Friday, November 10, 2006

Inequality and Wages in the United States

One of the Federal Reserve bankers gave a speech recently which explained why the Republicans did not get credit for a good economy. The reason was obvious - for 80% of workers their real income has gone down the last several years as increases in business profits flow to less than 1% of the people. Nothing new here except this is from a Federal Reserve banker. Link from Jim.
Improvements in education are an imperative for reducing inequality and an easily justifiable investment, given its high social return. In contrast, improvements in the social safety net entail costs, even when policy interventions are well-designed from an efficiency standpoint. Even so, in my opinion, they deserve high policy priority. Inequality has risen to the point that it seems to me worthwhile for the U.S. to seriously consider taking the risk of making our economy more rewarding for more of the people.

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