Summary of Fed Chair Ben Bernanke's Speech "the Level and Distribution of Economic Well-Being"

Summary of Fed Chair Ben Bernanke's Speech

Ben S. Bernanke (2007, February 6) divides his speech "The level and distribution of economic well-being" into three discrete parts. He first introduces some trends in the dispersion of economic well-being in the US, the most popular of which is increasing economic inequality. Next, he discusses several fundamental sources of those tendencies, the three most crucial among which can be named as technological change, globalization, and changes in the institutions. Finally, he briefly suggests some ways that policymakers can apply "not to eliminate inequality per se but rather to spread economic opportunity as widely as possible".

Regarding recent trends in American distribution of economic well-being, significant gains can be, according to Bernanke, observed in almost all indicators of living standards. In other words, the average standard of living of Americans has considerably improved over time. Before coming to that point, however, Bernanke brings up three social widely-accepted principles concerning equality of economic opportunity for all individuals, which are clearly illustrated in the bedrock notion that "all individuals should have the opportunity to succeed on the basis of their own effort, skill, and ingenuity". Bernanke concludes, by the end of his first part, that increase in economic inequality, which has been manifest for at least three decades, happens concurrently with improvement in standard of living.

Next, Bernanke presents what economic research has to say about the sources of rising earnings inequality. Three most important reasons are respectively mentioned: "skill-biased technical change" with endless debates on the increase in CEOs pay package; globalization with immigration and international trade leading to increasing measured inequality, and changes in the institutions with the declines in the real value of the minimum wage. Though influence of globalization and changes in the institutions on inequality has surely been less important than the effects of "skill-biased technological change", all of those factors, argues Bernanke, significantly contribute to exacerbate the rise in economic inequality.

Finally, Bernanke wraps up his speech by briefly considering some implications for economic policy. In addition to pointing out such unhelpful policy approaches as "those that would inhibit the dynamism and flexibility of our labor and capital markets or erect barriers to international trade and investment", he also recommends better approaches that not only will facilitate job mobility, but also will mitigate the effects of any resulting dislocations, like policies encouraging job search by displaced workers or boosting national investment in education and training, etc. Bernanke, overall, appears to be optimistic in "moving toward that goal", which