Election Reflections From the Filene Research Institute

It’s ironic that any election – despite months and years of planning and prognosticating – marks a beginning, not an end. So it is this year.

At the Filene Research Institute, we’ve been carefully following the past month’s political developments. Here we offer reflections on some near- and longer-term implications for credit unions.

Economy

Perhaps the single most impactful outcome of the election for credit unions and their members is a possible second aid package … but it remains to be seen whether and when that may happen.

The U.S. economy showed some signs of recovery leading up to November. Still, that recovery has been profoundly uneven, with – for example – low-income service workers continuing to struggle while jobs and spending have rebounded for those at the top. Keep an eye on consumer sentiment: After a collapse in March and April, consumer confidence stayed low, if steady; CEO confidence however has increased, even though one in three expect to reduce their workforce.

It’s clear now that the CARES Act, combined with credit unions’ support of members, was able to shore up households’ budgets over the summer and into the fall. But as unemployment assistance runs out and payment deferrals expire, conditions may worsen. As financial institutions approach the limits of what they can do, any continued recovery will depend on significant fiscal action and public policy to control the coronavirus pandemic and provide economic relief.

In the medium/long term, the economy is likely to be shaped by structural trends pre-dating the election: Prolonged low-interest rates mean tight net interest margins, necessitating creative cost control, growing loan volume and (for some) experiments in nontraditional revenue generation.

In this, Filene can help. Our Center for Consumer Financial Lives in Transition seeks to understand consumers’ changing financial lives and livelihoods, and in the coming months, we will launch a new Center for Innovation and Incubation, which will explore how credit unions can cultivate capacity to solve consumer and business problems in novel ways.

Politics

As we write, a split government looks increasingly likely, with Joe Biden and Kamala Harris in the White House, Democrats leading the House of Representatives and the Senate gridlocked or under Republican control. Expect President Biden to be proactive in fighting the pandemic in the short term. Beyond that, while the administration may be limited in what it can accomplish legislatively, with more than 75 million popular votes and a share of the Electoral College similar to what Donald Trump won in 2016, Biden’s team has indicated that it will also seek to tackle racial injustice, climate change and socioeconomic inequality.

Credit unions should expect a more active CFPB, especially around small-dollar lending, as well as action on housing finance and bankruptcy reform, and possibly the introduction of a new public credit reporting agency. Revamping the Community Reinvestment Act and new rulemaking protecting consumers’ rights to access their financial data may also be on the agenda.

Two of Filene’s research centers will dig into these areas on behalf of credit unions. The Center for Community Social Impact provides guidance on focusing, measuring and demonstrating credit unions’ support of members’ communities. The Center for Data Analytics and the Future of Financial Services focuses on data governance, management and analytics to prepare ​credit unions to leverage data responsibly to gain and maintain member trust and successfully grow into the future.​

Data

Data is front and center again in the wake of the election. Polling may have systematically underestimated how close election results would be – and how divided the electorate actually is.

The problems are, in fact, multiple. Historically high turnout and mail-in balloting threw off calculations. Pollsters also struggled with low response rates and “non-response bias,” which results in the underrepresentation of certain groups due to their tendency not to respond to surveys. Political polls may also have been mischaracterized or misinterpreted by the public, leading to false confidence and depressing votes for the perceived leader. Finally, polling has become the subject of public criticism and partisan wrangling. Trust in numbers – and, in some cases, statistics or even research itself – may be eroding. Yet it’s clear that data played an important part in both presidential campaigns.

As Filene jump starts its journey into the role of data in financial services, we will map how data circulates and creates value in a broader ecosystem. Good data is powerful. Data provide direction, prompt questions and add depth to our understanding of member behavior and business challenges. But even the best data require context. It must be incorporated into broader strategy conversations: Do not allow data to make your decisions for you.

People

There is no doubt that the past months have been stressful not only for credit union members but also employees. Many feel anxious and isolated, as the coronavirus has attacked our very capacity for social interaction. Many are struggling to separate work and home, and threats to work-life balance, like the collapse of childcare, are hitting women and caregivers especially hard. Jaw-dropping workforce numbers prove this out; in September, for example, four times as many women as men dropped out of the labor force entirely.

The election likely heightened this stress for many employees. Research by Filene Fellow Y. Sekou Bermiss showed that “ideological misfits” may leave organizations if they perceive differences between their own politics and the values of their employer. In fact, Bermiss showed that conservative employees are more likely to leave, and the overall likelihood of employee departure drops as individual and organizational ideologies become more progressive.

Members, too, may feel disenchanted, whether or not they supported the election’s winner. Once again, we saw how hyperpolarized the U.S. electorate is. We learned in research published in 2019 that this polarization does not extend to consumers’ perceptions of credit unions. Nonetheless, as researcher Andrew Turner wrote recently on Filene’s blog, “high stakes and deep partisanship almost assures that an unprecedented number of Americans will be angry, frustrated, disillusioned and numb regardless of who ultimately prevails.”

In the face of these challenges, inclusive leadership is more important than ever. Filene’s Center for Diversity, Equity and Inclusion provides insights into building fair and inclusive organizations. Filene Fellow Quinetta Roberson wrote about fostering inclusion by cultivating a cooperative culture, reducing status differences and insider-outside dynamics, and encouraging diverse perspectives and meaningful contributions.

Still, reflecting on this election cycle, we are struck by people’s resilience. 2020’s elections saw historic highs in the number of votes cast. More than 160 million Americans may have voted in 2020, a turnout rate nearing 67%, which would exceed the record set 120 years ago, according to the U.S. Elections Project.

Challenges remain, of course. Despite high turnout, millions of eligible voters chose not to vote, and millions more (due to age, or involvement with the criminal justice system) are without a say in the democratic process. How can credit unions reach across the U.S. to engage consumers, meet their financial inclusion mission, and grow as responsible providers of financial services in the face of such social and political disengagement?

We look at elections, and we see division and discord. That’s no mirage. Look more closely, however, and the U.S. appears very different: United by shared challenges, compelled by shared commitments. Not all values are political in the partisan sense. Credit unions share intimate connections to their communities, and their commitments – to well-being, empowerment and opportunity – require no political affiliation.

As with all elections, we’re just getting started.

Taylor C. Nelms, Senior Director of Research and Elry Armaza, Custom Research Director Filene Research Institute Madison, Wis.