Bernanke: focus on skills to widen opportunity
Tuesday, February 6, 2007; 4:13 PM
OMAHA, Nebraska (Reuters) - Policy-makers should seek to expand worker skills but refrain from restricting trade or labor flows in efforts to narrow income disparity, U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday.
"The challenge for policy is not to eliminate inequality per se but rather to spread economic opportunity as widely as possible," Bernanke said to the Greater Omaha Chamber of Commerce in Omaha, Nebraska.
"Policies that focus on education, job training, and skills and that facilitate job search and job mobility seem to me to be promising means for moving toward that goal," he added.
Bernanke did not discuss the outlook for interest rates or the economy and did not take questions after the speech.
The Fed chairman's remarks come as Democrats, who took control of both houses of Congress after November's elections, have spotlighted income disparity as a concern and are questioning whether U.S. trade agreements have speeded the decline of manufacturing industries.
Income inequality has increased in the United States over the last three decades, Bernanke said. Income at the 90th percentile of wage earners -- those close to the top -- rose 34 percent between 1979 and 2006, while the wage at the 10th percentile rose a scant 4 percent in that period, he said.
Advances in technology may have contributed to pay disparity because technology has improved the productivity of highly skilled workers more than that of workers at the lower end of the spectrum. But he added that this is only one of the factors.
At the same time, globalization -- whether in the form of expanded trade, the outsourcing of jobs or immigration into the United States -- has probably only had a "moderate" effect on economic inequality, Bernanke said.
Policy-makers who want to slow income disparity have to balance approaches that promote economic growth with measures that provide a backstop for workers who lose their jobs as a result of changes in the economic landscape, he said.
But while increased trade can cause job losses, it would be counterproductive for policy-makers to erect barriers to trade or investment, Bernanke said.
"Hindering the adoption of new technologies or inhibiting trade flows would do far more harm than good, as technology and trade are critical sources of overall economic growth and of increases in the standard of living," he said.
Instead, smoothing the way for workers to hold on to health and retirement benefits when they change jobs would "reduce the costs that individuals and families bear as a result of economic change," Bernanke added.