Ben Bernanke on Inequality
Mark Thoma directs us to David Wessel's summary of Ben Bernanke's Omaha speech:
David Wessel: Federal Reserve Chairman Ben Bernanke cautioned that widening inequality may make Americans "less willing to accept the dynamism... so essential to economic progress," but warned politicians to avoid responding by limiting the flexibility of labor markets or erecting barriers to international trade and investment.
Wiser responses, he said, would be to improve education and training and cushion the dislocations caused by technology and globalization, such as making health and pension benefits more portable and offering retraining and job-search assistance to displaced workers....
"Although average economic well-being has increased considerably over time," he said "the degree of inequality in economic outcomes has increase as well... for at least three decades," he said, wandering beyond the boundaries of the aspects of the economy over which the Fed has direct influence.... [Bernanke] documented the inequality trend and detailed reasons behind it -- from the extra wages that employers are willing to pay workers with formal education to the decline of unions to the impact of globalization, which he said has been "moderate and almost surely less important than the effects of... technological change."...
[H]e offered three principles that he said are "broadly accepted in our society" -- economic opportunity should be as widely distributed and equal as possible, economic outcomes needn't be equal but should be linked to a person's contributions and people should get some insurance against "the most adverse economic outcome."
"We... believe," he said, "that no one should be allowed to slip too far down the economic ladder, especially for reason beyond his or her control."
Mr. Bernanke... avoided any mention of tax policy, a favorite tool of Democrats interesting in reducing the inequality produced by market forces.
