The function of community organizations
Previous articles in this year’s “The State of Economic Justice” series have highlighted major economic inequalities and suggested that their removal could not only benefit some individuals and households, but also have a positive impact on the economy as a whole. In this concluding article, we examine the economic conditions of low- and moderate-income (LMI) communities and the role of organizations working to promote residents’ economic security.
Understanding conditions in LMI communities is important because they can impede opportunity and affect resident outcomes. For example, being born in a neighborhood with lower income and education levels can negatively impact economic mobility opportunities (PDF). Additionally, more children in these communities are enrolled in underperforming schools, and there is evidence that efforts to improve education can boost future economic success (PDF). Finally, people living in LMI communities are more likely to be exposed to toxic installations or other environmental hazards, such as lead poisoning, air pollution, and noise pollution. Exposure to pollutants can negatively impact productivity, labor force participation and even income.
Organizations operating in the LMI community represent a critical component of the infrastructure that promotes economic resilience and mobility for all. These entities include nonprofits, governments, financial institutions, and public-private partnerships. Some organizations work to increase the supply of affordable housing in their communities, or serve as hubs for other agencies, policymakers, and funders to direct investment where it is needed. Likewise, other organizations may provide a variety of social services, including human resource development, to help workers acquire skills needed for jobs and support childcare needs, as well as to improve the efficiency of the job matching process between workers and employers.
When the crisis occurred, the Federal Reserve initiated the COVID-19 Community Impact Survey (CIS) in order to collect information about the effects of the economic disruption caused by the crisis on both LMI communities and the organizations that serve them.
Fewer COVID-19 disruptions in LMI community, but recovery hasn’t hit much
According to the CIS conducted in August 2022, the percentage of respondents reporting that their communities were severely disrupted decreased compared to 2021 responses
However, the impact of pandemic-related disruptions continues to stress communities: more than 80 percent of respondents indicated that their communities have not recovered from the disruptions caused by COVID-19, and 40 percent of these organizations Family life is severely disrupted by financial stability statements.
This contrasts with signs of overall economic health, as real GDP returns to pre-pandemic levels in the first quarter of 2021 and unemployment falls to 3.5% by July 2022.
One area of continued concern is housing instability, which has led to evictions, rent arrears, foreclosures and homelessness. Almost half of those surveyed said housing stability faced serious disruption and little progress had been made in the past year. Lack of affordable housing and high housing costs have been the main reasons for the disruption.
Organizations serving LMI communities also face challenges that affect their ability to promote the resilience of these communities. Despite strong macroeconomic growth indicators, the majority of companies surveyed (71%) noted increased demand for their services compared to the previous year, with more than half unable to meet the majority of total demand.
Lack of staff and volunteers and financial difficulties were cited as the main reasons for not meeting overall demand.