"The Level and Distribution of Economic Well-Being"

Read in full the remarks by Federal Reserve Board Chairman Ben S. Bernanke before the Greater Omaha Chamber of Commerce, Omaha, Nebraska, February 6, 2007.

In this speech, the Chairman of the U.S. Federal Reserve Board describes the U.S. economic advances in the last half century, while describing the growth of income disparity in recent decades. The speech notes that the disparity of lifetime earnings is a more important issue than the disparity of wages at a specific moment, but that available data do not allow the lifetime disparity to be measured well. He summarizes the results of economic research which attribute the increasing income disparity,among other factors, to the ability of more educated workers to appropriate new information and communications technology more effectively, to the impacts of globalization, to the "superstar" phenomenon, and to the increasing remuneration of corporate executives. Recognizing that the distribution issues involve values and must be made through the political process, he recommends that the nation choose alternatives that retain competitiveness and the flexibility of business and labor markets, but provide a safety net for those disadvantaged by the creative destruction of the free-market system. He especially emphasizes education as a policy instrument, both enabling individuals to help themselves and increasing the competitiveness of the nation.

The presentation is very clear and well organized. It focuses on the United States, but should be of interest in other nations because of the U.S. role in the global economy. The discussion of the economic research on the factors leading to income disparity may generalize to other countries as they move through the information technology revolution.