Greenspan Says Workers' Lack of Skills Lowers Wages

Federal Reserve Chairman Alan Greenspan, disputing election-year assertions that the U.S. economy is producing lower-quality jobs than it has in the past, said yesterday that continuing wage sluggishness reflects the fact that many workers are ill-prepared to take advantage of the opportunities that the economy offers.

Growing U.S. income inequality largely reflects differences in workers' education and job skills, not an underlying problem with the economy, Greenspan said during a House Financial Services Committee hearing, echoing many of the remarks he made before a Senate committee the day before.

The growing pay gap reflects the "skill premium" commanded by relatively higher-educated, better-trained workers, and represents "a major problem of matching skills of workers to the technological base of the economy, which I believe is an education issue and requires that we address that as quickly and broadly as we can."

Greenspan, in similar remarks earlier this year, said it is critical that the nation better prepare its workers. The alternative is a workforce increasingly divided between those able to earn and compete and those struggling to get by.

"I think that the effective increase in the concentration of incomes here, which is implicit in this, is not desirable in a democratic society," Greenspan told the Senate Banking Committee on Tuesday.

His comments yesterday appeared to support both the Bush administration and its opponents in the campaign debate over how workers are faring in the recovery from the 2001 recession.

Critics argue that most of the jobs being created are in relatively low-wage industries, such as retail, hospitality and personal services, and note that the wages of workers in those jobs have stagnated even during the recovery. The Bush campaign and its supporters disagree, pointing to job gains in industries that pay above-average wages, including health care, construction and financial services.

Greenspan, responding to questions about job quality from committee members, said tracking employment gains by industry doesn't prove that jobs are low- or high-paying because of the substantial pay differences within industries.

Because of how information is collected, there is no way to know whether a new hire at a retail company is flipping burgers in the kitchen or overseeing global operations from a headquarters office.

There is evidence that jobs are being added at both ends of the spectrum, Greenspan said.