NCoC: Federal Reserve Governor Sarah Bloom Raskin Discusses the Importance of NCoC Research

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Federal Reserve Governor Sarah Bloom Raskin Discusses the Importance of NCoC Research

October 22, 2012

I think that the power of this research is that it shows that there is a structural element and that civic engagement may in fact be a buffer that keeps the structural unemployment element from being higher than it was and from being higher in the future.
-- Governor Sarah Bloom Raskin

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Sarah Bloom RaskinGovernor, U.S. Federal Reserve BoardSarah Bloom Raskin is a member of the Board of Governors of the Federal Reserve System

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Civic Health and Unemployment II: The Case BuildsClick to Download PDF Document

Panel: Exploring the link between civic engagement and employment67th Annual National Conference on CitizenshipSeptember 18, 2012

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In Review: 67th Annual National Conference on CitizenshipSeptember 14, 2012 in PhiladelphiaSeptember 18, 2012

At the 67th Annual National Conference on Citizenship, Federal Reserve Governor Sarah Bloom Raskin participated in a panel discussion exploring the link between civic engagement and employment. These are her opening remarks.

I’m very interested in exploring this link between civic engagement and economic resilience. I was excited to receive a copy of this research and send it out to various fed researchers to sort of ‘kick the tires’ on and give their reactions. It’s an extremely important topic.

First of all, I should commend the researchers for both the important timeliness of the work and the analytical rigor that it was conducted under. I would say that the potential power of this provocative correlation is really quite significant.

I’d like to start by considering the potential power of the correlation from one particular frame, and that’s the frame of the macro-economy.

At the Federal Reserve, my colleagues and I spend a large amount of time thinking about the factors that affect unemployment and the labor markets at a national level. We do this by looking at fairly traditional factors. Things that matter to our understanding of the labor markets include the demand for specialized skills, composition of industry and how that evolves, education levels, and how the workforce is skilled. And these traditional factors are, I think, important. But what I think this research today is showing us is that they may be nuanced. There may be some nuances here that are worth exploring.

So just to repeat what we now all know: we’re seeing from this research that civic health seems to play a large role in understanding differences in employment across states, across metropolitan areas, and across counties. I would say that the initial returns on the research show that the correlations are significant. These appear to be statistically significant correlations between civic health and unemployment.

The civic health piece, as we saw in the PowerPoint, is looked at by looking at the number of nonprofits and the degree to which they engage local residents. I would point out as just a question of method, is that I’m not quite sure how that engagement piece is measured. But that’s one component of how the civic engagement piece of the research was conducted.

The other piece of the research is social cohesion – this notion that [includes] neighbors trusting people, volunteering, attending community meetings and that sort of thing. Intuitively, this really has quite a bit of appeal because we can imagine civic health being related to the enhancement of human capital and to the enhancement of networking capabilities.

Now, just from the perspective of human capital, people develop relevant, necessary, work-place skills through civic engagement; People can enhance their writing skills, their negotiating skills, their ability to understand technology, and their computer skills. You can imagine the intuitive appeal of what volunteering and non-paid work can provide in terms of the enhancement of human capital – the appeal towards what I’ve always referred to as “the PTA parent.” PTA parents are people who have really honed in and had the chance to develop a lot of really key skills that make them—should they choose or want to be in the work place—in high demand.

I’m reminded of a time when I was hiring somebody and looking for a lawyer. A woman called me who had been out of the work place for a while but she wanted to get back into it. However, she was not sure she had the skills necessary – so much had happened in terms of technology. She hadn’t had the opportunity to stay in a job for a continuous amount of time, so how could she possibly be prepared to jump in to what we needed her to do? I asked her to tell me what she had been doing. She said, “Well I’ve been really engaged in the PTA.” She talked at length about everything she had done on the PTA, how she had been able to create an excel spreadsheet, to begin doing social media, to stand up against the board of education and make these very powerful arguments on the behalf of children. I was very much convinced she had the necessary skills and the punch line to this is yes, she was hired. She had skills that, while they were not directly related to having worked continuously in a legal capacity, convinced me that she had, in essence, developed a really robust set of skills that I would find helpful.

Lets put this into a particular frame. Specifically, when we look at this research we want to think about unemployment from both an entry and exit perspective. In order to tighten this linkage between civic participation and unemployment, we want to understand: Are we looking at the unemployment rate from the perspective of people being laid off, or are we looking at the unemployment rate from the perspective of who’s coming back in? I think that in the research, if the data sets were able to pinpoint these differences in entry and exit, it could have a bit more power.

I also want to point out a current debate that many of you are probably familiar with in terms of how labor markets have responded to the financial crisis. Between 2007 and 2009, the unemployment rate shot up more than four percentage points to more than ten percent. Since then the rate has come down but at a disappointingly slow pace to 8.1% in the latest figures.

There are many discussions about whether this unemployment rate is what we call cyclical or what we call structural. This is the economist’s jargon for essentially trying to figure out what is the cause of the unemployment because that will, in essence, determine what an appropriate response would be.

Cyclical unemployment means it is a temporary weakness – it stems from a lack of jobs due to a weak demand for business services. In this case you’ll see layoffs and slow hiring across all sectors.

Some macro-economic policymakers believe that a certain fraction of the unemployment rate is not cyclical but is what we call structural. Structural unemployment is related to factors that don’t quickly go away when the demand in the over all economy picks up. When we talk about structural unemployment we are talking about a mismatch between the skills that employers are looking for and the skills that potential employees have.

The question is, how does this research work and fit in to our distinction between structural and cyclical unemployment? In my view, most unemployment, since the financial crisis, has been cyclical – in other words it stems from a lack of jobs due to an overall weak demand for goods and services. That said, I think that the power of this research is that it shows that there is a structural element and that civic engagement may in fact be a buffer that keeps the structural unemployment element from being higher than it was and from being higher in the future.

I like the research for many reasons, but particularly because it shows us that civic engagement is, potentially, a kind of softening agent – it’s a buffer that keeps unemployment from being much higher than it could be. The way civic engagement does this is through these duel effects: the enhancement of human capital which you get when you participate in a lot of volunteer and civic minded activities; and the networking component, the ability to actually stay engaged, to meet other people, to be an integral part of the community.

I’m looking forward to hearing reactions to how I read the research and to hear how it might be able to move forward.

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Civic Engagement, Civic Health, Economy, Government, Public Policy, Volunteering