was an effort to describe locally wealth and wealth disparities. This had been done nationally but had not been done to capture some of the local sort of characteristics. And here the analysis looked at a sample across the Greater Boston area.

And to really summarize, it found steep and stark differences, not dissimilar to that found nationally, between different racial and sub-ethnic groups. When this study was released, when the analysis was released, it was a firework across the region. It really caught the attention of public, civic, and private nonprofit actors. While a lot of those sectors focused on the stark differences, and we're talking here on the order of a couple hundred thousand dollars …

JESSICA GAGNE:

Wow.

PRABAL CHAKRABARTI:

… of wealth. It found that the white families had over $200,000 close to $240,000 in median wealth. And for some groups, it was virtually zero. Now, there's wide ranges…

JESSICA GAGNE:

Right.

PRABAL CHAKRABARTI:

… in the sample, and we get sort of technical in the details here. But really, I think the number to emphasize is the aggregate difference, that couple hundred thousand dollars difference or greater.

JESSICA GAGNE:

So, we'll start there. This new research initiative, it's going to expand a little bit on the things that you were discussing, that the Color of Wealth study brought out. But it's going to be more robust, it's going to be more comprehensive and go a little deeper. So, can you talk about the aims of this project?

PRABAL CHAKRABARTI:

Yes. And I really like how you put it in terms of revisiting it and being more comprehensive. So, the Color of Wealth, like all studies, had things that we would do differently, had its imperfections. And one of those is really the size of the sample. We want to increase the size of that sample.

The other thing that the study didn't do was while it highlighted differences, it didn't say much about the sources of those differences. And so, this new study, putting this sort of more affirmatively, is going to say more about the sources of those differences, including things like inheritance and the role that inherited wealth plays.

It is also going to obviously be more comprehensive, it's going to be geographically greater, right? So that's a second sort of difference, in addition to the size of the sample. The third is that it's going to allow us to do more sort of modeling of solutions.

So, the first study was a real catalyst, but we really hope that this study is more of a compass, that it points a direction for policymakers and stakeholders, in terms of what types of programs or initiatives can actually reduce and someday eliminate the racial and ethnic wealth gap and the wealth disparities that we see.

Of course, it's going to give us, we hope, more information about the distribution within various groups, and, crucially, it's going to engage the community more in the survey. And so, these are ambitious goals.

JESSICA GAGNE:

Right.

PRABAL CHAKRABARTI:

They're going to take us time, and it's going to take some diligent planning and design to ensure that this is rigorous and up to Boston Fed standards. And so, we're going to do this, we're going to do it right. And we hope that this actually has, if this is hard to imagine, even more impact than the initial study.

JESSICA GAGNE:

That's great. Well, speaking of time, why now? Why is now a good time to sort of build on that study and put out new research?

PRABAL CHAKRABARTI:

Jess, that's a terrific question. I'm going to give you actually three sort of quick responses to that. The first is, it's been a while since that study, it's been 2015. And while this is much more than an update, this is really doing a, I would say almost like a brand-new survey.

JESSICA GAGNE:

Right.

PRABAL CHAKRABARTI:

It's still important to think about giving us some insight into what's happened after a pretty traumatic economic and human experience through COVID.

JESSICA GAGNE:

Sure.

PRABAL CHAKRABARTI:

And so a couple pieces there, of course, the context we have now is rising prices and inflation. Wealth is an incredibly important buffer in terms of emergency savings and being able to be resilient in the face of those rising costs.

The other thing about wealth, and this was something that I think the original study was successful in highlighting, wealth is important in getting ahead economically. And it can involve starting a business, owning a home, access to education that gets you a higher-paying job. Wealth is important for all of these things.

And then the final reason is there's a set of stakeholders in the community who are actively investing in reducing the wealth gap. And so being able to work alongside and inform those efforts around the entire field here in the state of Massachusetts is that third reason.

JESSICA GAGNE:

Yeah. And let's talk about those stakeholders, because I know we are partnering with several organizations on the study. So, can you discuss who the Bank's working with on this, and what are some of the roles that each partner will play going forward?

PRABAL CHAKRABARTI:

The Boston Foundation, the Barr Foundation, the Boston Chamber of Commerce, and the Eastern Bank Charitable Foundation are funding this community effort. Why that's important, these are a set of a few organizations that have as their focus to reduce the racial wealth gap.

But the larger point here is this isn't just about those organizations. This is really about a broader set of organizations around the region that are engaged in their own ways in programs and initiatives that focus on wealth. Now, there's a lot of efforts that show promise, but, again, they're largely sort of disparate, many of them are not evaluated for their impact.

And we believe that the survey can play an important role in pointing the direction for some of these initiatives to increase their chances of success. And so, this isn't just for the partner organizations, this is really for Boston as a whole.

JESSICA GAGNE:

You said earlier, this is going to be an involved process. So, can you kind of describe where we are right now in the process of establishing the survey and when can people expect to see results and see some of this work being done?

PRABAL CHAKRABARTI:

It is going to take time to do rigorously. We have a desire to get a set of eight or 10 demographic groups, racial and ethnic demographic groups. We also want to have a category of gateway city or small and medium-sized city as a group.

And so, trying to get a sample that has sufficient data to be statistically significant, designing that survey, that is going to take time. The other piece here is some of the questions that look at sources of wealth and allow us to do the kind of modeling around solutions haven't been asked before in surveys. So, we actually need to design and test new questions.

So, overall, this is going to take roughly three years. We're already underway on that and making progress. And the other thing I'll say is throughout, we are keeping in mind, of course, people are not waiting for a study, they're investing now. And so, we're involved with them and trying to inform those efforts to the extent that we can, just with knowledge. We understand there's real people who we want to see their lives improve.

I just give an example, when the original study came out and we presented it, there was a woman in the audience, a Black woman who raised her hand and said, "You know that data you're presenting? That's me." …

JESSICA GAGNE:

Wow.

PRABAL CHAKRABARTI:

…"I have a job." …

JESSICA GAGNE:

Yeah.

PRABAL CHAKRABARTI:

…"I have a decent income. It's not a terrifically high." But you're sort of starting out earlier in your career. But she said, "I have student loan debt, and I basically live paycheck to paycheck." …

JESSICA GAGNE:

Yeah.

PRABAL CHAKRABARTI:

…"I have no wealth. And what you're describing on that graph is me." And so, I think about that, I think about her, I think about that moment. Certainly, there needs to be an important response to reduce the racial wealth gap.

What we think is, as you think into the future, that we're going to be designing a survey for the long haul that can be repeated in some way and regularly updated and be a resource for the region and for the state.

JESSICA GAGNE:

That's great. Thank you for sharing that anecdote. And thank you for sharing about this important project. I think we'll definitely have you on as updates come out. Thanks again for taking time to chat, Prabal.

PRABAL CHAKRABARTI:

Great to be here.

JESSICA GAGNE:

As always, you can find more information on everything discussed today on our website. Visit bostonfed.org/six-hundred-atlantic, where you can check out other interviews, as well as our series pieces, which are focused on issues with the nation's child care system, and geographic economic disparities across the United States. And while you're there, subscribe to our email list to stay informed of upcoming episodes. And don't forget to rate, review, share, and subscribe on your favorite podcast app. I'm Jessica Gagne, signing off on this episode of Six Hundred Atlantic. Thanks for listening.

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