Bernanke Urges Reduction of Income Inequality
Tuesday, February 6, 2007; 1:38 PM
Federal Reserve Chairman Ben S. Bernanke warned policymakers to make sure individual workers are not allowed to suffer too much from the effects of free-trade, globalization, technological progress and other developments that have boosted economic progress for the nation as a whole.
The dynamism of the U.S. economy "creates painful dislocations," such as factory closings and layoffs of workers with obsolete skills, the Fed chief said in remarks prepared for delivery at a meeting in Omaha, Neb. "If we did not place some limits on the downside risks to individuals affected by economic change, the public at large might become less willing to accept the dynamism that is so essential to economic progress."
Bernanke did not offer specific policy remedies for such problems. But he said generally that improving education and training should help reduce income inequality and expand economic opportunity, while efforts to restrict trade would hurt economic growth.
The Fed chairman also said the long-term rise in American income inequality arises from many factors, but chiefly technological changes that boost the value of workers' education and other skills.
Bernanke, a former top economic adviser to President Bush, made his comments less than a week after Bush acknowledged growing income inequality in a speech and similarly blamed the phenomenon primarily on rising rewards for education and skills.
Many congressional Democrats, in contrast, have recently stepped up their criticisms of Bush trade and tax policies, blaming them for contributing to rising inequality.
Bernanke did not comment in his prepared remarks on the economy or Fed interest rate policy.