WASHINGTON — Federal Reserve Chair Janet Yellen on Friday sounded an alarm about widening economic inequality in the U.S., suggesting that America’s longstanding identity as a land of opportunity was at stake.
The growing gap between the rich and everyone narrowed slightly during the Great Recession but has since accelerated, Yellen said in a speech at a Boston conference on economic opportunity. Robust stock market returns during the recovery have helped the wealthy outpace gains in wages, employment and home prices for middle-class America.
“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 represented a departure from the central bank’s past leaders, who focused on core Fed issues of interest rates, inflation and unemployment. Indeed, the Fed’s mandate does not specifically include broad, complex issues such as inequality.
But since taking over from Ben Bernanke in February, Yellen has chosen to emphasize more pocketbook issues that affect regular workers and families.
Throughout this year, Yellen has stressed the need for the Fed to keep interest rates low to boost economic expansion, bolster the labor market and promote stronger wage growth. In her first speech as Fed chair in Chicago, 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.
The past few decades have given rise to “significant income and wealth gains for those at the very top and stagnant living standards for the majority,” she said.
Yellen did not discuss the current state of the economy, monetary policy or how her views might affect future Fed actions.
Instead, she outlined four areas that she described as “building blocks of opportunity” — early-childhood education, affordable higher education, business ownership and inheritances.
“In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources opportunity for individuals and their families to improve their economic circumstances,” Yellen said.
On Thursday, Yellen visited a career center in Chelsea, Mass., to meet with people looking for work.
The Fed will next meet Oct. 28 and 29. The central bank is widely expected to wind up a monthly bond purchases program it has been pursuing to put downward pressure on long-term interest rates.
Deep concerns
Federal Reserve Chair Janet Yellen expressed deep concerns in a speech Friday about growing inequality in the United States. Citing data compiled by the Fed, she outlined four “building blocks of opportunity” that she believes would help ensure that upward mobility is within reach of all Americans:
Resources for children: She expressed support for government-subsidized early childhood education. Gains in enrollment and funding have stalled since 2010.
Affordable higher education: Since 2001, college costs have risen far faster than income has in most U.S. families. That has resulted in student loan debt quadrupling from $260 billion in 2004 to $1.1 trillion this year.
Business ownership: A significant source of wealth and an important way for households to move up economically, the pace of new business creation has fallen in recent decades.
Inheritances: While large inheritances play a big role in the top 5 percent of households, they are also common among households below the top, Yellen said.
