WASHINGTON — Federal Reserve Chairman Janet Yellen sounded an alarm Friday about widening economic inequality in the United States, suggesting that America’s longstanding identity as a land of opportunity was at stake.
WASHINGTON — Federal Reserve Chairman Janet Yellen sounded an alarm Friday about widening economic inequality in the United States, suggesting that America’s longstanding identity as a land of opportunity was at stake.
The growing gap between the rich and everyone else narrowed slightly during the Great Recession but has since accelerated, Yellen said in a speech at a conference in Boston on economic opportunity. And robust stock market returns during the recovery helped the wealthy outpace middle-class America in wages, employment and home prices.
“The extent and continuing increase in inequality in the United States greatly concerns me,” Yellen said. “By some estimates, income and wealth inequality are near their highest levels in the past hundred years.”
Yellen’s extensive comments on economic inequality marked an unusual public departure for a Fed chair. Her predecessors as head of the U.S. central bank tended to focus exclusively on the core Fed issues of interest rates, inflation and unemployment. Indeed, the Fed’s mandate doesn’t explicitly include issues like income or wealth disparities.
But since taking over from Ben Bernanke in February, Yellen has made clear she is deeply concerned about the financial challenges that ordinary workers and families face.
Throughout this year, she has stressed the need for the Fed to keep rates low to boost economic expansion and hiring. She has said that the unemployment rate, now at 5.9 percent, doesn’t fully reflect the health of the job market: Yellen has expressed concern, for example, about stagnant incomes, the number of part-time workers who want full-time jobs and the many people who have given up their job searches and are no longer counted as unemployed.
In her first speech as Fed chair, she highlighted the hurdles faced by three unemployed workers. And in congressional testimony in February, Yellen called income inequality “one of the most disturbing trends facing the nation.”
Her remarks Friday, accompanied by extensive data compiled by her staff, expanded on her concerns. Between 1989 and 2013, Yellen noted, the average income of the top 5 percent of households rose 38 percent. For the remaining 95 percent of households, it grew less than 10 percent.
Many analysts argue that widening income inequality is hurting economic growth itself. The wealthy are receiving higher pay and rising investment earnings. Yet those households tend to spend less of their money than do low- and middle-income consumers who are dealing with sluggish wage growth. Because consumer spending accounts for roughly 70 percent of U.S. economic activity, less spending tends to slow growth.