A “very concerned” Janet Yellen told a congressional panel today that she thinks income inequality is “one of the most important issues and one of the most disturbing trends facing the nation at the present time.”
But why, exactly?
1.) If you buy the thesis that a big jump in high-end inequality has been mostly driven by technology and globalization, then the alternative is more equality, perhaps, but less innovation here and more extreme poverty abroad. Now that’s a disturbing scenario.
2.) If you are concerned about upward mobility, then family structure, education, and geographic segregation are bigger issues than 1%-99%-style inequality, which has zero correlation with climbing the opportunity ladder.
3.) Along those same lines, here are e21′s Scott Winship and Donald Schneider, whose recent work undermines “the idea that rising inequality has hurt economic mobility … the accumulating evidence [is] that mobility has been stable and that there is little robust correlation between inequality and mobility levels across geographic areas. We argue that instead of trying to construct an unsupportable case that mobility is falling and that inequality is to blame, Democrats should simply point to the insufficiently high mobility levels experienced by poor children.”
4.) If you are concerned about poverty, income inequality is a distraction. Poverty expert Ron Haskins of Brookings: “If our goal is to increase opportunity, it seems unlikely that limiting income at the top of the distribution or taking more money from the rich will increase opportunity.”
5.) If you are concerned that crony capitalist links between big business and big government are promoting inequality and making the American Dream seem like a rigged game, well, right on! But Yellen didn’t talk about that.
6.) Does Yellen know that the top 1% own a slightly smaller share of US wealth than a generation ago?
7.) Here is social scientist Lane Kenworthy, a progressive who just wrote a book on creating a Nordic-sized welfare state in the US: “Faster economic growth would be a good thing (particularly if with it came a shift towards greener growth). But there is little evidence that the American economy will grow more rapidly if the US manages to reduce income inequality. … Income inequality is too high in the US. It would be good to reduce it. But it is a mistake, in my view, to put inequality reduction at the top of the agenda.”
What disturbs me is the lack (a) economic growth, (b) good-paying, full-time jobs, (c) social mobility, and (d) educational opportunity in a time of advancing automation. Those are the disturbing trends Yellen, given her prominence and bully pulpit, should be talking about.