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Thu, Feb. 08, 2007

Wider income gap a threat

By DIANE STAFFORD
Columnist

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Workspace KC blog by Diane Stafford
Perhaps you heard. The income gap among Americans is widening.

Federal Reserve Chairman Ben Bernanke said so, and no better finger-on-the-pulse economic observer exists.

Speaking this week before Omaha’s chamber of commerce, Bernanke shared income distribution statistics that at first glance sounded like position papers from United for a Fair Economy or the Economic Policy Institute or the Center on Budget and Policy Priorities.

Those groups — which have long warned of the growing chasm between the nation’s very wealthiest and everyone else — typically get criticized for an anti-free market pinko liberal bias.

Bernanke dealt the same statistics they do, but easily avoided that label. That’s because he came down on the side of wealth being good, particularly if attained by top performers who earn it.

He carefully wrapped his income-disparity observations in the blanket of “equality for economic opportunity” — not guaranteed “equality of economic outcome.”

Although he did say that “no one should be allowed to slip too far down the economic ladder,” he added the caveat “especially for reasons beyond his or her control.”

And, yes, he acknowledged, “superstar” pay packages for athletes and chief executives are ballooning income for the top 1 percent of Americans. But market forces prompting that compensation drew no criticism from him.

Rather, he challenged the rest of us to keep income-growth pace, even if not in real dollars.

He emphasized that we enjoy a better standard of living, aided by technological innovations. And he downplayed globalization, immigration, and the decline of collective bargaining as forces depressing median wages.

Instead, he proffered education as the bootstrap for prosperity.

In Bernanke’s words:

“In assessing the potential of education and training to moderate inequality, one should keep in mind that the economically relevant concept of education is much broader than the traditional course of schooling from kindergarten through high school and into college … and graduate work.

“Indeed, substantial economic benefits may result from any form of training that helps individuals acquire economically and socially useful skills, including … on-the-job training, coursework at community colleges and vocational schools, extension courses, online education, and training in financial literacy.”

Agreed. The onus is on all of us to narrow the income gap through skill acquisition.

The “market incentives for individuals to invest in their own skills are strong,” he said. A worker with greater education and training is likelier to have greater lifetime earnings than a worker who has less.

(Here, too, of course, there’s no guarantee of wealth, or even month-to-month economic comfort, as many holders of Ph.D.s and other education-rich credentials can attest.)

But while Bernanke spoke of the economic incentive for workers to get more education and training, he rather facilely left the problem of how to pay for that ever-more-expensive education to other policymakers.

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To reach Diane Stafford, call (816) 234-4359 or send e-mail to stafford@kcstar.com. Read her archived columns and Workspace blog at KansasCity.com.