Janet Yellen — Perspectives on Inequality and Opportunity from the Survey of Consumer Finances
Board of Governors of the Federal Reserve System
Chair Janet L. Yellen
At the Conference on Economic Opportunity and Inequality, Federal Reserve Bank of Boston, Boston, MassachusettsOctober 17, 2014
Video and transcript
The distribution of income and wealth in the United States has been widening more or less steadily for several decades, to a greater extent than in most advanced countries.1 This trend paused during the Great Recession because of larger wealth losses for those at the top of the distribution and because increased safety-net spending helped offset some income losses for those below the top.
But widening inequality resumed in the recovery, as the stock market rebounded, wage growth and the healing of the labor market have been slow, and the increase in home prices has not fully restored the housing wealth lost by the large majority of households for which it is their primary asset.
The extent of and continuing increase in inequality in the United States greatly concern me. The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression. By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then.2 It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity.…
In my remarks, I will review trends in income and wealth inequality over the past several decades, then identify and discuss four sources of economic opportunity in America--think of them as "building blocks" for the gains in income and wealth that most Americans hope are within reach of those who strive for them. The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances. Like most sources of wealth, family ownership of businesses and inheritances are concentrated among households at the top of the distribution. But both of these are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families below the top.
In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources of opportunity for individuals and their families to improve their economic circumstances.…
Also
Project Syndicate
The Inequality Trifecta
Mohamed A. El-Erian | Chief Economic Adviser at Allianz and a member of its International Executive Committee, and Chairman of President Barack Obama’s Global Development Council
There were quite a few disconnects at the recently concluded Annual Meetings of the International Monetary Fund and World Bank. Among the most striking was the disparity between participants’ interest in discussions of inequality and the ongoing lack of a formal action plan for governments to address it. This represents a profound failure of policy imagination – one that must urgently be addressed.…
As a result, most countries face a trio of inequalities – of income, wealth, and opportunity – which, left unchecked, reinforce one another, with far-reaching consequences. Indeed, beyond this trio’s moral, social, and political implications lies a serious economic concern: instead of creating incentives for hard work and innovation, inequality begins to undermine economic dynamism, investment, employment, and prosperity.
4 comments:
"The wealthiest 5 percent of households held nearly two-thirds of all such [financial] assets in 2013, the next 45 percent of families held about one-third, and the bottom half of households, just 2 percent."
Good on Yellen for using her bully pulpit to talk about inequality.
Good too that Yellen is linking this to the founding objectives of the United States which was to escape the oppression of the political inequality being imposed by British 18th century Fat Cats. Yellen calls that founding premise equality of opportunity which can so easily be confused with Libertarian freedom whereas Danielle Allen in her recent book "Our Declaration" explains very clearly why the Founding Fathers understood that political equality in all walks of life must come first before freedom and expressed this belief in the Declaration of Independence.
I completely agree with Mr. Lynch.
I have no idea how effective Yellen's comments will be, however, at the very least she goes on the official record.
The 4 big ideas:
resources available for children affordable higher education
business ownership
inheritances.
Never mind raising incomes faster than inflation, cutting taxes progressively, increasing levels of employment or time limits on regulatory monopolies.
What we need is for everyone to have even more education, preschool and school lunches, start a business and then an inheritance to get ahead. Right. Big ideas.
I would call that recipe, the secret sauce of every successful economy in recent history! Not.
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