Bernanke: Education, training will trim pay gap

WASHINGTON -- Bolstering education and training -- rather than erecting trade barriers -- would help narrow the economic gap between low- and high-income workers, Federal Reserve chairman Ben Bernanke said yesterday.

In his most extensive remarks to date on economic inequality, Bernanke also issued a fresh warning for the United States to steer away from policies that seek to erect protectionist barriers to trade and investment opportunities or to stifle the economy's flexibility. Such a course, he cautioned, "would do far more harm than good."

His remarks come as Democrats, who have sought to portray the Bush administration's economic and tax policies as mainly benefiting the wealthy, have made it a priority to take steps to alleviate widening economic inequality in the United States.

Bernanke, in remarks delivered to the Omaha Chamber of Commerce, said disparities in education and training are "likely the single greatest source of the long-term increase in inequality."

Thus, "policies that boost our national investment in education and training can help reduce inequality while expanding economic opportunity," he said.

In 1979, a full-time worker close to the top of the wage scale earned about 3.7 times as much as a full-time worker near the bottom of the wage rung. Reflecting the relatively fast growth of wages of higher-paid workers, workers near the top of the wage scale today earn about 4.7 times as much as those near the bottom, Bernanke said.

Bernanke, while exploring various possible forces behind this, did not offer specific policy solutions. That, he said, must be left to politicians.

Trade tensions, especially with China, have led some Democrats and Republicans in Congress to advocate policies that, among other things, would impose hefty tariffs on Chinese-made goods flowing into this country.

Democrats and other critics, meanwhile, blame the Bush administration's free-trade policies for record-high trade deficits and the loss of U S factory jobs.

"The influence of globalization on inequality has been moderate and almost surely less important than the effect of skill-biased technological change," Bernanke said.

To help the working poor, the Democrat-controlled Congress recently approved a boost in the federal minimum wage from $5.15 an hour to $7.25 an hour over two years. The wage hasn't budged for nearly a decade.

Differences between House- and Senate-passed versions must still be resolved. Bush has said he supports such an increase as long as it includes provisions to help businesses absorb the sting of higher labor costs.

Bernanke said research is inconclusive about the effect of the minimum wage on income inequality.