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US Fed chief warns about growing economic inequality

Wednesday, February 7th 2007 - 20:00 UTC
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United States Federal Reserve Chairman Ben Bernanke said on Tuesday that while on average economic well-being has increased for US citizens the degree of inequality in economic outcomes has raised as well.

Addressing the Omaha Chamber of Commerce Bernanke noted that since 1947, the real hourly compensation of workers in the U.S. non-farm business sector has increased more than 200%. In other words, he said, the real reward for an hour of work has more than tripled over the past sixty years. Real disposable income per capita has ballooned up almost 270%, over the same period, and real consumption per capita has climbed almost 280%, and real wealth per capita has jumped 310%. But inequality also continues to widen. In real terms, Bernanke pointed out, the earnings at the 50 th percentile of the distribution, referred to as the median wage, climbed about 11.5% between 1979 and 2006. Over the same period, the wage at the 10 th percentile, near the bottom of the wage distribution, Bernanke noted, rose just 4%, while the wage at the 90 th percentile, close to the top of the distribution, increased 34%. Bernanke then mentioned that improving education and skills of the working population should help reduce inequality. "As the larger return to education and skill is likely the single greatest source of the long-term increase in inequality, policies that boost our national investment in education and training can help reduce inequality while expanding economic opportunity." "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-biased technological change," he argued.

Categories: Economy, International.

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