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Wednesday, November 08, 2006
Fed Bank President Concerned by Rising Inequality
BNA ($):
San Francisco Federal Reserve Bank President Janet Yellen urged lawmakers in a Nov. 6 speech to address the causes of income inequality and strengthen the social safety net as part of a long-term effort to protect the economy and U.S. democracy.
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"Over the past three decades, much of the gain from excellent macroeconomic performance has gone to just a small segment of the population--those already in the upper part of the distribution," Yellen said. "As a result, inequality has grown. This inequality, coupled with increased turbulence in family incomes associated with job displacement and restructuring, sheds substantial light on the sources of the disappointment and concern that show up in the opinion polls."
Yellen said research shows that nearly 50 percent of the productivity gains seen in the labor force between 1997 and 2001 went to 10 percent of wage and salary earners and a similar pattern has been evident since the 1970s.
From 1973-2005, inflation-adjusted hourly wages rose by 30 percent for people in the 90th percentile for income, where people typically have college or advanced degrees. The bulk of that gain was seen in the top one percent of wage earners--including sports and entertainment figures and corporate leaders. Meanwhile, those in the bottom 50 percent--where many people have a high school diploma at most--real wages grew by just 5 to 10 percent.
Yellen’s call for prioritization of income inequality is justified by a thirty-year trend in which many workers have not benefited from broad, substantial economic gains, but her concern for its effects on democracy often goes overlooked. The issue of income inequality has been gaining attention lately, but its corrosive effects on democracy are absent from the discussion despite the widely-held belief that money buys access to the political system.
Posted by Craig Jennings
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