By Christopher Condon and Jeff Kearns from Bloomberg
Federal Reserve Chair Janet Yellen said she’s “greatly” concerned by the most sustained rise in U.S. wealth and income inequality since the 19th century, while declining to offer any policy prescriptions.
The lower half of U.S. households by wealth held 1 percent of the total last year, according to 2013 data from the FedSurvey of Consumer Finances, while the wealthiest 5 percent held 63 percent, Yellen said today in the text of a speech prepared for delivery at a Boston Fed conference on economic inequality.
“The past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority,” Yellen said. “It is appropriate to ask whether this trend is compatible with values rooted in our nation’s history.”
Average income for the top 5 percent of households grew 38 percent from 1989 to 2013, compared with an increase of less than 10 percent for all others, Yellen said. She didn’t discuss monetary policy or the economic outlook.
Rising inequality has grown as a political issue as U.S. voters head to the polls next month in election contests that may shift control of the Senate from Democrats to Republicans. Even with the Fed holdinginterest rates near zero since December 2008, average wage gains have barely kept pace with inflation since the 18-month recession ended in June 2009.
Since the current version of the Fed survey began in 1989, it has shown “a rise in the concentration of income in the top few percent of households,” Yellen said. Wealth distribution is more unequal than income, and Fed data show that the wealth gap has grown more thanincome inequality.
Yellen said mobility in the U.S. is lower than in most other advanced nations, and a major reason is that it’s one of a few major economies that funds primary and secondary public education through taxation that’s not at the national level.
“Half of U.S. public school funding comes from local property taxes, a much higher share than in other advanced countries,” which means inequalities in housing wealth and income “enhance the ability of more-affluent school districts to spend more on public schools,” Yellen said.
Resources for children, affordable higher education, business ownership and inheritances are four “building blocks” that can help promote economic opportunity, she said.
Businesses and inheritances “are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families below the top,” Yellen said.