Federal Reserve Chairman Alan Greenspan weighed into the political debate on jobs yesterday, saying the disparity between top income-earners and hourly workers is getting worse.
Mr. Greenspan also argued passionately for action to address chronically high joblessness among blacks, which he called a “failure of our society” that is partly due to discrimination, in testimony before the House Financial Services Committee.
The answer to problems of joblessness, the focus of a partisan war all year, is to increase education and skills so that workers can qualify for the good-paying but highly technical jobs being created in the economy, he said.
“We do have problems with the distribution of income,” he said. “The skill premium for skilled workers versus lesser-skilled continues to widen.
“Real wages have been rising,” he said, but “there’s been a disproportionate rise in the 20 percent of payrolls which were supervisory workers,” who have higher qualifications, while the wages of hourly workers have “barely budged.”
Mr. Greenspan lent credibility to the Democratic argument that employers have had to devote much of their increase in compensation in the past year to skyrocketing health insurance premiums and pension costs — leaving workers with few real gains.
Adding fuel to the Democrats’ fire, Mr. Greenspan noted that corporations have been devoting an unusually large share of their income to profits rather than wages, though he predicted that would not continue.
Mr. Greenspan disputed Democratic arguments, however, that the 1.4 million jobs created in the past year are of lower quality and offer lower pay and benefits than the 3 million jobs lost during the recession, saying he has seen no “meaningful” evidence of that.
The problem, Mr. Greenspan said, is the skills of workers who have lost jobs in manufacturing and other areas do not match the increasingly “technological” requirements for better-paying jobs, such as in health care and education, so many of them have had to take lower-paying service jobs.
“This I believe is an education issue,” he said, urging Congress to address the problem “as quickly and broadly as we can.”
Mr. Greenspan said community colleges have been doing a good job of providing people with the retraining they need to get better jobs, but Congress should also upgrade basic education to ensure that people are able to keep learning the new skills they will need throughout their lives.
“When people get laid off, they usually have difficulty regaining the wage level that they had before they were laid off. And this leads to the question as to whether they could do better by shifting the profession they’re in,” he said.
Evidence suggests that many laid-off workers in the past three years signed up for additional training at community colleges or other vocational schools, he said.
Their need to be re-educated explains in part why so many people dropped out of the work force during the recession and only now are coming back into the market, he said.
“They’re all going back to school,” he said. “And when, in effect, the economy picks up, they come back into the labor force.”
He said the stream of newly re-educated workers coming back into the job market also explains why the unemployment rate hasn’t fallen from 5.6 percent this year, despite a surge in employment.
To redress the inequity of an unemployment rate among blacks that is nearly twice the national average, Mr. Greenspan said the government should “double up” efforts to ensure that black workers are getting training and education.
While decrying the widening income gap in America, he said he would be leery of efforts by Congress to legislate limits on the pay of chief executives, which has been soaring.
“Shareholders still own the corporation and it’s their money that is being employed for purposes of CEO and general executive compensation,” he said.
“If government gets too heavily involved in that transaction, I’m fearful that in an endeavor to improve corporate governance, we may in fact go in the wrong direction,” Mr. Greenspan said.
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