Kristian Rouz – US economic growth has been hampered by the significant wealth and income inequality among the nation's workforce, Federal Reserve Governor Lael Brainard says. She says the distribution of employment is uneven across the US: certain metropolitan areas doing better, while others still have some slack in the local labor market.
However, Brainard advocates a different approach. She says the Federal Reserve should take measures to address income inequality at the expense of the existing production capacity.
“To the extent that disparities in income and wealth across race, ethnicity, gender, or geography reflect such disparities in opportunity… the disadvantaged groups will underinvest in education or business endeavors, and potential growth will fall short of the levels it might otherwise attain,” Brainard said at a Fed research conference.
She was citing the numbers from the upcoming Fed publication, Survey of Consumer Finances. Brainard emphasized that wealth redistribution should be favored over wealth generation, which is hardly surprising, given her background.
At this point, as a Fed policymaker, she is blaming income inequality for lower consumer confidence and, therefore, slower overall economic growth. However, it is the emerging economies plagued with sky-high income inequality that has shown higher economic growth figures over the past two decades, because of their cheap workforce.
Brainard is also missing the point in urging the Fed to address income inequality. The central bank may lack the tools and levers to tackle poverty, but its ultra-loose monetary policies over the past 10 years have resulted in a massive accumulation of household indebtedness – hampering the disposable incomes of everyday Americans and lowering their consumer spending potential.
The Fed Governor admits the central bank does not possess the tools to enforce her proposed agenda, but she simply goes on to promote the celebrated ‘one-percenter’ narrative.
“The gaps in household income and wealth between the richest and poorest households are at historically high levels, as income and wealth have increasingly accrued to the very richest households,” she says.
Brainard also added that the ‘one-percenters’ held 24 percent of total US income in 2015, up from 17 percent in 1988, whilst the share of wealth held by the ‘one-percenters’ reached 39 percent in 2016 compared to 30 percent in 1989.
She also said that while the average unemployment rate is 4.3 percent and poised to decrease to 4.1 percent, the rate for blacks is 7.7 percent; the rate is 5.2 for people originating from Latin America.
While citing the same old concerns about ‘discrimination’, and ‘harder access to education’, Brainard fails to mention lower rates of labor market participation among blacks (61.5 percent) compared to whites (62.8 percent) and also neglects to mention the unofficial employment practices common among people of Latin-American descent.
Her divisive speech further emphasized the difference in income between races, with an average white family making $123,000 per year in comparison to $54,000 for black families and $57,000 for families of Latin-American ancestry. The figures also come for her upcoming Survey of Consumer Finances.
“These gaps have more than doubled over the past three decades,” Brainard stressed.
She, however, failed to mention employment situations within families in her generalized review of race and income. According to the Bureau of Labor Statistics (BLS), among white families, the share of families with at least one member working was 80.2 percent in 2016. Among blacks, the measure was 77.8 percent, and in Latinos 86.7 percent.
Overall, the Fed Governor’s report appears to be the last stand of the failed monetary policies of the outgoing central bank administration. President Trump is poised to replace Fed Chair Janet Yellen’s team in February, in order to take on broader economic reform in the US.