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Federal Reserve Speeches·

Barr, Unlocking Opportunities for Workers and Entrepreneurs with a Criminal Record

  • The Federal Reserve views financial inclusion, entrepreneurship, & AI innovation as central to future U.S. economic growth, full employment, & higher living standards.
  • Inflation remains above the 2 percent target after stalling in 2025 due to tariffs, Middle East conflicts, & rapid AI buildout, prompting potential rate hikes if moderation does not occur.
  • Individuals with criminal records face substantial employment barriers, including 7 to 26 percent lower employment propensity after a charge & unemployment rates nearly five times higher than the general population.
  • Occupational licensing requirements disqualify nearly one in four jobs for those with records, often regardless of public safety risk, reducing labor supply & increasing recidivism.
  • Federal Reserve data shows formerly incarcerated individuals have lower financial well-being, reduced credit access, & higher rates of being unbanked, often relying on high-cost alternative financial services.
  • Entrepreneurship offers a viable economic path for this group, with business owners potentially earning 24 percent more & experiencing lower recidivism rates than those in traditional employment.
  • The Small Business Administration removed automatic criminal history bars from loan programs in 2024, citing research on the viability of entrepreneurship among people with records.
  • Effective support models exist, such as Texas's Prison Entrepreneurship Program, which combines lending with structured mentorship & training to help graduates launch successful businesses.
  • Small Business Development Centers, CDFIs, & local chambers of commerce play critical roles in connecting entrepreneurs with credit, technical assistance, & business networks.
  • Future progress requires more data on creditworthiness, long-term program evaluations, & expanded pilot programs to identify scalable best practices.
  • AI technologies can improve financial inclusion through cash-flow-based underwriting & provide "judgment-free" financial advice to help those with thin credit files access mainstream credit.
  • AI tools can also assist entrepreneurs with record by drafting business plans, analyzing markets, & automating tasks, thereby lowering barriers to business formation & management.