References 1. Autor, David, Arindrajit Dube, and Annie McGrew, “The Unexpected Compression: Competition at Work in the Low Wage Labor Market,” NBER Working Papers 31010, 2023. 2. O’Trakoun, John, “Savings Still High, but Not for All Households,” Macro Minute, Federal Reserve Bank of Richmond, June 2023. 3. In order to qualify for a low-income designation, the majority of a credit union’s membership (50.01 percent) must meet certain low-income thresholds. “The question of how low-income Americans are faring financially remains an open one. Credit union data is suggestive but not robust enough to settle the issue.” The last item is of particular interest to a credit union industry that is still experiencing low share growth. The competition for deposits is fierce, and households have spread liquid savings beyond banks and credit unions. Yet savings growth within the credit union industry may help shed light on the question of how low-income households are faring. If low-income households are truly seeing higher real wage gains than average and growing liquid deposits, that could result in relatively higher share growth among low-income designated credit unions (LICUs).3 In general, share growth among LICUs is remarkably similar to that of non-LICUs. But since the onset of COVID a wedge has developed, with LICU share growth outpacing that of non-LICUs. That gap peaked in early 2021, likely as a result of pandemic stimulus, before subsiding over the remainder of that year. Since 2021, the wedge has grown again, with share growth at LICUs outpacing growth at non-LICUs by over 2 percentage points. That supports a narrative that low-income credit union members are disproportionately benefitting from a tight labor market and seeing real wage growth. Alternatively, the difference in share growth experienced by LICUs as compared to non-LICUs could simply be the result of a greater willingness to pay in order to attract deposits, but cost of funds has been moving in the opposite direction. From the beginning of 2022 through June 2023, LICU cost of funds has risen by a smaller amount than for non-LICUs, providing further evidence that underlying share growth dynamics are stronger at LICUs. The question of how low-income Americans are faring financially remains an open one. Credit union data is suggestive but not robust enough to settle the issue. In the fourth quarter, the Federal Reserve will release results from the triennial Survey of Consumer Finances, which is the highest-quality data on the topic. Until then, let the debate continue. Sources: NCUA, NAFCU Research Cost of Funds: LICUs vs Non-LICUs 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% 0.20% 0.15% 0.10% 0.05% 0.00% -0.05% -0.10% 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 LICU Non-LICU Diff’ce: LICU minus Non-LICU (right axis) 11 THE NAFCU JOURNAL November–December 2023
RkJQdWJsaXNoZXIy Nzc3ODM=