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Yellen Was Half Right About Unemployment Disparities

Fed Chairwoman Janet Yellen got it half right yesterday when she answered a question about how the Fed can help reduce disparities in unemployment in the states.
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Fed Chairwoman Janet Yellen got it half right yesterday when she answered a question about how the Fed can help reduce disparities in unemployment in the states.

During Dr. Yellen's testimony before the House Committee on Financial Services, she was questioned by a congressman from Minnesota about what the Fed can do to address the yawning gap between white and black unemployment in Minneapolis. Unemployment among blacks in Minneapolis was 14 percent in December, while only 2.9 percent for whites.

Dr. Yellen explained that the Fed's tools to influence employment are too broad to differentiate between white and black workers. She said that education and training were more important, and that this disparity was Congress' job to address.

Nationally, the disparity was 4.1 percent for whites and 8.8 percent for blacks in the 4th quarter of 2015, according to the U.S. Bureau of Labor Statistics. There is clearly an even bigger problem in Minneapolis, with black unemployment more than four times higher than white unemployment.

This is not news to Minnesotans. The Minnesota Advisory Committee to the U.S. Commission on Civil Rights issued a report in 2011 on the unemployment disparity in the state. That report followed a similar analysis in 2005. The 2011 report found:

"While metropolitan areas across the nation are grappling with similar challenges, our research indicates that some of the issues that have resulted in intolerably high unemployment rates for African Americans are unique to Minnesota and the Twin Cities Metro area."

But many across the country listening to Dr. Yellen pointing to Congress to solve this might get the wrong idea. The solutions to racial disparities in unemployment won't come from a one-size-fits-all approach from Washington. The solutions to minority unemployment in Minnesota are in Minnesota.

There is a vicious cycle at work. High school children who see huge barriers to employment and access to occupational training, even when the local economy is doing well, have little incentive to stay in underperforming schools. Without a high school diploma, employment prospects simply worsen.

Local employers are part of the solution. They can be more engaged in giving high school students of color a reason to stick it out in sub-standard schools and troubled neighborhoods. Partnering with high schools and community colleges, some employers are giving students hope that there is a decent job after school.

Companies like E.J. Ajax, a small metal forming manufacturer outside of Minneapolis, is one example. They are among scores of Pioneer Employers chronicled by the Hitachi Foundation's Good Companies@Work program. The Foundation has crossed the nation finding examples of employers who are profiting from investing in their front-line workers.

With a 2.9 percent unemployment rate among the white workforce, Minneapolis employers should have an incentive to invest in the undertapped local labor force of black and Hispanic workers who are desperate for a chance.

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