Federal Reserve Chairman Ben Bernanke told the Greater Omaha Chamber of Commerce on Tuesday that the single-greatest source of the long-term increase in inequality is due to gaps across education and skills.
To fix that, he recommends policies that boost the national investment in education and training but do not restrict trade or labor flows.
Bernanke, who received a 1590 out of 1600 on his SAT exam and later went on to Harvard and MIT, added that “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.”
Unions, Tech Surge, and Benefit Portability
He said unions tend to “compress the dispersion of pay for jobs in the middle of the skill distribution.”
The decline in private-sector union membership over the post-World War II period, “particularly the sharp drop in the 1980s, has been associated with an increased dispersion of pay among workers with intermediate levels of skill,” he said.
And while the recent boost in the federal minimum wage (up to $7.25 an hour over two years) is progress after a decade-long stall, Bernanke implied that advances at technology companies (which are much faster than in retail or trade markets, for example) has made the game of catch-up more difficult.
“Overall, I read the available evidence as favoring the view that the influence of globalization on inequality has been moderate and almost surely less important than the effects of skill-based technological change,” he said in the prepared speech.
He recommends policies that reduce the costs to workers of changing jobs. For example, improving the portability of health and pension benefits between employers might help to maintain economic flexibility.
He also said displaced older workers present a “particularly difficult problem, as these workers have greater difficulty than others in finding new jobs and experience a greater decline in earnings than other workers if they are re-employed.”
Bernanke is expected to deliver a report next week in Washington on the country’s economic policy issues.